Market's 'Unpleasantness' Drags On With Few Positive Signs Appearing - TheStreet

Market's 'Unpleasantness' Drags On With Few Positive Signs Appearing

No one's seeing any panic yet, but the ongoing malaise is making few optimists on Wall Street.
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SAN FRANCISCO -- A stronger-than-expected July

employment report

produced somewhat unexpected results on Wall Street today. The final result was pretty predictable as major equities finished another rough week on a down note. But while bonds plummeted in the wake of the job data, which confirmed to most that additional

Fed

rate tightening is unavoidable, selling in equities was not nearly so harsh.

The price of the 30-year Treasury bond fell 1 6/32 to 87 26/32, its yield rising to 6.15% as some bearish players speculated the central bank might consider a 50 basis point rate hike at its Aug. 24 meeting.

Before the market opened, the

Labor Department

reported nonfarm payrolls grew by 310,000 in July and average hourly earnings rose 0.5%, both in excess of expectations. (The unemployment rate was unchanged at 4.3%, as expected.) Nonetheless, stock proxies opened higher. But that proved to be the mother of all head fakes (unless you consider

yesterday's bounce).

"This is an unpleasant market," said Doug Myers, vice president of equity trading at

Wachovia Securities

in Atlanta. "That's what Southerners used to say about the Civil War. They called it 'the recent unpleasantness.'"

The

Dow Jones Industrial Average

rose as high as 10,818.20 around 10 a.m. EDT in its initial defiance of the employment report. But the blue chip proxy tumbled soon thereafter, trading as low as 10,653.25 before closing off 79.79, or 0.7%, to 10,714.03. The index is now 4.4% off its all-time high of 11,209.84, set

July 16.

The

S&P 500

followed a similar path, closing down 13.42, or 1%, to 1300.29 after trading as high as 1316.74 and as low as 1293.19. The index is down 8.4% from its July 16 record. The

Russell 2000

fell 1.71, or 0.4%, to 428.04.

Among tech gauges,

TheStreet.com Internet Sector

index regurgitated about two-thirds of yesterday's bounce, falling 15.16, or 3%, to 498.49. The

Nasdaq Composite Index

continued its correction, falling 17.86, or 0.7%, to 2547.97, climbing off its session low of 2535.63 but ending far from its early best of 2592.33.

Among individual tech names,

eBay

(EBAY) - Get Report

found itself in the unwanted spotlight, falling 10.5% after experiencing another site outage.

Conversely,

EarthLink

(ELNK)

rose 12.3% and

MindSpring

(MSPG)

gained 10.3% after

America Online

(AOL)

signed distribution and co-branding agreements for its instant messaging software with the Internet service providers. AOL rose 0.9%.

Although some market players expressed pleasant surprise that losses weren't worse, Myers found it hard to be optimistic.

"All the stocks are grinding down," he said. "And when they grind down 1, 3, 9 points at a time it really hurts."

That view was reflected in market internals, which sagged again.

In

New York Stock Exchange

trading, 698.9 million shares were exchanged while declining stocks led advancers 1,969 to 966. In

Nasdaq Stock Market

action 817.2 million shares traded while losers led 2,178 to 1,694. New 52-week lows bested new highs 192 to 41 on the Big Board and by 89 to 35 in over-the-counter trading.

August (24th) and Everything (After)

However, "the market did put up a pretty good showing," countered Jim Volk, co-director of institutional trading at

D.A. Davidson

in Portland, Ore. "I think the economic numbers are another excuse to continue to correct the market to levels where people feel more comfortable. Add to that the summer doldrums in a market that's already correcting and that's why you got more. But there was no panic today, obviously."

Volk noted there was some "bargain hunting" in big names such as

AT&T

(T) - Get Report

, which rose 2%. Moreover, there was out-and-out strength in chip names such as

Micron

(MU) - Get Report

due to reports of strongly rising DRAM prices. Micron gained 7.3% today, leading the

Philadelphia Stock Exchange Semiconductor Index

up 1.7%.

The "reason the

broader market continued to act poorly is not because they expect the Fed to increase rates," the trader continued. Today's data are "another reason for them to go for a third hike, which is really spooking people. People are looking ahead" to the Fed's meeting Oct. 5.

Rao Chalasani, chief investment strategist at

Everen Securities

in Chicago, is one who is looking ahead to that October meeting, but for reasons that put him in a distinct minority on Wall Street.

