It's as if investors got so used to biding time ahead of
Federal Open Market Committee
meeting, they'd forgotten what to do after the moment passed. As the final hour unfurled, however, they remembered the "buy the dip" mantra.
While bonds leapt in celebration of the FOMC's
decision to adopt a tightening bias but leave rates unchanged, equities dawdled until a late-day surge left major proxies with decent gains.
The price of the 30-year Treasury bond rose 1 2/32 to 92 4/32, its yield falling to 5.81%. Meanwhile, the June bond futures contract rose 23/32 to 118 8/32, just off its session high of 118 11/32.
A move of such magnitude in fixed-income might otherwise have inspired growth stocks but was initially obscured by disappointment over
last night's profit report by
reviewed the results in a
Despite supportive analyst commentary today, Dell shed 9.7%, exerting a heavy downward influence on the
Nasdaq Composite Index
. The tech-beguiled index fell as low as 2540.38 before rallying to close up 19.04, or 0.7%, to 2577.40.
The Comp finished higher thanks largely to strength in Internets and chip equipment stocks, inspired respectively by better-than-expected results from
Lycos (furthered buoyed by a 2-for-1 split announcement) rose 3.5%, helping
TheStreet.com Internet Sector
index climb 8.14, or 1.3%, to 647.50. The DOT also got an assist from
, which gained 5.2%.
Elsewhere, Applied Materials added 3.5% while
rallied impressively in concert, pushing the
Philadelphia Stock Exchange Semiconductor Index
traded in a tight range throughout before closing with a flourish, up 10.91, or 0.8%, to 1344.23. Similarly, the
Dow Jones Industrial Average
closed up 50.44, or 0.5%, to 10,887.39 after spending most of the day hovering within 25 points of breakeven.
Johnson & Johnson
led Dow gainers, rising 3.6% and 3.3%, respectively. Conversely,
fell 1.1% while
regurgitated 2.3% of yesterday's whopping gains.
"I think it'll be a little choppy in here because we still have the overhang of the economy maybe overheating short-term, but the market still seems to have decent momentum," said Robert Harrington, co-head of block trading at
. "It may have a little bit of a lid on it until we actually find out how hot the economy is, but autos and airlines coming down doesn't sound to me like the economy is overheating."
Harrington observed the market is "acting decently despite having absorbed a lot of potentially negative news -- namely
resignation, the FOMC bias change, and higher-than-expected
Consumer Price Index
data. Furthermore, the trader took solace in the performance of utility stocks, noting the
Philadelphia Stock Exchange Utility Index
, which rose 1.3%. Meanwhile, the
Dow Jones Utility Average
jumped 5.42, or 1.7%, to an all-time best of 324.25.
"Looking forward six months, I don't think they'd be acting as well if interest rates are going higher," Harrington said. "Having said that, short-term there's some concern about having higher rates and some higher P/E stocks
are vulnerable. People are moving into mid-cap, deeper cyclicals and being selective in techs."
While blue-chip averages waffled until day's end, the
continued steadily along its recent path of righteousness. The small-cap proxy rose 3.69, or 0.8%, to 446.14.
New York Stock Exchange
trading, 801.2 million shares were traded while advancers led declining stocks 1,730 to 1,261. In
Nasdaq Stock Market
activity, 969.4 million shares were exchanged while gainers led 2,130 to 1,831. New 52-week lows led new highs 60 to 38 in Big Board activity while new highs led 84 to 26 in over-the-counter trading.
"It's the flip side of what we've seen for last four years, when the S&P did well but only because of 20 or 50 stocks," said Hugh Johnson, chief investment officer at
. "What appears to be happening now is the 20 or 50 stocks are starting to post poor relative performance and rest of the market -- where there's clearly better value -- is catching up. This is particularly true of small-caps."
The reversal -- evidenced by the Russell 2000's 8% outperformance vs. the S&P 500 from April 1 through yesterday -- has only just begun, Johnson said.
"Large-caps have outperformed since 1994, which is a very long time
and they've outperformed small-caps by 118%, which is a very big margin," he said, comparing the Russell 1000 to the small-cap 2000. "These things are usually symmetric: What goes up, comes down by the same amount. You've been seeing it very consistently."
