Market Watching Another Magic Number With Nasdaq 3000 in Reach
Nasdaq 3000. You don't have to be much of a prosodist to know that phrase doesn't roll off the tongue as trippingly as Dow 10K. But it's a nice, round milestone all the same, and unbeknownst to the market's trading range, it's almost within reach.
The market's major benchmarks were mixed around midday. The
Dow Jones Industrial Average
was down 21 to 10,709, while the S&P 500 was off 1 to 1362. Small-caps and Net stocks were faring better, with the
Russell 2000
up 3 to 432 and
TheStreet.com Internet Sector
index up 8, or 1.1%, to 759.
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Meanwhile, the
Nasdaq Composite Index
was still floating around in record territory, though it had backed off from its earlier highs. The Comp was up 19, or 0.6%, to 2986, having traded as high as 2997.90. "Considering the rally we had last week, not to be down today is a pretty good sign," said Peter Boockvar, equity strategist at
Miller Tabak
.
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Stocks' ability to dig in at these levels has much to do with the bond market, which is easing back only slightly after putting together three pretty impressive rallies itself last week. Earlier, the 30-year Treasury had fallen around a half-point after the
National Association of Purchasing Management's
released its
Purchasing Managers' Index
. The headline PMI slipped to 56.6 in October from 57.8 in September, slightly higher than the 56.4 forecast by economists in the
Reuters
poll, but the prices paid index rose to 69.4 from 67.6.
The bonds shrugged that off easily enough. The long bond was lately down 5/32 to 99 9/32, putting its yield at 6.18%. (For more on the fixed-income market, see today's early
Bond Focus.)
"Today the bonds are acting great," said Boockvar. "The prices-paid component is being ignored, with people thinking it may have topped out. Now the glass is half full."
Boockvar was referring to the bond market's shift in sentiment following
last Thursday's
Employment Cost Index
, which came in slightly softer than expected and sparked the first of two huge rallies in both stocks and bonds. "This NAPM is not a good number for bonds. But now any news is good news, whereas before, any news was bad news."
And that's been good for stocks as well. "Overall, things have definitely improved as of late last week," said Bob Dickey, managing director of technical analysis at
Dain Rauscher Wessels
in Minneapolis. "We had three really good days with the kind of technical underpinnings we haven't seen in two months: decent advance/declines, improvement in the new highs/new lows ratio, better participation by big-cap tech stocks."
Still, many market participants are remaining cautious toward the market, which never approached the level of capitulation that conventional wisdom said it needed to form a bottom to the fall correction. "We never really reached an extreme reading as far as sentiment to the downside is concerned," Dickey said. "Now we're seeing a shift to the bullish side, but the spots on the market are changing. We're in for more of a rotational and churning sort of market than a trending market -- not necessarily down, but mixed. I don't think the market is going to bail us out any more."
On a technical basis, Dickey said he sees money moving into big-cap technology and drug stocks: "It's longer-term momentum for techs, while the drugs are more of a turnaround play. Financials have had their run and are likely going to be struggling now."
That's not exactly what Byron Wien has in mind.
Morgan Stanley Dean Witter's
equity strategist said today that he was raising the equities position of his portfolio to 85% from 80%, with all of that new exposure in financial stocks. (The remaining 15% of Wien's portfolio is in cash.)
Time will tell. The
Philadelphia Stock Exchange/KBW Bank Index
, which had gained about 25% between Oct. 15 and last Friday, was letting off some steam today, lately down about 0.7%. You can chalk a lot of that downside up to
American Express
(AXP) - Get American Express Company Report
, down 3.1%, and
Chase Manhattan
(CMB)
, off 2.6% after saying that a rogue trader's book-cooking would be rectified to the tune of $60 million in pretax fourth-quarter profits.
In other sector news, the
Morgan Stanley High-Tech 35
was about 1.1% higher, while paper stocks were also extending Friday's strength, with the
Philadelphia Stock Exchange Forest & Paper Products
Index up a further 0.7%.
The
Dow Jones Transportation Average
was down about 2%.
Market Internals
Breadth was narrowly positive.
New York Stock Exchange:
1,436 advancers, 1,400 decliners, 484 million shares. 62 new 52-week highs, 54 new lows.
Nasdaq Stock Market:
1,844 advancers, 1,882 decliners, 639 million shares. 158 new highs, 70 new lows.
Monday's Midday Watchlist
By
Eileen Kinsella
Staff Reporter
The technology sector was pulling away from the rest of the pack and heading higher at midday, helped along by a number of joint venture and financing agreements.
TradeOut.com
said it will receive $22 million in third-round financing from
eBay
,
Benchmark Capital
and
Morgan Stanley Dean Witter
(MWD)
. The deal calls for eBay CEO Meg Whitman and Benchmark venture capitalists Bill Gurley and David Beirne to sit on TradeOut.com's board. Shares of eBay gained 3 1/16 to 138 1/8 while Morgan Stanley fell 3/16 to 110.
