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Market's Resilience Persists With Late-Day Hop

Equities finally caught up with today's strong move in bonds, moving firmly higher into the close.
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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

story yesterday.)

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




Applied Materials



Lycos (furthered buoyed by a 2-for-1 split announcement) rose 3.5%, helping 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

Novellus Systems








rallied impressively in concert, pushing the

Philadelphia Stock Exchange Semiconductor Index

up 3.9%.


S&P 500

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.

General Electric



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



Robert Rubin's

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."

Pint-Sized Power

While blue-chip averages waffled until day's end, the

Russell 2000

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

First Albany

. "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

Reynolds Metals



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

lost 4%.


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

By Heather Moore
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.


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









, the



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.

Premiere Technologies


, which owns a significant stake in WebMD, jumped 1 1/16, or 7%, to 16 5/16.

American Airlines




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;

US Airways


lost 2 3/4, or 5%, to 52 1/8; and

Alaska Air


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

Creative Computers


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.

First Commonwealth


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

Washington Mutual


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

Tyco International


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.

U.S. Bancorp


sliced off 1 13/16, or 5.3%, to 32 9/16 after agreeing to buy

Western Bancorp


in a stock deal valued at $958 million. Western Bancorp flew 1 11/16 to 40 5/16.

Earnings/revenue reports and previews

AMC Entertainment


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.

Analog Devices


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.

Closeout retailer

Consolidated Stores


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


Hastings Entertainment


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

Hillenbrand Industries


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,

Merrill Lynch

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.

Redback Networks

(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.

Analyst actions

E-Tek Dynamics


tumbled 6 1/4, or 14.5%, to 36 15/16 after

First Albany

initiated coverage with a neutral rating.

Southwest Securities


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

Prudential Securities

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;

Foundation Health


rose 1 13/16, or 10.6%, to 18 15/16; and

United Health


rose 2 7/8, or 5%, to 59 7/8.

Providian Financial


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.