Market's Worries Deepen as Goldman IPO Can't Stop Selloff
Goldman Sachs
(GS) - Get Report
took the ball and ran on its first day as a public entity while the
Dow Jones Transportation Average
enjoyed a second straight session in the sandbox of new highs. But another big tumble in the bond market bullied most other "kids" off the equity playground.
The price of the 30-year Treasury bond fell 25/32 to 93 12/32, its yield rising to 5.72%, the highest yield since July 31. Most troubling, the weakness could not be pinned to any single piece of economic data or comment from a political or financial honcho. Some said the selling stemmed largely from a growing concern about inflation's re-emergence, exacerbated by crude oil hovering just under $19 a barrel.
Other market players attributed the decline to Richard Bernstein, chief quantitative strategist at
Merrill Lynch
, who lowered the recommended bond allocation in his model portfolio to 30% from 50%. In conjunction with the call on bonds, Bernstein increased his recommended cash allocation to 30% from 10%, while leaving the equity allocation unchanged at 40%.
Bernstein could not be reached for additional comment.
With bonds on the defensive and cyclicals unable to repeat their recent extravagance, the
Dow Jones Industrial Average
closed down 128.58, or 1.2%, to 10,886.11 after falling as low as 10,868.36.
The index was waylaid by weakness in
General Motors
(GM) - Get Report
, down 5% after reporting weaker-than-expected sales for April. Additionally, financials
American Express
(AXP) - Get Report
,
J.P. Morgan
(JPM) - Get Report
, and
Citigroup
(C) - Get Report
had the Dow backing away from the land of 11,000.
Goldman Sachs rose 32.8% in its first day of trading, but other financials -- including the aforementioned Dow components -- were made squeamish by the bond market's move; the
Philadelphia Stock Exchange/KBW Bank Index
fell 2.7%. Brokerages suffered wider losses; the
American Stock Exchange Broker/Dealer Index
lost 4.4%.
'There's no good feel to the tape when it comes to tech stocks,' said Barry Hyman of Ehrenkrantz King Nussbaum. 'There's a tendency to open higher and trend lower, which is not the best short-term trading pattern.'
Drugmakers were unable to rally despite reports
Johnson & Johnson
(JNJ) - Get Report
, which lost 2.8%, is considering an acquisition of
Centocor
(CNTO)
, which rose 4.8%. The
American Stock Exchange Pharmaceutical Index
lost 1.1%.
Transports were a highlight on the upside, however, as strength in airlines pushed the Dow transports up 35.29, or 1%, to a record 3731.88. The
American Stock Exchange Airline Index
gained 3.4%.
Meanwhile, technology stocks were unable to find solid footing after some early promise. The
Nasdaq Composite Index
fell 50.46, or 2%, to 2485.12 after an initial move to as high as 2557.21.
TheStreet.com Internet Sector
index shed 17.84, or 2.8%, to 615.13.
Nasdaq-traded tech bellwethers fell in unanimity, with
Cisco
(CSCO) - Get Report
and
Sun Microsystems
(SUNW) - Get Report
spearheading the decline. The
Nasdaq 100
fell 1.9%.
In
New York Stock Exchange
activity,
EMC
(EMC)
tumbled 6.5% amid speculation
Hewlett-Packard
(HWP)
will end its reseller agreement with the company. The
Morgan Stanley High-Tech 35
shed 1.8%.
"I'm not giving up on tech
but it doesn't look like tech is ready to reclaim the leadership status," said Barry Hyman, senior market strategist at
Ehrenkrantz King Nussbaum
. "There's no good feel to the tape when it comes to tech stocks. There's a tendency to open higher and trend lower, which is not the best short-term trading pattern."
In Netland, bellwethers such as
Amazon.com
(AMZN) - Get Report
and
America Online
(AOL)
suffered again. But newly public Net firms
MapQuest.com
(MQST:Nasdaq) and
Flycast Communications
(FCST)
rose 48.8% and 19%, respectively.
Weakness in the high-tech stock and other growth-oriented stocks such as retailers and consumer products sent the
S&P 500
down 22.63, or 1.7%, to 1332.00. The
Russell 2000
, once as high as 436.56, closed down 0.69, or 0.2%, to 432.59 as market internals worsened throughout the day.
In NYSE trading, 933.1 million shares were exchanged while losers led gainers 1,581 to 1,400. In
Nasdaq Stock Market
activity, a relatively modest 928 million shares were exchanged while declining issues led 2,304 to 1,728. Still, new 52-week highs led new lows 109 to 17 on the Big Board and by 76 to 63 in over-the-counter trading.
Breather or Teaser?
"Today's story really is interest rates," Hyman said. "A combination of profit-taking in
cyclicals -- a sector that may have moved up too far, too fast -- and Treasuries breaking some kind of trading range was enough to hurt the market today and possibly beyond. The consolidation I'm looking for to start by May 15 could possibly be beginning."
For some time, Hyman has been forecasting that a "normal" consolidation of up to 7% would begin in major averages around mid-May.