America Online
(AOL)
bounced up 3 5/8 to 132 7/8 after it announced a two-year online marketing pact with
Toys R Us
(TOY)
lately up1, or 7%, to 15 1/8.
eToys
(ETYS)
wasn't exactly smiling about the news, and was lately off in the corner, sulking 2 7/16 to 57 1/2.
Lastly, America Online and eBay announced four new co-branded sites on several AOL sites. For more on the Internet sector, see the latest
Nothing but Net.
Mergers, acquisitions and joint ventures
Adaptec
(ADPT) - Get Adaptive Biotechnologies Corp. Report
inched up 9/16 to 45 5/8 after saying it plans to acquire privately-held
Distributed Processing Technology
for $235 million in a deal that will strengthen Adaptec's efforts to provide backup hardware and software for computer storage systems. The purchase price includes the cost of assuming Distributed Processing's stock option plan.
Germany's
Allianz
said it would assume a goodwill charge of $2.4 billion to $2.5 billion for the $3.3 billion majority interest it has taken in
Pimco Advisors
(PA)
. Shares of Pimco popped up 2 3/8, or 6.9%, to 37 1/16. Allianz board member Helmut Perlet said at a news conference that the charge in 2000 would total roughly $120 million to $220 million in the following year,
Reuters
reported. Allianz said earlier that it plans to have the goodwill completely written off over a 15-year period.
Separately, Allianz said it could boost its 70% interest in Pimco Advisors, while
Pacific Life Insurance
, in which Pimco shareholders have a 30% stake, would possibly lower its interest in the interim. Allianz also said that after closing the transaction, Pimco would be delisted.
AT&T
rose 7/16 to 47 3/16 and
priceline.com
(PCLN)
lost 1 to 59 /8 after the companies announced plans for a broad marketing agreement.
Separately, AT&T announced plans to form a new public company,
AT&T Latin America
, that will merge the operations of
Netstream
, the local exchange company AT&T is buying in Brazil, and
FirstCom
, a publicly traded company with telecommunications operations in Chile, Colombia and Peru.
TheStreet.com
examined the deal in a
story today.
Citigroup
(C) - Get Citigroup Inc. Report
fell 1 1/16 to 53 1/4 after it announced plans to take a minority interest in Japan-based online broker
Nikko Beans
. Citigroup said the 19% interest enables both parties to sell to other's customers in Japan.
Britain's
General Electric PLC
announced that its
Marconi Communications
division would acquire
Nokia's
SDH/DWDM transport equipment unit. Shares of Nokia fell 3 1/16 to 112 1/2.
Timber
(TGP) - Get Teekay LNG Partners L.P. Report
rose 1/16 to 23 15/16 after it announced plans to sell its California timberlands to
Hawthorne Timber LLC
, in a deal for roughly $397 million.
Visio
(VSIO)
fell 9/16 to 39 1/8 after it said the
Justice Department
asked it for additional information on the proposed acquisition of Visio by
Microsoft
(MSFT) - Get Microsoft Corporation Report
. Shares of Microsoft were up 1/8 to 92 3/4.
Online investment bank
Wit Capital
(WITC)
rose 4 1/16, or 23.5%, to 21 11/16 is buying
SoundView Technology
, a private investment banking concern based in Connecticut, for about $320 million in stock.
TheStreet.com
took a look at the deal in a
story today.
Earnings/revenue reports and previews
(
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
)
Air Express International
(AEIC)
jumped 3 1/2, or 13.2%, to 30 1/8 after it posted third-quarter earnings of 38 cents a share, missing the 12-analyst estimate of 40 cents and in line with year-ago 38 cents.
Avado Brands
(AVDO)
lost 1/8 to 5 3/8 after it reported third-quarter earnings of 10 cents a share, shy of the six-analyst estimate of 18 cents and down from the year-ago 58 cents.
Mercury General
(MCY) - Get Mercury General Corporation Report
slipped 3/16 to 28 after it posted third-quarter earnings of 59 cents a share, missing the six-analyst estimate of 69 cents and down from the year-ago 73 cents.
Orbotech
(ORBK) - Get Orbotech Ltd. Report
climbed 2 15/16 to 80 3/4 after it posted third-quarter earnings of 97 cents a share, beating the five-analyst estimate of 88 cents and up from the year-ago 75 cents
Offerings and stock actions
Mead
(MEA)
rose 5/16 to 36 5/16 after it set a 10 million-share buyback.
Neuberger Berman's
(NEU) - Get NewMarket Corporation Report
fell 1/2 to 28 1/2 after its board approved a $50 million stock buyback plan. Neuberger Berman went public last month.
Track Data
(TRAC)
gained 2 3/8, or 25.2%, to 11 7/8 after it set a 2-for-1 stock split.
