Market Players Pleased but Skeptical as Stocks Rise

The Dow breaks a losing streak, but NYSE volume remains sluggish and the market's direction stays uncertain.

Author:: Robert Mann
Publish date:: Sep 1, 1999 6:19 PM EDT

We don't have to wait till tomorrow
Hey!
We don't have to wait till tomorrow
What you say?
(We don't have to wait till tomorrow)
It must have been right, so forever, goodnight, listen at 'cha .

SAN FRANCISCO -- It's highly doubtful

Jimi Hendrix

was thinking about Wall Street when he wrote/sang the above. But with most market players talking about waiting for Friday's employment data and the forthcoming holiday weekend before making substantive bets, some investors decided they didn't need to

Wait Until Tomorrow

Bellwether Net stocks fell in concert with the bond market but most major market averages ended higher. Beneath the surface, some individual stocks were subjected to decidedly volatile preholiday, pre-employment report trading.

The

Dow Jones Industrial Average

snapped a four-session losing streak, rising as high as 10,941.36 before closing up 108.60, or 1%, to 10,937.88. Strength in

IBM

(IBM) - Get Report

Merck

(MRK) - Get Report

and

AT&T

(T) - Get Report

paced the index.

Other tech bellwethers, notably chip stocks such as

Teradyne

(TER) - Get Report

and

Intel

(INTC) - Get Report

, joined IBM on the upside, with Intel helping the

Nasdaq Composite Index

rise as high as 2768.55 early on.

Intel rose 1.4% after

ABN-Amro

upped its earning estimates and said they are "anticipating an upside earnings preannouncement" from the chip giant. Other semis got a boost from

Banc of America Securities

analyst Rick Whittington, who initiated coverage on seven names with strong buy recommendations and two with buys. Among those aided were

Conexant

(CNXT) - Get Report

, up 6.3% to an all-time high of 76 7/16, and

TranSwitch

(TXCC)

, higher by 5.7%. The

Philadelphia Stock Exchange Semiconductor Index

rose 1.6%.

But the Comp closed off its high, up 11.46, or 0.4%, to 2750.81. The tech-assuaged index was restrained by weakness in Net names such as

Amazon.com

(AMZN) - Get Report

and a huge drop in recent high-flyer

Qualcomm

(QCOM) - Get Report

Qualcomm lost 12.2% after

Everen Securities

issued some cautious comments about the company's earning prospects and Banc of America downgraded the stock to buy from strong buy.

Meanwhile,

TheStreet.com Internet Sector

index fell 2.81, or 0.5%, to 563.14 after struggling to find any positive footing even at the broader market's heights.

Speaking of which, the

S&P 500

rose 10.65, or 0.8%, to 1331.06 while the

Russell 2000

gained 3.16, or 0.7%, to 430.99.

Much as they mainly dismissed recent weakness, most market players cautioned against reading too much into today's advance.

"There's been action, but the volume is crappy. That's why you're getting these wacky movements," said one New York-based trader. "Nobody is around. Everybody is leaving early to play golf or go on vacation. A lot of people are taking off tomorrow

and Friday. If they need to do business, they do it from their cell but will try to keep it as minimal as possible, which is smart."

The trader, who requested anonymity, said the period right before and after Labor Day is generally strong for equities and "would probably lean toward buying here."

But "coming into the next couple of weeks I'd start selling, then stay on the sidelines and get short before late September," he said. "There's a lot of skittish people out there and the bond market is saying inflation is perking up its head."

The price of the 30-year Treasury bond fell 6/32 to 100 18/32 today, its yield rising to 6.08%.

New York Stock Exchange

trading, 708.2 million shares were exchanged while advancers led declining stocks 1,703 to 1,251. In

Nasdaq Stock Market

action 925.7 million shares traded while gainers led 2,073 to 1,809. New 52-week lows bested new highs 90 to 24 on the Big Board but new highs led 74 to 50 in over-the-counter trading.

Warming Up the Roller Coaster

"Today is a bounce after the selloff that came after the Dow hit an all-time high" last

Wednesday, said Scott Bleier, chief investment strategist at

Prime Charter

. "Once we come back from Labor Day, it's possible we see a rally that takes us to new highs

but then we get on the roller coaster. We're already on the roller coaster but we're not at full power."

Notwithstanding expectations for a postholiday rally, Bleier recommends long-term investors "buy a little insurance" for their portfolios, specifically with protective puts.

The market has been mainly range-bound since mid-July, the strategist said, predicting the Dow will stay in a trading range between 11,500 and 10,500 and the S&P between 1200 and 1450 "until the end of the year."

Concerns about inflation and the

Federal Reserve

will be a restraining force, he said, but "the Fed is not going raise rates again."

Bleier's prediction stems from a belief economic figures are "not going to be as wildly powerful as they need to be" to encourage the central bank to raise rates in October, which is "seasonally the worst time of the year." In addition, "real or perceived problems with regard to Y2K will cause some type of disruption," Bleier said, ahead of which "the Fed is not going to take overt and aggressive action."

