Markets Stagger Through Day Two of Earnings Season

All the major indices had a lousy day today. Earnings and inflation worries are blamed.
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SAN FRANCISCO -- Like

The Angels' boyfriend, the bonds were back and there was trouble for those long stocks today. (Hey nah, hey nah, the bonds are back.)

Yesterday, the

Nasdaq Composite Index

set a record while blue-chip gauges dipped very modestly during the Columbus Day-absence of bond market trading.

Today's Market: Join the discussion on

TSC

Message Boards.

Today, all major equity proxies tumbled as rising bond yields overshadowed better-than-expected earnings from big brokers and tech names such as

Novellus Systems

(NVLS)

. Rising oil prices and the falling dollar added to investors' skittishness, overcoming anticipation of strong earnings due after the close from bellwethers such as

Intel

(INTC) - Get Report

and

Motorola

(MOT)

.

The price of the 30-year Treasury bond fell 14/32 to 98 18/32, its yield rising to 6.23% after hitting a high of 6.24% intraday. In late New York trading, the dollar was quoted at 106.24 yen vs. 106.72 late yesterday.

Bonds and the dollar each recovered from their worst levels of the morning amid reports that an army-led coup has ousted Pakistani

Prime Minister Nawaz Sharif

. Those developments helped further an already unsettled equity market.

"There was some negative sentiment coming into the day and

the coup is a nice little added bonus," said one West Coast trader. "The bottom line is the market had a great rally in the last week-and-a-half and it got a little overdone.

The Pakistan news is probably why it's gotten a little sloppier."

However, another trader said the Pakistani news may have only exacerbated what was more of a fundamental decline. "This is dollar weakness, bonds' resistance levels being tested and poor general market action the last few days," he said.

The

Dow Jones Industrial Average

fell 231.12, or 2.2%, to 10,417.06 while the

S&P 500

lost 22.17, or 1.7%, to 1313.04.

The combination of rising interest rates and the falling greenback was most damaging to financials stocks. The

Morgan Stanley Broker/Dealer Index

fell 0.6% despite stronger-than-expected profit reports from

Merrill Lynch

(MER)

,

PaineWebber Group

(PWJ)

and

Donaldson Lufkin & Jenrette

(DLJ)

. The

Philadelphia Stock Exchange/KBW Bank Index

fell 1.4% and

American Express

(AXP) - Get Report

was among the biggest drags on the Dow.

Other Dow laggards included cyclical names such as

AlliedSignal

(ALD)

and

Caterpillar

(CAT) - Get Report

as well as growth favorites such as

Hewlett-Packard

(HWP)

and

IBM

(IBM) - Get Report

.

Tech stocks outside the Dow also suffered in the wake of rising interest rates, which makes their high valuations harder to justify. The Nasdaq Comp, once as high as 2932.32, closed down 43.55, or 1.5%, to 2872.40.

TheStreet.com Internet Sector

index lost 21.23, or 2.9%, to 724.18. The

Philadelphia Stock Exchange Semiconductor Index

fell 1.1% while the

Nasdaq 100

and the

Morgan Stanley High Tech 35

each shed 2%.

The 20-stock

Red Hots technology index tumbled 7.32, or 3.3%, to 216.49.

Among earnings-related names, Novellus leapt 7.5% after last night reporting third-quarter earnings of 54 cents a share, well ahead of the 22-anlayst consensus of 45 cents.

After the close, Intel posted third-quarter profits of 55 cents a share vs. the 23-analyst estimate of 57 cents.

Reflecting on Intel's report, Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee, suggested word of the shortfall may have leaked out, contributing to technology's overall malaise. However, he had no specific knowledge of such an occurrence and Intel rose 3/16, or 0.3% to 76 11/16 ahead of the report; in after-hours trading, the stock was quoted as low as 71 1/4,

Reuters

reported.

"The beginning of earnings season has been kind of spotty," Herrick said, noting recent warnings by

Knight/Trimark

(NITE)

yesterday and

Raytheon

(RTN.B)

, down 43.6%.

"There have been some landmines earnings wise," he said. " The market moved higher in anticipation of good numbers and a belief pre-announcement were out of the way. Here you have these earnings coming out and that's putting the market on its heels."

The

Russell 2000

declined 5.51, or 1.3%, to 424.68 as market internals turned decidedly negative, although volume was still relatively subdued.

In

New York Stock Exchange

trading, 778.3 million shares were exchanged while declining stocks dominated advancers 2,161 to 853. In

Nasdaq Stock Market

action 1 billion shares traded while losers led 2,390 to 1,492. New 52-week lows bested new highs 196 to 32 on the Big Board and by 111 to 85 in over-the-counter trading.