"To me, the market is in need of a breather," he said. "I think there's going to be a spook on the market on interest rates in the short term. Nevertheless, I don't look for the
Fed
to do anything at its mid-May meeting and still remain quite optimistic from a macro
perspective. Overhanging everything is the fact
first-quarter earnings have been so much better than expected, which gives me a good view for similar-type second quarter, which gets us off to a great start for the first half."
Like Hyman, most market players were largely untroubled by today's action. But others were less sanguine.
"It is nuts. Everyone I'm talking to -- the best of traders -- are getting hammered," said one equity market participant, who requested anonymity. "Longs that should be going up are down and shorts that should be down are up."
For example, the trader noted consumer stocks such as
PepsiCo
(PEP) - Get Report
and
Kellogg
(K) - Get Report
were losers despite a
Goldman Sachs
conference on the group tomorrow.
Also, "
Merrill Lynch
(MER)
shouldn't be down
6.9% with Goldman out and General Motors is trading like an over-the-counter stock," he said. "It's not the normal thing."
Expect abnormalities to rule until Friday's April employment data, the trader continued. "Before the number, nobody is going to take a sizable position unless it's hedged out," he said. "Buying regular equities, I don't know the downside or the upside. In options, you can make a ton of money or you have a good idea what you can lose."
Among other indices, the
Dow Jones Utility Average
fell 3.02, or 1%, to 313.32; and the
American Stock Exchange Composite Index
shed 0.97, or 0.1%, to 785.70
Elsewhere in North American equities, the
Toronto Stock Exchange 300
fell 27.21, or 0.4%, to 7054.76 and the
Mexican Stock Exchange IPC Index
dipped 18.51, or 0.3%, to 5560.63.
Tuesday'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, Goldman Sachs leapt 17 3/8, or 32.8%, to 70 3/8 -- off an earlier high of 77 1/4 -- after its IPO priced near the top of its range at $53 a share late yesterday.
TheStreet.com
wrote about the offering in a story
last night.
Elsewhere in new issues, MapQuest.com popped up 7 5/16, or 48.8%, to 22 3/8 after
BancBoston Robertson Stephens
priced its 4.6 million-share IPO above-range at $15 a share. And Flycast Communications, a Web advertising network, popped up 4 3/4, or 19%, to 29 3/4 after
BT Alex. Brown
priced its 3 million-share IPO at $25 a share.
Mergers, acquisitions and joint ventures
Centocor surged 2 1/4 to 49 1/8 after
The Wall Street Journal
reported Johnson & Johnson is in talks to buy the biotechnology firm in an all-stock deal that could be valued well above $3 billion. Johnson & Johnson lost 2 3/4 to 95.
Chock Full O' Nuts
(CHF)
jumped 7/8, or 9.3%, to an annual high of 10 5/16 after
Sara Lee
(SLE)
said it would begin a cash tender offer for the company of $10.50 a share. Last month, Chock Full O' Nuts rejected Sara Lee's $223 million cash bid, calling it inadequate. Sara Lee shed 13/16 to 21 15/16.
Wang Global
(WANG)
climbed up 3, or 11.8%, to an annual high of 28 5/8 on news
Getronics
, a Dutch information technology company, is buying the company in a deal worth about $2 billion. Getronics will buy all 46 million outstanding Wang shares for $29.25 each.
Earnings/revenue reports and previews
Aon
(AOC)
sliced off 1 13/16 to 67 1/8 after recording postsplit first-quarter earnings of 58 cents a share vs. the year-earlier 53 cents. Presplit, Aon's earnings hopped to 87 cents a share, 2 cents above the eight-analyst estimate and higher than the year-ago 80 cents.
CNA Surety
(SUR)
spiked up 1, or 7.6%, to 14 1/4 after last night beating first-quarter earnings estimates by 4 cents a share.
Coach USA
(CUI) - Get Report
hopped up 2 1/16, or 8.1%, to 27 5/8 after last night meeting first-quarter earnings estimates for 14 cents a share.
Foodmaker
(FM) - Get Report
rose 2, or 8.1%, to 26 13/16 after last night posting second-quarter earnings 6 cents a share ahead of forecasts.
Information Advantage
(IACO)
tanked 15/16, or 23.4%, to 3 1/8 after warning it expects to report a first-quarter loss and saying it sees revenue in the range of $12 million to $14 million. The analytical software company said revenue was hurt by the length of sales cycles in larger enterprise application projects. The seven-analyst forecast called for earnings of 4 cents a share vs. the year-ago 1 cent.
Intervu
(ITVU)
lowered 8, or 15.8%, to 43 even after last night posting a first-quarter loss 11 cents a share narrower than expected.
Intimate Brands
(IBI)
picked up 3 3/4, or 7.5%, to an all-time high of 54 after last night reporting its April same-store sales surged 7%.
MBIA
(MBI) - Get Report
gave up 1/8 to 68 15/16 after reporting first-quarter earnings of $1.17 a share, on target with the nine-analyst view and 5 cents higher than the year-earlier figure.
RenaissanceRe
(RNR) - Get Report
excelled 3, or 9.7%, to 33 15/16 after late yesterday reporting first-quarter earnings of $1.43 a share, 2 cents ahead of the five-analyst view but behind the year-ago $1.52. The company also announced plans to buyback up to $25 million worth of stock.
