Market Recovering from Unwelcome Surprises

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Proving once again that it's as resilient as the still-working, 94-year-old

Bob Hope

, the similarly mature bull market is fighting off a big earnings disappointment and a big economic-data surprise as most indices post relatively modest declines.

The downside earnings report late

yesterday from tech bellwether

Intel

(INTC) - Get Report

has battered that stock 5 1/16 to 86 3/4, which in turn is rocking the

Nasdaq Composite Index

. Intel represents about 6.9% of the tech-loaded Comp, and around noon EDT the index was down 12 to 1721.

Still, both Intel and the Nasdaq have joined the rest of the financial markets in coming off their early lows. Unexpected strength in the September

retail sales

report this morning sent bonds reeling and stocks tumbling, but buyers have come in to mitigate the losses. The

Dow Jones Industrial Average

, having traded as low as 8035.39 before 10 a.m. EDT, was off 30 to 8066 around noon. The

S&P 500

and the small-cap

Russell 2000

pulled similar switchbacks, although they also remained in negative territory. The yield on the benchmark 30-year Treasury bond, as high as 6.44% earlier, had moderated to 6.41% by midday.

So is any Intel-bred weakness a buying opportunity? "It certainly looks like that's the way the market's treating it," said Warren Epstein, head trader at

Richard A. Rosenblatt

in New York. "

Dell

(DELL) - Get Report

just turned positive,

Cisco

(CSCO) - Get Report

was upgraded,

Compaq

(CPQ)

was upgraded,

Microsoft's

(MSFT) - Get Report

doing okay. We're hanging in pretty well."

Dell was up 1 1/4 to 100 7/16, having dipped just slightly early in the session. Cisco, upgraded to buy from neutral at

PaineWebber

, was up 13/16 to 81 7/8. Compaq surged 3 3/16 to 76 13/16 after

Merrill Lynch

upped its 1997 and 1998 earnings estimates. Microsoft, reportedly weighing an investment of up to $1 billion in

TCI

(TCOMA)

, was up from its intraday low of 134 7/8 but still down 1 to 135 5/8.

For all the worry about a 3-cent shortfall by Intel, the earnings season seems to be proceeding on its usual course of more upside surprises than downside ones. "There are times I think that earnings reporting season is akin to making sausage -- you don't necessarily want to see the process, but it usually comes out okay," said Philip Tasho, head of equity strategy and management at

Riggs Investment Management

in Washington.

Tasho said the market's focus on technology earnings overlooks the fact that expectations are even higher in some other industries, such as the torrid oil-service sector and consumer cyclicals. He said he's heartened by the results coming out of airlines, which are exceeding even those lofty outlooks.

As for Intel, Tasho shrugs off the third-quarter miss and the resulting selloff. "Intel's a great company, they're just in a product transition area," he said. "And it's got half the Microsoft multiple." Microsoft's trailing price-to-earnings ratio is 51.5, while Intel's is 22.7.