"I don't believe the Fed is going to do anything in August," he said. "I think they'll tighten in October. My feeling is now that the long bond yield is above 6%, the bond market is doing the job for the Federal Reserve. There's no reason for the Fed to move until October."

Still, Chalasani does not believe the stock market will be able to make much forward progress.

"On a short-term basis I believe the movement of the stock market is no longer on the upside," he said, showing a flair for the obvious. "Net-net, with the threat of the Fed moving in August or October, the market will be slow to move on the upside even though it doesn't seem to have a lot of downward momentum."

Among other indices, the

Dow Jones Transportation Average

fell 63.13, or 1.9%, to 3220.03; the

Dow Jones Utility Average

gained 0.66, or 0.2%, to 318.38; and the

American Stock Exchange Composite Index

managed to rise 1.83, or 0.2%, to 777.92.

For the week, the Dow industrials added 58.88, or 0.6%; the S&P 500 shed 28.43, or 2.1%; the Comp surrendered 90.52, or 3.4%; the Russell 2000 fell 16.73, or 3.8%; while the DOT plunged 57.60, or 10.4%. Additionally, the Dow transports tumbled 113.21, or 3.4%; the Dow utilities rose 3.72, or 1.2%; and the Amex Composite fell 10.31, or 1.3%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 27.75, to 6878.80 and the

Mexican Stock Exchange IPC Index

lost 121.13, or 2.35% to 5029.66. For the week, the TSE fell 202.23, or 2.9% and the IPC shed 230.69, or 4.4%.

Friday's Company Report

By Eileen Kinsella
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.

)

American Home Products

(AHP)

dropped 6 1/16, or 11.9%, to 44 7/8 after a jury awarded a heavy $23 million to a Texas woman who said the diet-drug combination fen-phen had caused her heart valve damage. The company said it would appeal the verdict.

Mergers, acquisitions and joint ventures

Aetna

(AET)

took the unusual step of publicly denying rumors it is acquiring

Oxford Health Plans

(OXHP)

, citing extremely ominous-sounding reasons like "some online stuff," and "rumors in the marketplace." The company also announced it completed its $1 billion acquisition of

Prudential Healthcare

. Shares of Aetna fell 2 7/8 to 81 9/16 while shares of Oxford edged up 1/4 to 16 1/2.

America Online gained 11/16 to 84 5/8 after it signed distribution and co-branding agreements for its instant messaging software with Internet service providers EarthLink and MindSpring. EarthLink ascended 4 9/16, or 12.3%, to 41 9/16 on the news, while MindSpring hopped up 2 11/16, or 10.3%, to 28 13/16.

Chevron

(CHV)

added 3/8 to 95 13/16 after the company said it was in talks with

Royal Dutch/Shell

(RD)

and four West African countries to build a pipeline to supply Nigerian gas to the region.

Century South Banks

(CSBI)

inched up 7/8 to 22 1/4 after it said it would acquire

Haywood Bancshares

(HBS)

in a $26.7 million stock deal. Haywood jumped 5 3/16, or 36.3%, on the news.

Deutsche Telekom

(DT) - Get Report

slipped 11/16 to 40 1/16 after it confirmed plans to buy U.K. mobile telephone firm

One2One

from

Cable & Wireless

(CWP)

and

MediaOne

(UMG)

for about $11.2 billion. Telekom will also assume about $2.4 billion in One2One debt. Cable & Wireless rose 1 5/16 to 36 15/16, but MediaOne lost 1/8 to 70 5/8.

FDX

(FDX) - Get Report

, the parent company of

Federal Express

, lost 5/8 to 42 7/16 after it agreed to acquire the assets of privately held

GeoLogistics'

Air Services unit for $116 million.

InterCept Group

(ICPT) - Get Report

a bank processing service, added 2 1/8, or 9.9%, to 23 7/8 after agreeing to buy rival

SBS

to beef up its Internet banking service.

Nokia

(NOK) - Get Report

added 1/4 to 81 11/16 after the company said it was in talks to sell its

Salcomp

unit, which makes mobile phone battery chargers, as part of its plan to focus on core telecommunications and Internet technologies.

NextCard

(NXCD)

added 5/8 to 23 after last night posting a narrower-than-expected second-quarter loss. The company said it lost 45 cents a share for the quarter, 2 cents thinner than the five-analyst consensus.

