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Nasdaq Continues Its Pullback While Dow Heads Higher

Financials are getting a boost from the bond market's upswing, but tech stocks continue to suffer.

The tech-inflamed

Nasdaq Composite Index

continued to cool off after yesterday's red close brought an end to its recent hot streak. But while the tech darlings of past weeks were shedding some gains, the

Dow Jones Industrial Average

made an about-face turn upward, with interest-rate-sensitive financials leading the way.

"Financial services are cheap, especially since the long bond's move from 6% over 6.30%," said Brian Gilmartin, portfolio manager at

Trinity Asset Management

. "I think it's the cheapest sector out there."

The benchmark 30-year Treasury lately was up 9/32 to 97 26/32, with its yield easing to 6.29%. (For more on the fixed-income market, see today's early

Bond Focus.)

Lately, the

American Stock Exchange Broker/Dealer Index

was up 2%, with

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley Dean Witter

(MWD)

leading the pack.

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Despite the Dow's strong session performance, some investors still feel that tech is the sector to watch. "The run-up in technology stocks is incredible," noted Gilmartin, "The old economy is lagged, such as financial services, industrials, aerospace defense, so some say it is a better value, but our portfolios are still 50% to 60% tech."

According to Gilmartin, Y2K will bring an end to the PC era, and put the communications sector into its prime. "There has been a shift from computer-centric sectors to the communications sectors," he said. "That's been the macro shift that we have seen this year. When

Intel

(INTC) - Get Report

bought

DSP Communications

, it was essentially moving into the next growth sector."

With Y2K woes withering for the tech sector, Gilmartin holds some concern for the brokerage sector. "The brokerage sector will be the most effected sector because they are planning on shrinking their balance sheets. As they shrink their balance sheets, the fixed income market will be effected much more than the equity market."

The Nasdaq Composite Index was down 38, or 1.1%, to 3384. In Nasdaq trading, Internet content delivery service

Akamai Technologies

(AKAM) - Get Report

, was soaring 17 1/8, or 7.5%, to 244 1/2 thanks to a buy rating from

Donaldson Lufkin & Jenrette

, while recently hot stocks like

Red Hat

(RHAT)

continued to give up gains. Lately, Red Hat was sinking 20 11/16, or 8.7%, to 216 9/16.

The Internet sector was stumbling in tandem with the other tech darlings.

TheStreet.com Internet Sector

index was off 20, or 2%, to 950, with

BroadVision

(BVSN) - Get Report

and

Yahoo!

(YHOO)

weighing it down.

On the flip side, the Dow was mounting 54, or 0.5%, to 11,002, thanks in part to

J.P. Morgan

(JPM) - Get Report

, up 1.6%, and

American Express

(AXP) - Get Report

, hopping 2.7%.

Other major indices were in the red, with the broad

S&P 500

skidding 4 to 1404 while the small-cap

Russell 2000

was down 2 to 455.

On the

New York Stock Exchange

, decliners were beating advancers 1,507 to 1,420 on 557 million shares, while on the

Nasdaq Stock Market

, laggards were edging out leaders 2,194 to 1,660 on 886 million shares. New 52-week lows were beating new highs on the NYSE, 187 to 29, while on the Nasdaq, highs were leading lows 121 to 64.

The dollar was lately quoted at 101.74 yen, following the

Bank of Japan's

latest unsuccessful effort to weaken the rallying yen.

Tuesday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Hewlett-Packard

(HWP)

gained 2 1/4 to 98 1/4 after it entered into an agreement with

Amazon.com

(AMZN) - Get Report

, in which Amazon will use H-P systems in its Web infrastructure as well as offer H-P products to its customers. Amazon dropped 3 7/8 to 86 1/2.

Mergers, acquisitions and joint ventures

Axa

(AXA)

gained 1/4 to 68 1/2 after it acquired a controlling interest in Japanese life insurance company

Nippon Dantai

.

Bank of Scotland

said it would bow out of its $39.6 billion offer for

National Westminster Bank

(NW)

if

Royal Bank of Scotland's

rival bid is seen as higher than reasonable. NatWest climbed 1 to 138. Royal Bank of Scotland's competing bid values NatWest at about $42.5 billion.

Conseco

(CNC) - Get Report

rose 1 3/4, or 9.8%, to 20 3 /8 after saying it is selling $500 million of Series F convertible preferred stock to

Thomas H. Lee Co.