Don't Call It a Failure

Today's decline had some market players fretting the rally of the past week or so was either a mirage, or a failure and noted key technical levels -- such as Dow 10,500 -- provided little resistance to the selling.

"We're tempting fate," said Greg Nie, chief technical analyst at

First Union Securities

in Chicago. "The market started trading in poor fashion on Friday. The best way to describe the dichotomy is there's a new high in the Comp yesterday and a new low in the advance/decline today."

Additionally, the five-day

Arms Index

showed the market had become "overbought" "and now we're paying the price," he said, while noting the 30-day trend remains "neutral."

If volume were to expand markedly on the downside or the bond futures contract were to break 112, "you're opening the door to the scenario that's caused maximum headaches for the equity market," the technician said. The December bond futures contract closed at 112 7/32 today.

But "it's too harsh to say the recovery attempt" from the lows in September "has occurred and if failing," Nie said. "What we're faced with now is a situation where some sloppy trading is going to occur. But somewhere

in the fourth quarter bulls will have a chance to rescue and repair the long-term bullish trend. They have to make maximum use of that opportunity before sellers get a stronger grip on tape action."

Among other indices, the

Dow Jones Transportation Average

lost 64.53, or 2.1%, to 2961.49; the

Dow Jones Utility Average

dipped 0.13 to 295.59; and the

American Stock Exchange Composite Index

gained 2.09, or 0.3%, to 792.11.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 19.00 to 7135.04 and the

Mexican Stock Exchange IPC Index

plunged 128.20, or 2.4%, to 5202.82.

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.

)

Novellus soared 5 3/16, or 7.4%, to 74 11/16 after it reported third-quarter earnings of 54 cents a share, beating the 22-analyst estimate of 46 cents and above the year-ago 22 cents.

Banc of America Securities

upgraded the stock to strong buy from buy, while

Lehman Brothers

raised its fourth-quarter estimate to 65 cents a share from 57 cents and its fiscal 1999 estimate to $1.75 from $1.60.

Thomas Weisel Partners

also raised its fiscal 1999 estimates to 1.75 a share, from $1.58.

Mergers, acquisitions and joint ventures

AirGate PCS

(PCSA)

, which slipped 3/4 to 34, and

Lucent

(LU)

, which declined 2 3/16 to 63 9/16, said they set a three-year supply deal worth $150 million.

Consolidated Edison

(ED) - Get Report

is in talks to buy

Northeast Utilities

(NU)

, according to published reports. Shares of Con Ed stumbled 3/4 to 36 7/16, while Northeast Utilities advanced 1/8 to 21 1/4.

Excite@Home

(ATHM) - Get Report

retreated 3 3/16, or 6.6%, to 45 after it said

IBM

(IBM) - Get Report

will use the Excite portal as an Internet launch page. IBM shares fell 3 3/8 to 110 7/8.

HomeStore.com

(HOMS)

lost 2 5/16 to 45 7/8 after it said it bought an Internet home buyers service from

Central Newspapers

(ECP)

for $85 million. HomeStore's latest purchase rivals

Cendant's

(CDT)

plans to roll out a similar real estate site. Shares of Central Newspapers bounced 3/8 to 45 3/8, while Cendant shares were unchanged at 23 7/16.

HCC Insurance

(HCC) - Get Report

tumbled 9/16 to 15 7/16 after it agreed to buy

Centris Group

(CGE)

for $171 million. HCC is offering $12.50 a share for each of Centris' 11.6 million shares outstanding. HCC also agreed to acquire $25 million in debt. Centris mounted 1 3/16, or 11.5%, to 11 1/2.

A new plan will enable

Hewlett-Packard's

(HWP)

HP Brio PC

owners to access the Internet using

AT&T''s

(T) - Get Report

AT&T Worldnet Service

. According to the plan's terms, Brio owners are entitled to free Internet access for one month, six e-mail accounts and AT&T technical support. AT&T charges $9.95 per month for 10 hours of access, or $21.95 a month for unlimited access. Shares of H-P declined 4 3/16 to 84, while AT&T stumbled 7/8 to 47 7/8.

United Technologies'

Pratt & Whitney

division said it has been awarded a contract from

British Airways

(BAB) - Get Report

that could bring in more than $300 million. The transaction calls for Pratt to supply the airline with PW6000 engines to run its

Airbus Industrie A318 aircraft

. British Airways has ordered 12 firm A318s and 12 option aircraft. Shares of United Technologies retreated 3 7/16, or 5.8%, to 55, while British Airways tumbled 1 5/16 to 52 15/16.

TD Waterhouse Group

(TWE)

climbed 3/8 to 12 7/8 after it said it signed a letter of intent to join the

RediBook

electronic communications network

consortium. Members include

Fidelity Investments

,

Donaldson Lufkin & Jenrette

and

Spear Leeds & Kellogg

.