American depository receipts of Swedish truckmaker

Scania

(SCV.A)

climbed 7 3/16, or 23.8% after rival

Volvo

(VOLVY)

made a bid to acquire the 78.4% of the company it doesn't already own. Volvo -- which was down 2 9/16, or 8.5%, to 27 1/2,on the news -- is offering nearly $39 (315 kronor) in cash for each Scania share or a stock swap of six new Volvo shares for every five Scania shares.

Investor

, Scania's controlling shareholder, has agreed to sell its stake.

Earnings/revenue reports and previews

CommNet Cellular

(CELS)

lost 1/16 to 30 9/16 after reporting third-quarter earnings of 14 cents a share, surpassing the lone-analyst estimate of 4 cents.

SCI Systems

(SCI) - Get Report

lost 1 9/16 to 51 7/8 despite posting fourth-quarter earnings of 60 cents a share last night, 3 cents above the 19-analyst estimate and up from the year-ago 54 cents.

SG Cowen

raised the stock to buy from neutral today, and the company said it expects higher profits in 2000, but that wasn't helping matters any.

ADRs of U.K. cable firm

Telewest Communications

(TWSTY)

fell 2 7/8, or 7%, to 38 5/8 after the company said yesterday that its second-quarter loss had widened 56% because of higher accounting charges and interest payments for acquisitions. Telewest said it expects its losses to peak early next year as it launches its high-speed Internet and multimedia services

Terra Nova

(TNA) - Get Report

jumped 4 5/8, or 18.8%, to 27 5/16 after the company said last night that it had received an unsolicited merger offer and retained

Donaldson Lufkin & Jenrette

to help it consider its alternatives. The news came as Terra Nova reported lower-than-expected second-quarter earnings of 68 cents a share, worse than the four-analyst estimate of 71 cents and a penny less than the year-ago 69 cents. The company also said last night that it is in the final stage of talks to acquire a U.S. company.

Unilever's

dual ADRs fell in New York even after the company posted an 8% rise in second-quarter pretax profit. Unilever is a joint venture of the Netherlands'

Unilever NV

(UN) - Get Report

and the U.K.'s

Unilever PLC

(UL) - Get Report

-- the Dutch ADRs were down 2 to 72, while the British ones lost 1 9/16 to 38 3/4.

Credit Suisse First Boston

reiterated its hold rating on Unilever today.

Offerings and stock actions

Internet Gold

(IGLD) - Get Report

lost 1/8 to 11 15/16 in its first day of trading, having been priced last night at $12 a share by lead underwriter

Lehman Brothers

.

E-commerce investment group

Internet Capital

(ICGE)

jumped 5 7/8, or 24.1%, to 30 5/16 on the day after its trading debut.

Sycamore Networks

said it plans to raise $115 million in an IPO.

Morgan Stanley Dean Witter

,

Lehman Brothers

,

J.P. Morgan

and

Dain Rauscher Wessels

will underwrite the offering.

Analyst actions

Diversified holding company

Loews

(LTR)

gained 1 1/2, to 72 1/2 after

Merrill Lynch

raised it to near-term buy from neutral.

Natural gas and electricity company

MCN Energy

(MCN) - Get Report

slipped 3/16 to 18 7/16 after

Deutsche Banc Alex. Brown

cut it to market perform from buy.

Yahoo!

(YHOO)

shaved off 1 7/16 to 126 5/16 after

Goldman Sachs

raised it to its recommended list from market outperformer. The upgrade comes at a time when Yahoo! is trading at about a 45% discount to its 12-month intraday high of 244, set back on April 6.

Miscellany

Adam.com,

an online health service and unit of

A.D.A.M. Software

(ADAM)

, sued

drkoop.com

(KOOP)

alleging breach of contract and copyright and trademark infringement. Shares of A.D.A.M. lost 9/16 to 15 1/4 while shares of drkoop fell 1 7/16, or 8.4%, to 15 3/4.

Meanwhile,

Boston Scientific

(BSX) - Get Report

was hit 6 1/2, or 17.8%, to 30 after it said it will recall its Rotablator RotaLink Advancer and RotaLink Plus rotational atherectomy systems, which, when they work, open constricted blood vessels by drilling away plaque from the vessel walls. Boston Scientific has sold about $60 million worth of those two products in the first half of this year.

Citigroup

(C) - Get Report

fell 1 1/2 after the company said it would realign its units to form an investment management and private banking arm.

Decking products maker

Trex

(TWP)

was banging a gong this morning ahead of its earnings report on Monday. Trex lately rose 1 13/16, or 7.8%, to 25 3/4.

Editorial assistant

Eric Gillin and senior writer

Justin Lahart contributed to this story.