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Market's Rebound Looks Feeble Next to Mountainous Worries

Market watchers appreciated the significant bounce from the lows, but they aren't betting it means much.
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Granted, it was a heck of a rally off the bottom, even though major stock proxies couldn't close in the plus column. But one gets the feeling that the market's moral win was about as filling and satisfying as the paltry lettuce on a Big Mac would be to someone who'd just hiked the Appalachian Trail all day without a bite.

But even if the market's widely-watched gauges had closed in positive territory -- although the small-cap

Russell 2000

didn't threaten to do that the way its index siblings did -- the victory would've been hollow, considering the market's deadly breadth and the fact that a certain level of gloom and skepticism hangs over the market.

The blue-chip

Dow Jones Industrial Average

gave up 27.86, or 0.3%, to 10,275.53, after trading as low as 10,081.13.


S&P 500

shed 1.11, or 0.1%, to 1282.20. The big-cap gauge tumbled as low as 1256.28 intraday.


Nasdaq Composite Index

slipped to 5.50, or 0.2%, to 2756.25, falling as much as 2694.74 during the session.

The small-cap Russell 2000 fell 3.37, or 0.8%, to 418.49.

Major market averages hit their intraday lows around 1:30 p.m. EDT.

Treasuries fared much worse than stocks as the 30-year Treasury bond fell a full point to 100 16/32, yielding 6.09%. (For more on the fixed-income market, see today's late

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Bond Focus.) Internet Sector

index added 2.30, or 0.4%, to 631.30, after trading as low as 607.01 intraday. The outperforming member of the DOT was

America Online


, which soared 8.7%.

Major stock proxies started out lower and the selling gradually took them to their intraday lows around 1:30 p.m. EDT, as traders dumped stocks the way one would drop rotting potatoes in a gunny sack.


Chicago Board Options Exchange Volatility Index

, an overall measure of investors' level of fear, spiked up and peaked along with the bottoms reached by the major stock proxies and then faded, slipping on the day. The VIX closed at 26.97, after closing yesterday at 27.27. Last Thursday, the VIX closed at 30.28.

Intraday Ugliness, Then a Rally

Part of the blame for the selloff was pegged on some negative comments out by Ralph Acampora, the widely followed chief technical strategist at

Prudential Securities


In a research note, Acampora wrote: "We are adjusting our target for the Dow because we have broken through our support level of 10,334 and have established a downward trend. We had said before that if the Dow took out its support level we would push out our target of 12,000 to next year. We did this because we remain long-term bulls."

For the rest of the year, Acampora said the "best-case scenario" is 10,000-11,300 for the Dow, while the "worst case" is that the venerable blue-chip gauge "continues lower, spurred on by the weak breadth and lack of follow-through in an oversold rally to a low of 8,900-9,200. We put the probability at 60%-70% that the Dow will continue lower than 10,000."

The early afternoon swoon may have been accentuated by a

Dow Jones

report citing an unsettling and unpublished draft of a

Federal Reserve

study. According to the

Dow Jones

report, the Fed study concludes that U.S. stocks may decline 32% to 38% -- again, that's 32% to 38% -- when the currently booming pace of corporate stock buybacks slows.

Also not helping the market earlier in the session was the hangover of yesterday's less than impressive advance after last week's steep losses. Then came the rebound.

Jay Suskind, head of institutional equity trading at

Ryan Beck

, said he thought the turnaround was a matter of the market having a pretty bad day throughout and people taking a look at the market, seeing it down 10% to 12% off its highs, and stepping up to buy. Also, he said the snapback might have been related to some quarter-end window dressing, although he conceded he didn't know how much window-dressing really had to do with it.

Suskind also highlighted the fact that the Dow's ability to hold above the technically important 10,000 mark gave people some relief. "You had some violent moves," the trader said.

Don't Buy Rallies, Strategist Says

Tim Hayes, senior equity strategist at

Ned Davis Research

in Nokomis, Fla., said that when the Dow broke below 10,400 last week there was no real good support after that and one would have to look at around 10,000 for support. As for 10,000, Hayes said that the level was a big level going up and it'll be big going down.