Earnings/revenue reports and previews

ADTRAN

(ADTN) - Get Report

jumped 2 3/8, or 6.4%, to 39 after it reported third-quarter earnings of 36 cents a share, better than the 12-analyst estimate of 33 cents and up from the year-ago 29 cents.

American Freightways

(AFWY)

lost 3/4 to 15 1/4 after it posted third-quarter earnings of 44 cents a share, beating the eight-analyst estimate of 40 cents and above the year-ago 26 cents.

Amway Asia Pacific

(AAP) - Get Report

gained 1 7/8, or 17%, to 12 7/8 after it reported fourth-quarter earnings of 25 cents a share, well above the two-analyst estimate of 14 cents and the year-ago 5 cents. The company said fourth-quarter sales in China rose 84.8%.

AVX

(AVX) - Get Report

skidded 1 to 37 7/16 after it reported second-quarter earnings of 30 cents a share, greatly beating the six-analyst estimate of 23 cents and the year-ago 12 cents.

Donaldson Lufkin & Jenrette

(DLJ)

bounced 2 3/16, or 5.4%, to 42 1/2 after it posted third-quarter earnings of 85 cents a share, topping the seven-analyst estimate of 76 cents and above the year-ago 15 cents.

DLJ's online brokerage division,

DLJdirect

(DIR)

, mounted 3/16 to 15 5/16 after it reported a third-quarter loss of 3 cents a share, in line with the five-analyst estimate of a 3-cent loss but down from the year-ago 1-cent profit.

Dow Jones

(DJ)

fell 1 5/16 to 57 11/16 after it posted third-quarter earnings of 50 cents a share before a special gain, 2 cents ahead of the 11-analyst estimate and up from the year-ago 37 cents, which excludes a special charge.

Enron

(ENE)

advanced 1/16 to 38 13/16 after it posted third-quarter earnings of 27 cents a share, in line with the 19-analyst estimate and up from the year-ago 24 cents.

Hertz

(HRZ)

slid 1/4 to 42 9/16 after it reported better-than-expected third-quarter earnings of $1.28 a share, beating the nine-analyst estimate of $1.25 and the year-ago $1.09. The company also said longtime executive Frank Olson will retire from his CEO post Dec. 31, but will continue as chairman. The company's president and COO, Craig Koch, will succeed Olson as CEO.

Hibernia

(HIB)

added 1/16 to 12 3/8 after it reported third-quarter earnings of 33 cents a share, beating the 11-analyst estimate of 30 cents and the year-ago 31 cents.

Hubbell

(HUB.B)

stumbled 2, or 6.5%, to 28 3/4 after it said it expects third- and fourth-quarter earnings to fall below estimates. The company said it expects to post earnings of 52 cents to 54 cents a share in the third quarter. The eight-analyst estimate currently calls for earnings of 56 cents. Hubbell said it sees fourth-quarter earnings coming in at 40 cents to 45 cents. The current seven-analyst estimate calls for the company to earn 57 cents.

International Paper

(IP) - Get Report

skidded 3/16 to 48 11/16 after it posted third-quarter 46 cents a share, beating the 13-analyst estimate 40 cents and the year-ago 20 cents. The company said that strong packaging and printing paper division gains helped boost its results.

Manitowoc

(MTW) - Get Report

lost 4 5/16, or 12.7%, to 29 7/16 after it posted third-quarter earnings of 74 cents a share, beating both the five-analyst estimate of 73 cents and the year-ago 58 cents a share.

MGIC Investment

(MTG) - Get Report

climbed 2 1/4 to 53 9/16 after it posted third-quarter earnings of $1.11 a share, beating the 10-analyst estimate of $1.04.

Merrill Lynch

(MER)

slipped 3/4 to 67 after it posted third-quarter operating earnings of $1.34 a share, beating the nine-analyst estimate of $1.29 and above the year-ago operating earnings of 28 cents.

Separately, Merrill said it plans to heighten its exposure to Europe in its "global portfolio" to 18% from 15.8%, saying that evidence supports that the region's growth, "could surprise strongly soon."

Metro-Goldwyn-Mayer

(MGM) - Get Report

was unchanged at 22 3/16 after it reported third-quarter earnings of 7 cents a share, beating the two-analyst estimate of a 19-cent loss and up from a year-ago 61-cent loss.

Mueller Industries

(MLI) - Get Report

declined 3/16 to 29 7/8 after it posted third-quarter earnings of 66 cents a share, ahead of the four-analyst estimate of 62 cents and up from the year-ago 47 cents. The company said operational improvements and acquisitions helped earnings.