Noting a lengthy article in

Reuters

yesterday headlined "U.S. Prepares for Possible Y2K Violence," the strategist observed the end of the millennium has already crept into the market's consciousness. "It's going to be like a full moon and a high tide and all that crazy stuff all rolled into one," he said. "And there's little history to use as a guide as to what may or may not happen."

In the meantime, day traders are "alive and well," Bleier said. The action in Qualcomm today is an example of what happens when day traders flee a stock. Meanwhile,

StarMedia

(STRM) - Get Report

, up 12%, and

Internet Capital Group

(ICGE)

, up 6.8% to an all-time high of 80 1/16, suggest there is still "rampant speculation," he said.

Internet Capital has risen 567% since going public at $12 a share Aug. 5.

Among other indices, the

Dow Jones Transportation Average

rose 28.34, or 0.9%, to 3104.44; the

Dow Jones Utility Average

added 1.09, or 0.4%, to 316.95; and the

American Stock Exchange Composite Index

gained 7.78, or 1%, to 783.19.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 7.49 to 6,978 and the

Mexican Stock Exchange IPC Index

dropped 87.93, or 1.7%, to 5,086.

Wednesday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.

)

Red Hat

(RHAT)

, the leading seller of packaged

Linux

freeware, plans to set up a wholly owned Japanese subsidiary by the end of the month, the

Nihon Keizai Shimbun

reported. The company, which canceled its contract with

Itsutsubashi Research

last week, hopes the new subsidiary will help sort out its jumbled operations in Japan. The stock, which has soared since its Aug. 10 debut at $14 a share, closed down 2 1/2 to 79 5/8.

The Nasdaq had a good day despite the selling in Qualcomm, which is finally backing off a bit from the latest in a long series of huge run-ups this year. The stock got slammed 23 1/2, or 12.2%, to 168 11/16 after

Everen Securities

analyst Mark Roberts said that pricing pressures and a components shortage may keep the company from blowing away earnings estimates in the fourth quarter; the 16-analyst consensus calls for earnings of 96 cents a share. Later in the day Banc of America Securities threw its own 2 cents in, cutting the stock to buy from strong buy. Qualcomm is still up about 673% on the year.

Mergers, acquisitions and joint ventures

Chesapeake

(CSK)

edged up 3/4 to 34 9/16 after it agreed to form a joint venture with

Georgia-Pacific

(GP)

which added 15/16 to 42 5/16 . Chesapeake says it expects sales of about $200 million from the joint venture which combines its color-box business with Georgia's graphic packaging unit.

H&R Block

(HRB) - Get Report

was hammered after setting plans to buy

Olde Financial

-- the parent company of

Olde Discount

, the fourth-largest discount broker in the U.S. -- for $850 million in cash. H&R Block lost 4 5/8, or 8.3% to 51.

North Face

(TNFI)

lost 15/16, or 10.8%, to 7 7/8 after it said its planned sale to its CEO and

Leonard Green & Partners

has been terminated.

Promus Hotel

(PRH) - Get Report

gained 2 15/16, or 10.1%, to 32 after

The Wall Street Journal

reported that

Hilton Hotels

(HLT) - Get Report

is in talks to buy it in a deal valued at significantly more than Promus' current market cap of $2.4 billion. Hilton lost 1/2 to 11 11/16.

Staff Leasing

(STFF)

lost 1 25/32, or 19.1%, to 11 1/4 after it said it turned down a $380 million buyout proposal from its largest institutional shareholder and that it would consider strategic alternatives, including the sale of the company.

Lehman Brothers

stepped in and cut its 2000 earnings estimate to 80 cents a share from $1.18 based on the increased risk and expense of a new workers' compensation insurance plan.

Earnings/revenue reports and previews

dELiA*s

(DLIA)

lost 7/16, or 5.5%, to 7 3/4 after posting a second-quarter loss of 42 cents a share, a penny wider than the four-analyst estimate.

Extending yesterday's losses,

MMC Networks

(MMCN)

dropped 3 15/16, or 12.8%, to 26 3/4 after saying last night that its fourth-quarter 1999 and fiscal 2000 estimates may be hurt by the departure of customer IBM from the network switch/router business. Yesterday Big Blue announced a pact with

Cisco

(CSCO) - Get Report

to supply network integration services to Cisco's customers.

TheStreet.com

examined the deal in a

piece last night.

Offerings and stock actions

CB Richard Ellis Services

(CBG)

added 9/16 to 13 1/16 after it set a share buyback for up to $5 million of its common stock.

CEC Entertainment

(CEC)

, operator of

Chuck E. Cheese

restaurants, gained 1 13/16, or 6.5%, to 29 11/16 after it said it would buy up to $25 million of its common stock in addition to a previously completed $15 million-share buyback plan.

Juniper Networks

(JNPR) - Get Report

was grounded 24 11/16, or 12.1%, to 180 1/4 after filing with the

Securities and Exchange Commission

for a secondary offering of up to 5.75 million common shares. Juniper went public a little more than two months ago.