Renal Care
(RCGI)
tacked on 1 11/16, or 7.7%, to 23 23/32 after last night topping first-quarter earnings predictions by a penny a share.
Rent-A-Center
(RCII) - Get Report
swelled 1 5/8, or 5.1%, to an all-time high of 33 13/16 after last night recording first-quarter earnings of 35 cents a share, 1 cent above expectations.
Henry Schein
(HSIC) - Get Report
climbed 3 9/16, or 14.1%, to 28 13/16 after last night posting first-quarter earnings a penny higher than estimated.
Wall Data
(WALL)
plunged 3 13/16, or 25%, to 11 7/16 after late yesterday warning it will report a fourth-quarter net loss due to its restructuring into two separate companies. The single-analyst estimate called for operating earnings of 25 cents a share vs. the year-ago profit of 7 cents. The company also said it hired an investment bank to explore the possibility of selling its
Rumba
Internet-hosting business or spinning-off its
Cyberprise
enterprise information business.
Warnaco
(WAC)
increased 1 13/16, or 6.8%, to 28 7/16 after posting first-quarter earnings of 39 cents a share, in line with the 11-analyst estimate and above the year-ago loss of 63 cents.
Salomon Smith Barney
started coverage of the stock with a neutral.
Wendy's
(WEN) - Get Report
added 1/8 to 27 3/8 after reporting first-quarter earnings of 25 cents a share, 2 cents higher than the 15-analyst view and above the year-ago 18 cents.
Offerings and stock actions
Affiliated Computer Services
(ACS)
shot up 2 3/16, or 5.7%, to 40 11/16 after late yesterday withdrawing its planned 3.5 million-share secondary offering, saying "other financing alternatives appear more attractive at this time."
Georgia-Pacific
(GP)
soured down 4 3/4, or 5%, to 90 3/4 even after setting a 2-for-1 stock split.
Oakley
(OO)
soared 1 1/8, or 16.1%, to 8 1/8 after President James Jannard increased his stake in the company to 59.6%.
Seagate Technology
(SEG)
grew 1 5/8, or 5.6%, to 30 7/8 after its board approved an increase of up to 25 million shares in the company's stock buyback program.
Analyst actions
Ceridian
(CEN) - Get Report
slipped 2 9/16, or 7.1%, to 33 9/16 after
Merrill Lynch
cut it to near-term accumulate from buy.
Coventry Health
(CVTY)
expanded 1 7/8, or 20.8%, to 11 after BT Alex. Brown raised it to buy from market perform.
Enhance Financial Services
(EFS)
tumbled 2 7/8, or 13.1%, to 19 1/16 after
Credit Suisse First Boston
downgraded it to hold from strong buy.
Extreme Networks
(EXTR) - Get Report
declined 7 3/8, or 13.9%, to 45 3/4 after
Morgan Stanley Dean Witter
started coverage with a neutral.
Monsanto
(MTC) - Get Report
vaulted 2 1/8 to 47 5/8 after Salomon Smith Barney upgraded the stock to buy from outperform.
SanDisk
(SNDK)
shot up 5 5/8, or 26.6%, to 26 7/8 after
First Union Capital Markets
added the stock to its analyst action list, citing an attractive share price and a strong fundamental outlook.
Superior Telecom
(SUT)
tacked on 3 3/8, or 12.6%, to 30 1/8 after Merrill Lynch named the stock its Focus One pick of the week.
USinternetworking
(USIX)
shaved off 5 3/4, or 13.1%, to 38 1/16 even after Credit Suisse First Boston initiated coverage with a buy and set a year-end price target of 60. The firm was lead underwriter on the company's IPO last month. BT Alex. Brown also started coverage with a buy.
VoiceStream Wireless
(VSTR)
pulled in 4 3/4, or 23.2%, up to an all-time high of 25 1/4 after BT Alex. Brown started coverage with a strong buy.
Miscellany
Consolidated Graphics
(CGX)
skidded 4, or 9.6%, to 37 7/8 but had no comment on its drop.
Continental Airlines
(CAL) - Get Report
flew up 2 to 47 after saying it trimmed its planned growth rate for the year 2000 to 6% from 9%.
Ford
(F) - Get Report
stumbled 2 9/16 to 64 1/8 after recalling about 57,200 1999 model-year Expedition and Navigator sport utility vehicles because of a manufacturing problem with the vehicles' wheels.
Limited
(LTD)
advanced 5 1/4, or 11.8%, to an all-time high of 49 7/8 on yesterday's news that the company sees first- and second-quarter earnings above estimates, plans to spin-off its Limited Too unit and will buyback 15 million shares.
KLM Royal Dutch Airlines
(KLM)
jumped 3 9/16, or 11.9%, to 33 5/8 after announcing it will buyback up to 25% of its share capital.
ING Barings
upgraded the stock to buy from sell.
Microsoft
(MSFT) - Get Report
slid 1 13/16 to 78 1/16 after
The Wall Street Journal
reported that Mister Softee is considering the creation of a tracking stock that would reflect the financial results of its Internet properties and any new cable operations.