With $500 million of assets under management, First Albany has the "flexibility" to make the migration to small-cap from large, Johnson said. However, it is a "laborious process," which could explain some of the market's apparent lassitude of late.
The fund manager recently acquired shares of
and is eyeing an investment in
But "if you're looking for lower P/Es without giving up growth rates, it's not just basic materials, you can find them in technology," he said, although he was unable to identify examples.
As for whether blue-chip averages must suffer if small-caps dominate, "it almost doesn't matter," Johnson said, predicting many fund managers who've converted to the religion of large-cap growth will underperform. "What's important is buying stocks that go up, and we are still in a market environment you can still find stocks that go up. It's just different stocks."
Among other indices, airline stocks wrought major damage on the
Dow Jones Transportation Average
, which tumbled 70.96, or 1.9%, to 3579.20. Airlines were bludgeoned by a negative report about revenues per seat from the
Air Transport Association
last night and cautious commentary today from
BT Alex. Brown
. With all major carriers down sharply, led by
7.3% decline, the
American Stock Exchange Airline Index
American Stock Exchange Composite Index
climbed 5.64, or 0.7%, to 788.36.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
rose 87.84, or 1.3%, to 7014.37 and the
Mexican Stock Exchange IPC Index
fell 124.95, or 2.1%, to 5731.20.
Wednesday's Company Report
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.
As noted above, Dell slid 4 1/4, or 9.7%, to 39 13/16 despite last night's first-quarter earnings report, which was in line with the 31-analyst outlook for 16 cents a share. Analysts were said to be disappointed with the PC maker's profit margins.
Web healthcare service provider
soared 24 1/16, or 43.4%, to an all-time high of 80 1/4 after confirming plans to buy privately held rival
. The deal will be a $5.5 billion stock transaction, according to
The Wall Street Journal Interactive Edition
. The new company's backers may include
Med E America
, which Healtheon recently agreed to buy for $460 million, hopped up 5 5/8, or 21%, to an all-time high of 32 3/8.
, which owns a significant stake in WebMD, jumped 1 1/16, or 7%, to 16 5/16.
slipped 2 1/8 to 69 3/16 following an earlier low of 66 1/2 after, as mentioned earlier, the Air Transport Association released figures last night showing revenue per airline seat falling by 3% in April, a drop as much as 1.5% steeper than analysts expected.
Separately, BT Alex. Brown issued a research note saying year-over-year monthly revenue trends for the domestic airline industry are "only likely to get worse." UAL lost 5 7/8, or 7.3%, to 74 11/16;
lost 3 3/16 to 61 1/2;
lost 2 3/4, or 5%, to 52 1/8; and
lost 2 11/16, or 6%, to 41 15/16.
tacked on 7/8 to 134 15/16, off an earlier high of 139 1/4, following an upbeat analysts meeting during which the company announced plans to launch a major new online shopping initiative called
this summer. AOL also said its shoppers spent a record $1.8 billion in the March 1999 quarter. The company brought more than 1.7 million first-time buyers to online merchants during the quarter.
Mergers, acquisitions and joint ventures
shot up 8 7/8, or 29.3%, to 39 1/8 after last night setting plans to spin off all of its 7.3 million shares in online auction site
to Creative Computers shareholders. UBid picked up 2 3/16 to 48 1/16.
swelled 5 1/16, or 27.2%, to an annual high of 23 3/4 on news it's being acquired by mutual dental insurer
Guardian Life Insurance
for $25 a share in cash.
Long Beach Financial
jumped 2 1/8, or 17.4%, to an all-time high of 14 3/8 after
agreed to acquire the company for $350 million. Washington Mutual added 3/4 to 39 3/4.
Telecommunications cable company
leapt 5 1/8, or 16.5%, to 36 1/4 on word it's being bought by diversified manufacturer
for $2.87 billion in cash and stock. Tyco, which grew 4 1/8 to an all-time high of 93 1/2, plans to integrate Raychem's business with its electronics business.
sliced off 1 13/16, or 5.3%, to 32 9/16 after agreeing to buy
in a stock deal valued at $958 million. Western Bancorp flew 1 11/16 to 40 5/16.