Phelps Dodge

(PD) - Get Report

gained 1 13/16 to 57 3/4 after it said it will ask shareholders to approve issuance of new shares in connection with a planned $2.5 billion hostile takeover of merging rivals

Asarco

(AR) - Get Report

and

Cyprus Amax Minerals

(CYM)

. Shares of Asarco rose 1 1/8, or 5.4%, to 22, while shares of Cyprus inched up 13/16 to 17 3/4. Separately, Phelps said it would cut costs at its mining operations in Morenci, Ariz., by about 10 percent.

Analyst actions

Forest and paper-product stocks got a pop from some kind words from PaineWebber:

Weyerhaeuser

(WY) - Get Report

Westvaco

(W) - Get Report

Temple-Inland

(TIN)

International Paper

(IP) - Get Report

Salomon Smith Barney

energized the brokerage sector today, raising third-quarter earnings estimates for

Morgan Stanley Dean Witter

(MWD)

Lehman Brothers

(LEH)

and

Goldman Sachs

(GS) - Get Report

, citing better-than-expected international business and relatively benign effects from widening credit spreads.

Continuing today's analyst trend of rating every single business in a given sector at once, Banc of America Securities initiated coverage of nine semiconductor companies with mostly bullish ratings. The following companies received strong buy ratings:

Galileo Technology

(GALT) - Get Report

; Conexant Systems;

Applied Micro Circuits

(AMCC)

;

Broadcom

;

PMC-Sierra

(PMCS)

;

Vitesse Semiconductor

(VTSS)

; and

Semtech

(SMTC) - Get Report

Lattice Semiconductor

(LSCC) - Get Report

and TranSwitch were rated buys.

Despite the nod, Galileo lost 2 1/4 to 49 3/4. Conexant lifted 4 1/2, or 6.3%, to 76 7/16; Applied Micro Circuits added 2 3/4 to 94 3/4; Broadcom lost 3/16 to 128 1/2; PMC-Sierra rose 2 1/4 to 95 1/4; Vitesse tacked on 2 to 69 7/8; Semtech gained 1 to 71 1/8; Lattice rose 1 1/16 to 62 7/8; and TranSwitch clicked up 2 13/16, or 5.7%, to 52 1/2.

Alkermes

(ALKS) - Get Report

fell 3 3/4, or 10%, to 33 1/4 after

Merrill Lynch

downgraded it to near-term neutral from near-term accumulate.

Guidant

(GDT)

rose 2 1/8 to 60 13/16 after

Warburg Dillon Read

raised its 12-month price target to 72 from 64 following the firm's decision to buy

CardioThoracic Systems

(CTSI)

for $313 million. CTSI was up 5/16 to 18 1/2.

Intimate Brands

(IBI)

put on 1 15/16, or 5.1%, to 40 5/16 after

Brown Brothers Harriman

raised the stock to short-term strong buy from buy and set a price target of 52 to 54.

Novoste

(NOVT) - Get Report

was unchanged at 21 7/8 after Banc of America upped its rating to strong buy from buy.

Teradyne added 3 3/8, or 9.9%, to 37 3/8 after Morgan Stanley reiterated its strong buy rating on the company.

Wesco International

(WCC) - Get Report

rose 1 11/16, or 13.4%, to 14 5/16 after

ING Barings

raised the stock to strong buy from buy.

Wackenhut Corrections

(WHC)

-- an operator of private prisons 54%-owned by security firm

Wackenhut

(WAK)

-- was punished 3, or 15.8%, to 15 15/16 after

Warburg Dillon Read

cut its earnings-per-share estimate for fiscal 2000 to $1.27 from $1.30.

Miscellany

Advest

(ADV)

was unchanged at 19 1/8 after it named Patrick Madden president and CEO of its

Advest Bank & Trust

unit. Madden has been with the company since 1993 and was formerly executive vice president.

Citigroup

unit Salomon Smith Barney said it will offer individual investors after-hours trading later this month through

MarketXT

, which now runs a 6 p.m.-to-8 p.m. EDT session for clients of Morgan Stanley Dean Witter's

Discover Brokerage

and

Mellon Bank's

(MEL)

Dreyfus Brokerage Services

. Citigroup gained 7/16 to 44 7/8.

Ditech Communications

(DITC)

moved up 6 1/2, or 11%, to 66 on no particular news whatsoever.

Integrated Health

(IHS)

lost 1/4, or 8.2%, to 2 13/16 after it said the

Justice Department

is conducting an investigation involving activities of its Florida subsidiary is involved in an investigation.

Ever-optimistic

Iridium

hired a team of specialists to help it restructure the remaining shreds of the company. Share trading was halted on the

Nasdaq Stock Market

after the company filed for bankruptcy protection last month. In another piece of good news, the company said CFO Leo Mondale will step down after a lengthy tenure of about four months.

New York Times

(NYT) - Get Report

lost 1/8 to 38 15/16 after saying it will raise the suggested Monday-through-Saturday newsstand price of

The New York Times

to 75 cents from 60 cents starting Sept. 13. The Sunday edition of the

Times

will remain at $2.50.