UAL
(UAL) - Get United Airlines Holdings, Inc. Report
, parent of
United Airlines
, lost 1 9/16 to 66 1/2 after its board authorized a $300 million-share buyback plan.
WorldGate
(WGAT)
added 7/8 to 22 1/4 after it said it was canceling its secondary offering. WorldGate plans to withdraw its registration statement, saying that it doesn't believe that an offering at this time is in the best interest of shareholders.
Analyst actions
Morgan Stanley sliced its rating on
Allmerica Financial
(AFC) - Get Ares Capital Corporation 6.875 % Notes 2007-15.4.47 Global Report
to neutral from outperform. Shares of Allmerica were falling 1 7/8 to 55 5/16.
Merrill Lynch
initiated coverage of
Calico Commerce
(CLIC)
with an intermediate-term accumulate rating and a price target of 72. Calico Commerce was plunging 6 3/16, or 9.9%, to 56 7/8.
Donaldson Lufkin & Jenrette
upped its rating on
Cardinal Health
(CAH) - Get Cardinal Health, Inc. Report
to top pick from buy. Cardinal Health was up 1/8 to 43 5/8.
Merrill sliced its intermediate and long-term ratings on
Frontier Insurance Group
(FTR) - Get Frontier Communications Corp. Report
to neutral from accumulate. Frontier Insurance was sinking 2 1/2, or 28%, to 6 3/8.
DLJ slashed its rating on
Hartford Life
(HLI) - Get Houlihan Lokey, Inc. Class A Report
to market perform from buy. Hartford Life shares were skidding 2 5/8 to 50.
Merrill reinstated coverage of
LSI Logic
(LSI) - Get Life Storage, Inc. Report
with an intermediate-term accumulate rating and a long-term buy rating. LSI Logic was adding 15/16 to 54 1/8.
Merrill named
News Corp.
(NWS) - Get News Corporation Class B Report
a Focus One selection and upped its 12-month price objective to 45 from 40. Shares of News Corp were gaining 3/4 to 30 3/8.
Goldman Sachs
initiated coverage of
PlanetRx
(PLRX)
as a market outperformer. Goldman was lead underwriter of the company's Oct. 7 IPO. Shares of PlanetRx.com were sliding 2 7/8, or 12.2%, to 20 5/8.
Credit Suisse First Boston
initiated coverage on
PRI Automation
(PRIA)
with a buy rating and a price target of 45. PRI Automation was climbing 1 3/8 to 41 1/2.
Morgan Stanley initiated coverage of
Province Healthcare
(PRHC)
and
Lifepoint
(LPNT)
with outperform ratings. Shares of Province Healthcare was mounting 1/16 to 16 1/4.
Morgan Stanley U.S. equity strategist Byron Wien said he boosted the stocks position in his U.S. equities portfolio by 5 points to 85%, while slicing the cash portion by 5 points to 15%. Wien noted that his portfolio additions came from financials, which include
Bank of New York
(BK) - Get Bank of New York Mellon Corporation Report
,
American International Group
(AIG) - Get American International Group, Inc. Report
,
Mellon Financial
(MEL)
,
Fannie Mae
undefined
and
Chubb
(CB) - Get Chubb Limited Report
.
Banc of America Securities
sliced its rating on
Wells Fargo
(WFC) - Get Wells Fargo & Company Report
to market perform from buy. Wells Fargo was slipping 1 3/8 to 46 1/2.
Miscellany
Disney
(DIS) - Get Walt Disney Company Report
and the government of Hong Kong have reached a deal to construct a Disney theme park in Hong Kong, according to published reports.
DuPont Photomasks
(DPMI)
said David Gino has resigned as executive vice president-finance and CFO.
Nearly two years after
Merrill Lynch's
(MER)
acquisition of
Mercury Asset Management
of Britain, the get-together isn't working out as gracefully as expected, the Heard on the Street column in
The Wall Street Journal
says today. Merrill was up 11/16 to 79 3/16.
Motorola
(MOT)
was hopping 2 5/8 to 99 15/16 after it unveiled its DSP56690 baseband processor, which can handle all major existing wireless standards as well as satellite-based products.
Nextera Enterprises
(NXRA)
was skidding 1/8 to 5 after it named board member Stephen Fink as CEO. The company also said it expected third-quarter revenues and earnings to be within the range of expectations. The current four-analyst estimate calls for earnings of 6 cents a share.
RealNetworks'
(RNWK) - Get RealNetworks, Inc. Report
RealJukebox software secretly monitors the listening habits and other activities of people who use it,
The New York Times
reported, citing a security expert. RealNetworks contends the practice does not violate consumer privacy because the info isn't stored by RealNetworks or distributed to other companies, the newspaper reported. Shares of RealNetworks were slipping 1 13/16 to 108.