"We are bearish," Hayes said, adding that any rally should be considered a mere oversold bounce, and he wouldn't be buying.

After last week's breakdown, "we've had pretty good follow-through on the downside," he said, and "we've moved underweight" in terms of asset allocation, The current asset allocation: 50% stocks, down from 55%; 35% bonds; and 15% cash, up from 10%.

On the

New York Stock Exchange

, decliners bashed advancers 1,893 to 1,095 on 885.5 million shares. On the

Nasdaq Stock Market

, losers hammered winners 2,474 to 1,434 on 1.11 billion shares.

On the NYSE, 283 issues set new 52-week lows while 31 touched new highs. On the Nasdaq, 150 issues set new 52-week lows while new highs totaled 44.

On the Big Board, AOL was most active with 30.9 million shares changing hands. It gained 8 13/16 to 109 15/16.

On the Nasdaq,

Global Crossing


was most active with 53.4 million. It rose 1 5/8, or 6.6%, to 26 1/4.

Among other indices, the

Dow Jones Transportation Average

fell 5.47, or 0.2%, to 2856.98; the

Dow Jones Utility Average

tumbled 1.96, or 0.7%, to 291.77; while the

American Stock Exchange Composite Index

fell 6.38, or 0.8%, to 772.85.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

declined 41.99 to 6853.70 and the

Mexican Stock Exchange IPC Index

slid 3.12 to 5052.64.

Tuesday's Company Report

By Tara Murphy
Staff Reporter


Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.


Foundry Networks

(FDRY:Nasdaq) stunned the Street in its trading debut, rocketing 131 1/4, or 524%, to 156 1/4. That's the second-largest first-day pop in U.S. IPO history, trailing only's


606% explosion in November 1998.

Deutsche Banc Alex. Brown

priced 5 million shares of Sunnyvale, Calif.-based Foundry at $25 each, above the boosted range of $22 to $24.



was off 5/16 to 73 13/16 after it said that it would acquire

Hambrecht & Quist


, which soared 7 13/16, or 19%, to 48 7/8, for roughly $1.35 billion in cash, in an effort to boost its investment banking business. The transaction calls for Chase to pay $50 a share, a 22% premium, for H&Q. Last year, Chase held negotiations with

Merrill Lynch


, but they never came to terms. Chase said it would set a $200 million retention pool to keep key members of Hambrecht & Quist's staff.

Network Solutions


and the

Commerce Department

are expected to announce a deal that would increase competition for registering new Internet addresses. Network Solutions was in talks for a year before it said it would permit rival firms to register new Web site names in its 5 million-address database, which includes names ending in .com, .org and .net. To register their customers, rivals will have to pay a $6 per name each year, a discount to Network Solutions registration charge of $35. The deal calls for Network Solutions to manage its database for at least four more years. Shares of Network Solutions leapt 12 13/16, or 17.6%, to 85 1/2.


Securities and Exchange Commission

announced that it has filed 30 enforcement actions charging 68 individuals and entities with fraud and/or abuses of the financial reporting system. The agency said the charges represent a "veritable cookbook of recipes for fraudulent accounting and reporting." Among those charged is former

Minnesota Vikings


Fran Tarkenton

, who allegedly "helped direct a multimillion-dollar financial fraud that resulted in overstatements of net income exceeding 200%" as head of software and consulting company


. The Hall of Famer agreed to refund $54,187 and pay $100,000 in penalties, without admitting or denying the charges.

Mergers, acquisitions and joint ventures

America Online


jumped 8 3/4, or 8.7%, to 109 7/8 after it said it has entered a content agreement with


. Shares of advanced 1 5/8 to 47.


Future Network

said it sold 182,492 shares in AOL, realizing $18.3 million.

Anadarko Petroleum


slipped 1 11/16, or 5.5%, to 29 after it signed a $770 million deal with Algerian state-owned oil and gas firm


to quadruple production from an Algerian oilfield.



fell 2 5/8, or 6.1%, to 40 3/16 after it said that it boosted its gross operated natural gas production from offshore fields in the Gulf of Mexico that it purchased from

Shell Oil

to 241 from 125 cubic feet per day. CEO Raymond Plank said he expects further gains from the fields but not ones as large as the gains already reported.