, a private equity firm. Those shares will be convertible into Conseco common stock at a rate of $19.25 a share. Conseco will also reduce the cash dividend on its common stock to a quarterly rate of 5 cents a share, beginning in April.

EMusic.com

(EMUS)

climbed 11/16 to 16 7/8 after it agreed to buy

Tunes.com

(TUNZ)

for roughly $130 million in stock.

Retaliating against a hostile $80 billion takeover bid from Pfizer, Warner-Lambert last night moved to end their agreement to jointly market Lipitor, the blockbuster cholesterol treatment with expected 1999 sales of more than $3.6 billion. Warner filed a counterclaim against Pfizer alleging "flagrant breach of contract," according to

Reuters

.

Pfizer responded last night by saying it did not violate any of its agreements with Warner and said it will continue to support Lipitor sales. If a court rules in its favor, Warner said it would not be required to make payments to or share revenue with Pfizer. Earlier this month, Warner agreed to merge with American Home Products in a $67.1 billion deal. Shares of Warner slipped 1 9/16 to 89 13/16, while Pfizer fell 7/8 to 36 9/16. American Home fell 5/8 to 51 7/8.

Shorewood Packaging

(SWD)

added 1/8 to 15 7/8 after it rejected an unsolicited $480 million bid from

Chesapeake

(CSK)

, saying it was not for sale and would continue to pursue an attempted $700 million purchase of the rival company. Shorewood called Chesapeake's $16.50-a-share bid grossly inadequate. Chesapeake fell 3/8 to 32 1/8.

Earnings/revenue reports and previews

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.

)

Finlay Enterprises

(FNLY)

climbed 1 7/16, or 11.7%, to 13 11/16 after it reported a third-quarter loss of 33 cents a share, narrower than the single-analyst estimate of a 34-cent loss and the year ago 37-cent loss.

Magellan

(MGL)

lost 3/16 to 6 3/4 after it posted fourth-quarter earnings of 26 cents a share, beating both the First Call six-analyst estimate of 22 cents and the year-ago 13 cents a share.

Offerings and stock actions

Barnes & Noble

(BKS) - Get Report

climbed 3/4 to 25 after saying it will buy back up to $250 million worth of its common stock.

Globalstar Telecommunications

(GSTRF)

lost 1 7/8, or 7.3%, to 23 7/8 after it said it plans for a $150 million convertible preferred stock offering, which is exempt from registration.

InfoSpace.com's

(INSP) - Get Report

gained 1 1/16 to 112 after its board approved a 2-for-1 stock split.

InterTAN

(ITN)

added 11/16 to 24 after it set a 3-for-2 stock split and a 1.5 million-share buyback.

Magic Software Enterprises

(MGIC) - Get Report

TheStreet Recommends

jumped 6 13/16, or 16.2%, to 49 after saying it set a 3-for-1 stock split. The split must still be approved by share holders during a Jan. 24 meeting.

The NBC television network's publicly traded Internet company

NBC Internet

(NBCI)

made its trading debut today. The company formed by merging the

Snap.com

Internet portal and

Xoom.com

(XMCM)

, along with some Internet features of NBC.

GE

(GE) - Get Report

, the parent company of NBC, hold a 47.3% interest in NBC Internet, while former XOOX.com holders have a 38.8% stake. Former Snap.com parent

CNet

(CNET) - Get Report

holds 13.8%. Shares of GE fell 1 to 132 1/8, Xoom.com was unchanged at 88 1/2, CNet lost 2 15/16, or 5.3% and NBCI shed 8 1/16, or 9.1%, to 81 1/8.

Analyst actions

Akamai Technologies

(AKAM) - Get Report

jumped 13 5/8, or 6%, to 241 after

Donaldson Lufkin & Jenrette

analyst Harry Blount initiated coverage with a buy rating.

Salomon Smith Barney started coverage of

Charles Schwab

(SCH)

with a neutral rating, while

Heller Financial

(HF) - Get Report

was rated a buy. Schwab gained 7/16 to 39, while Heller rose 5/8 to 22 3/16.

Credit Suisse First Boston

downgraded share of

Amgen

(AMGN) - Get Report

to a buy from a strong buy. Amgen dropped 2 to 46 11/16.