Neon Systems

(NESY)

plummeted 6 1/4, or 23%, to 20 7/8 after it cautioned that its second-quarter sales would fall 5% analysts estimates. The company said it expects to post second-quarter earnings of 7 to 8 cents a share, possibly missing the five-analyst estimate of 8-cent gain and up from the year-ago 4-cent gain.

PaineWebber

(PWJ)

climbed 11/16 to 35 after it posted third-quarter earnings of 86 cents a share, beating the nine-analyst estimate of 83 cents and above the year-ago 51 cents.

Phelps Dodge

(PD) - Get Report

mounted 1 7/8 to 57 1/16 after it reported third-quarter earnings of 27 cents a share, beating the seven-analyst estimate of 21 cents but down from the year-ago 35 cents. The company attributed the positive earnings surprise to increasing copper prices.

Proctor & Gamble

(PG) - Get Report

slid 13/16 to 97 3/16 after CEO Durk Jager said he expected the company to post first-quarter earnings in line with the 11-analyst estimate of 88 cents a share, up from the year-ago 80-cent gain.

Stanley Furniture

(STLY)

bounced 7/16 to 21 1/8 after it reported third-quarter earnings of 64 cents a share, ahead of the six-analyst estimate of 57 cents and up from a year-ago 46 cents a share.

Trustmark

(TRMK) - Get Report

was unchanged at 22 9/16 after it reported third-quarter earnings of 35 cents a share, a penny better than the six-analyst estimate and up from the year-ago 29 cents.

Weyerhaeuser

(WY) - Get Report

leaped 1 1/16 to 60 1/2 after it posted third-quarter earnings of $1.18 per share, beating the 12-analyst estimate of 95 cents and the year-ago 56 cents. The stock was giving the

Philadelphia Stock Exchange Forest and Paper Products Index

a nice boost, up 7.9 to 333.35.

Offerings and stock actions

Primus

(PRTL)

lost 2 9/16, or 11.1%, to 20 1/2 after it said it set an eight-million share offering priced at $22.50 a share. Lehman Brothers and

Morgan Stanley Dean Witter

are serving as the deal's lead underwriters.

Analyst actions

Abercrombie & Fitch

(ANF) - Get Report

declined 2, or 5.8%, to 32 1/2 after

Brown Brothers Harriman

cut its rating to near-term buy from strong buy.

American Home Products

(AHP)

skidded 1 1/4 to 48 3/8 despite

Deutsche Banc Alex. Brown

rolling out coverage of the stock with a buy.

Calpine

(CPN)

leaped 6 1/8, or 14%, to 49 5/8 after PaineWebber upped its third-quarter earnings estimates to 70 cents a share from 55 cents.

Fastenal

(FAST) - Get Report

sank 4 13/16, or 11.4%, to 37 1/8 after

U.S. Bancorp Piper Jaffray

sliced its rating from buy to hold. Yesterday, the company reported disappointing

third-quarter results .

MedImmune

(MEDI)

cratered 9 1/2, or 7.6%, to 114 despite Lehman Brothers raising its third-quarter estimate to a 3-cent profit from a 3-cent loss.

Monsanto

(MTC) - Get Report

gained 7/16 to 38 7/8 after PaineWebber upgraded the shares to buy from neutral.

Purchase.Pro

(PPRO)

advanced 9/16 to 36 7/16 after

Prudential Securities

initiated coverage with a buy rating.

Rite Aid

(RAD) - Get Report

mounted 1/2, or 5%, to 10 1/2 after wading in negative territory for most of the session. Lehman Brothers sliced fiscal 2000 estimates to 26 cents from $1.28 per share and fiscal 2001 estimates to 70 cents from $1.49 per share. After yesterday's close, the company

warned investors that it would post a loss for its third quarter.

Reynolds Metals

(RLM) - Get Report

tumbled 13/16 to 61 9/16 after Deutsche Banc Alex. Brown upped the shares to buy from market perform.

Tiffany

(TIF) - Get Report

declined 2 to 64 1/2 after Prudential Securities cut the shares to accumulate from strong buy.

Miscellany

Bank of America

(BAC) - Get Report

is expected to reveal today a service that will allow companies to set up an online store through the bank,

The Wall Street Journal

reported. Shares of Bank of America declined 9/16 to 53 9/16.

Raytheon

(RTN.A)

is behind schedule or over cost on more than a dozen of its fixed contracts with the Pentagon, the

Journal

reported, citing people familiar with the programs.

ING Barings

sliced the shares to hold from buy. Raytheon resumed trading at 42 in the final hour of the session.

Seagram's

(VO) - Get Report

Universal Studios

has set a marketing pact with

America Online

(AOL)

, which will result in AOL kiosks at Universal Studios'

Islands of Adventure

theme park, the

Journal

reported. Seagram's slid 13/16 to 43 5/16, while AOL shares fell 7 1/16, or 5.8%, to 114.