Cyprus Amax


amended their merger agreement to permit each company to explore all strategic alternatives. Asarco climbed 1/16 to 27, while Cyprus shares slid 7/16 to 19 1/8.



is expected to announce an equipment purchase from merger partners

General Instrument





that could be valued at up to $1 billion, the


said. The paper said AT&T plans to buy up to 2 million more cable TV set-top boxes from General Instrument and 1 million cable modems from Motorola. AT&T shares advanced 1/2 to 43 7/8, while Motorola jumped 2 1/8 to 88 5/8. Shares of General Instrument mounted 1 5/8 to 47 7/8.

El Paso Energy


stumbled 1/4 to 37 5/8 after it said it plans to divest some assets following its acquisition of



once it signs a consent decree with the

Federal Trade Commission

. Sonat shares bounced 1/8 to 37 1/4.

Ralston Purina


fell 1/2 to 28 3/8 after it announced plans to put its

OEM Rechargeable Battery

division up for sale.



tumbled 9/16 to 98 after it said that it has forged a $1.1 deal to buy German-based

Siemens Electromechanical Components

. The transaction is part of a huge reorganization effort by


, which is selling nine subsidiaries.

Earnings/revenue reports and previews

Bally Total Fitness


fell 9/16 to 31 7/8 after it said that it is in line with its third-quarter earnings expectations so far and is unaware of any business reason that would be cause a decline in its stock price.

Consolidated Products


declined 2 11/16, or 20.6%, to 10 5/16 after warning it would post fourth-quarter earnings only slightly higher than the year-ago 21 cents a share. The companies blamed delayed store openings and higher labor costs for the disappointing results.



was unchanged at 3 15/16 after it posted fourth-quarter earnings of 10 cents a share, beating both the three-analyst estimate of 9 cents and the year-ago 4 cents.

Erie Indemnity


was unchanged at 29 after it warned investors that it expects to report a third-quarter post-tax loss of 1 cent a share due to Hurricane Floyd.



skidded 1/4 to 16 9/16 after it posted a fourth-quarter loss of 87 cents a share, down from the two-analyst estimate of an 84-cent loss and the year-ago 80-cent loss.

Fortune Brands


advanced 1/18 to 33 3/4 after it said it anticipates reporting double-digit earnings for the third-quarter and fiscal 1999. According to analysts' consensus estimates, the company is expected to post third-quarter earnings of 42 cents a share, up from the year-ago 32 cents and $2 for fiscal 1999, also up from the year-ago $1.67.

Morrison Management


climbed 3/16 to 23 after it posted first-quarter earnings of 30 cents a share, in line with the three-analyst estimate and up from the year-ago 26 cents.

Offerings and stock actions

AirGate PCS


jumped 9 13/16, or 57.7%, to 26 13/16 in its first day of trading. The 6.7 million-share IPO was priced top-range at $17 a share.

According to an SEC filing,

Paul Allen's Charter Communications

plans a 170 million-share IPO, which is expected to price in the range of $17 to $19 a share.


mounted 1 9/16, or 13%, to 13 9/16 after making its trading debut. The stock priced yesterday after being priced at $12 per share.

Frontier Airlines


declined 1 3/4, or 16.6%, to 8 7/8 after it warned investors that it would post second-quarter earnings below the analysts' estimate of 48 cents a share and the year-ago 64 cents due to maintenance costs and late aircraft delivery.


Infosys Technologies


soared 9 3/4, or 8.1%, to 130 1/4 after it said it would not deliberate a stock split at its Oct. 8 board meeting.

Metropolitan Life Insurance

said its board favored its proposal to demutualize and form a stock company. With support from the board, the company's management can launch full demutualization of the company, where its value would divvied up among its 11.2 million individual and group policy holders.

Suiza Foods


mounted 9/16 to 35 13/16 after it said that it approved an additional $100 million for its share-buyback plan.

Wells Fargo


bounced up 3/8 to 38 7/8 after it set a repurchasing plan for up to 82 million common shares.