J.P. Morgan

boosted its price target on

Apple

(AAPL) - Get Report

to 115. Apple popped 6 15/16, or 7.4%, to 101 3/8.

Merrill Lynch

started coverage of

Cobalt Networks

(COBT)

with an intermediate-term accumulate and a long-term buy rating. Goldman Sachs also initiated coverage with a market outperformer rating. Cobalt climbed 2 5/8 to 159 1/8.

Goldman Sachs

sliced its rating on

ECI Telecom

(ECIL)

to market perform from market outperform and cut its fiscal 2000 earnings-per-share estimate to $2.55 from $2.70. ECI lost 1/4 to 25 7/8.

Exxon

(XON) - Get Report

inched up 5/16 to 79 11/16 after

Merrill Lynch

added the stock to its Focus 1 List. Merrill maintained its buy rating on the stock both intermediate term and long term.

Merrill rolled out coverage of

Plug Power

(PLUG) - Get Report

with an intermediate-term accumulate, long-term buy rating. Goldman Sachs also initiated coverage of the stock with a market outperformer rating. Plug Power rose 1 3/16, or 7.1%, to 18 1/16.

Goldman Sachs rolled out coverage of

Project Software

(PSDI)

with a market outperformer. Shares rose 7/8 to 87 1/2.

Credit Suisse First Boston

upgraded shares of

Research in Motion

(RIMM)

to buy from hold. Research in Motion gained 1 1/4 to 55 1/8.

Credit Suisse First Boston started coverage of

Siebel Systems

(SEBL)

with a strong buy rating. Siebel climbed 2 to 70 1/2.

Merrill upped its 12-month price target on

Sun Microsystems

(SUNW) - Get Report

to 165 a share. Sun rose 1 1/16 to 137 15/16.

Bear Stearns

initiated coverage of

Webvan

(WBVN)

with a buy rating. Bear Stearns was an underwriter on Webvan's IPO.

Deutsche Banc Alex. Brown

started Webvan with a strong buy, while Goldman Sachs put the stock on its recommended list. Goldman was a lead underwriter while Deutsche was a co-manager. Webvan jumped 3 7/16, or 13.9%, to 28 3/16.

Credit Suisse First Boston

raised its price target on

Whittman-Hart

(WHIT)

to 80 from 65. Whittman jumped 6 5/8, or 12.1%, to 61 7/8.

Miscellany

Abbott Laboratories

(ABT) - Get Report

lost 1/8 to 38 3/4 despite saying it received marketing approval from the

Food and Drug Administration

for its Perclose femoral artery closure device.

AT&T

(T) - Get Report

lost 2 5/16 to 57 11/16 despite saying it was awarded $510 million in contracts from

General Motors

(GM) - Get Report

and its

Delphi Automotive Systems

(DPH)

division to set up and maintain Internet Protocol networks that would strengthen its e-commerce capabilities. GM slipped 3/16 to 74 1/8 while Delphi climbed 1/4 to 16 1/8.

The

Federal Aviation Administration

said it would conduct a special audit of

Boeing

(BA) - Get Report

after a string of recent aircraft quality problems, including improperly tightened bolts and parts that failed federal flame tests. The FAA said the inspection would begin Thursday and likely run through February. Boeing slipped 1/16 to 40 13/16.

Data Broadcasting

(DBCC)

has named Mark Imperiale CEO and president. Shares climbed 1 15/16, or 12.9%, to 11 1/2.

Idex

(IEX) - Get Report

slipped 3/16 to 27 3/8 after it said its President and CEO Frank Hansen has announced his plans to retire. Hansen will remain in his roles until a successor is named.

Standard & Poor's

said

Molex

(MOLX)

and

Old Kent Financial

(OK)

will be added to the S&P 500 index. Molex, lately rising 5 1/8, or 11.9%, to 48 3/16, will replace

PacifiCorp

(PPW)

after the close of trading today. PacifiCorp is being acquired by

Scottish Power

. Old Kent, lately up 3 3/4, or 10.2%, to 40 1/2, will replace

Honeywell

(HON) - Get Report

after the close of trading tomorrow, due to its acquisition by fellow S&P 500 component

AlliedSignal

(ALD)

. AlliedSignal climbed 1 1/2,while Honeywell gained 2 5/8 to 112 3/4.