Earnings/revenue reports and previews
lowered 13/16 to 17 3/4 after posting a wider-than-expected fourth-quarter loss last night. The company lost 82 cents a share, including a 13-cent charge for impairment of long-lived assets. The 12-analyst estimate called for an operating loss of 62 cents vs. the year-ago loss of 25 cents.
advanced 1 7/16 to 41 3/16 after reporting second-quarter earnings of 25 cents a share, beating the 17-analyst forecast for a repeat of the year-ago 23 cents.
Semiconductor equipment firm Applied Materials excelled 2 3/16 to 65 5/16 after last night posting second-quarter earnings of 36 cents a share, topping the 25-analyst view of 27 cents but falling below the year-ago 37 cents.
covered the report in
a story last night.
lifted 1 5/16 to 37 1/8 after posting a first-quarter loss of 3 cents a share, narrower than the 15-analyst forecast of a loss of 4 cents but reversing the year-ago earnings of a penny. Meanwhile, Consolidated plans to merge its
Web site with closely held online toy seller
vaulted 1 1/8, or 9.3%, to 13 1/4 after reporting first-quarter earnings of 15 cents a share, 1 cent higher than both the six-analyst view and the year-ago figure.
Hospital bed and casket maker
skidded 3 5/8, or 7.6%, to 43 15/16 after it yesterday warned its second-quarter earnings would fall short of the expected 71 cents a share. The company said it expects to earn at least 59 cents a share for the quarter.
Lernout & Hauspie Speech Products
expanded 1 1/2 to 38 7/8 after it reported first-quarter earnings of 12 cents a share, beating the five-analyst forecast by 2 cents and matching last year's figure.
Lycos added 4 to 117 after last night it announced a 2-for-1 stock split and a narrower-than-expected loss for its third quarter. The Web portal recorded a quarter loss of 2 cents a share before goodwill amortization, a penny narrower than the 19-analyst forecast and narrower than the year-ago loss of 11 cents. Today,
raised Lycos to long-term buy from accumulate.
lost 1 3/8, or 15.2%, to 7 11/16 after saying that following its year-end audit, it would revise results for three quarters of fiscal 1999 and the year overall downward.
shaved off 1/16 to 31 7/8 after it reported first-quarter earnings of 62 cents a share, in line with the 13-analyst forecast and up from the year-ago 45 cents.
Offerings and stock actions
excelled 1 1/8, or 5.8%, to 20 5/8 after its 28-million IPO priced at $19.50 a share.
The price range for online toy seller
(ETYS:Nasdaq) IPO was raised to $18 to $20 a share from $10 to $12. The 8.32 million-share offering is expected to price tonight.
(RBAK:Nasdaq) rose 6 1/2, or 7.7%, to 90 1/2 in its second day of trading. During yesterday's trading debut, the supplier of high-speed Internet access systems jumped 45 to close at 68.
tumbled 6 1/4, or 14.5%, to 36 15/16 after
initiated coverage with a neutral rating.
surged 12 1/4, or 17.7%, to an all-time high of 81 9/16 after
Putnam Lovell de Guardiola & Thornton
started coverage with a buy.
climbed 1 7/16, or 5.3%, to 28 11/16 after
lifted it to strong buy from accumulate.
Teradyne grew 4 1/4, or 7.9%, to 58 1/4 after
Credit Suisse First Boston
upped its 1999 earnings view to $1.70 from $1.65 a share and its 2000 view to $2.85 from $2.80.
Several HMO stocks surged today on expectations for higher health-insurance premium rates next year:
rose 3 1/16 to 95 3/4;
Oxford Health Plans
rose 1 3/16 to 20 7/8;
rose 3 7/8 to 96 1/2;
rose 1 13/16, or 10.6%, to 18 15/16; and
rose 2 7/8, or 5%, to 59 7/8.
sank 17 3/16, or 13.9%, to 106 15/16 after
The San Francisco Chronicle
said that city's D.A. office was investigating the company for possible fraud.