Analyst actions



hopped 3 1/4, or 10.2%, to 34 after

Goldman Sachs

upgraded the stock to its recommended list from market outperformer.



plummeted 5 3/16, or 7.7%, to 61 3/4 after

Warburg Dillon Read

cut the shares to buy from strong buy. Goldman Sachs lowered its rating on the shares to market outperformer from its recommended list.

Merrill Lynch upgraded a pair of gold companies, upping

Barrick Gold


to long-term accumulate from accumulate and

Homestake Mining


to near-term accumulate from neutral. Despite the upgrade, shares of Barrick fell 1/4 to 23 7/8, while Homestake declined 3/16 to 9 5/8.

British Airways


fell 2 7/16 to 55 9/16 after analysts at

ABN Amro

upped their pre-tax loss forecast,

The New York Times




slipped 1 3/16 to 62 3/16 after

ING Barings

initiated coverage of the stock at hold.

Copper Mountain


climbed 1 7/16 to 89 after

Volpe Brown Whelan

started coverage at buy.



declined 9/16 to 15 7/16 after

Salomon Smith Barney

cut the stock's price target to 17 from 24.



skidded 3/16 to 22 1/4 after Salomon rolled out coverage of the stock with an outperform rating and a price target of 26.



skidded 3/16 to 27 7/16 after

SG Cowen

started coverage of the stock with a strong buy rating.


hopped 2 5/8, or 6.6%, to 42 1/16 after


started coverage of the stock with a buy rating.



sank 2 1/4, or 9.6%, to 21 1/16 after Salomon Smith Barney initiated coverage with a neutral rating. Salomon also gave neutral ratings to



, which fell 5 11/16, or 17.2%, to 27 3/8, and



, which slid 3/16 to 17 11/16.

MGM Grand


bounced 9/16 to 48 1/8 after

Lehman Brothers

upped its third-quarter earnings estimates to 52 cents from 41 cents a shares and raised its price target to 55 from 50.

Micron Electronics


stumbled 1 5/16, or 10.7%, to 10 15/16 after PaineWebber cut its shares to attractive from buy.

Banc of America Securities

upped its ratings oil companies

Burlington Resources





to buy ratings from market performers. Burlington shares tumbled 1 1/16 to 36 7/16, while Unocal fell 1 1/16 to 36 1/8.

Park Place Entertainment


advanced 1, or 9.2%, to 11 13/16 after

Morgan Stanley Dean Witter

started coverage of the stock with a strong buy rating.

Protein Design Labs


climbed 1 3/16 to 31 3/4 after SG Cowen initiated coverage of the stock with a buy rating.

Rite Aid


jumped 3, or 26%, to 14 1/2 despite

Warburg Dillon Read

cutting its fiscal 2000 estimates to $1.11 a share from $1.40 and $1.25 from $1.60 for fiscal 2001.

Station Casinos


skidded 11/16 to 21 13/16 after


upped its rating on the stock to outperform from perform in line.

Texas Industries


advanced 1/16 to 33 7/16 after

Warburg Dillon Read

raised its rating from a buy to a hold.




declined 2, or 5.5%, to 33 15/16 after it said that its president and CEO, Gert Munthe, will resign by the end of the year, primarily for personal reasons.



was slipping 3 9/16, or 11.2%, to 28 5/16 after it said it has stopped a Phase III test of its ulcer remedy

Regranex Gel

, after provisional information failed to back up earlier data. The Phase III study, which was conducted at the

R.W. Johnson Pharmaceutical Research Institute

, did not validate the Phase II findings.



declined 1 to 47 after it said that it was awarded marketing approval for


, product used to remedy abdominal aortic aneurysms. Guidant is set to begin distributing the device, which is an alternative to a surgery, to hospitals in the United States.




rose 1/16 to 33 15/16 after it said it received

Food and Drug Administration

marketing approval for its

Aneu Stent Graft System

, which is also used to treat abdominal aortic aneurysms.



bounced 1 7/8 to 101 3/4 after it said that it would embark on a $939 million restructuring program to transform itself into an Internet-based firm.

Nortel Networks


popped 2 to 50 after it unveiled a new network technology for the Internet which it said will avoid information traffic jams.