Nasdaq Ends Year Storming to a Record While Dow Drifts Down

Recapping 1998: The Dow proved the naysayers wrong with a 16.1% gain, small-caps and transports lost ground and Net stocks exploded.
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A year of tumult, travails and ultimate triumph on Wall Street came to a fittingly unpredictable end today. Annual trends were turned inside out as small-caps outperformed blue-chips, the majority of stocks ended with gains and major proxies ended mixed.

In its typically flamboyant fashion, the

Nasdaq Composite Index

refused to go quietly into the new year. Seizing the limelight once again, the tech-infused index surged 25.74, or 1.2%, to close the year at a new all-time high of 2192.69. The index gained a stunning 39.6% for the year after rising 29.4% in the fourth quarter.

The

S&P 500

fell as low as 1224.97 then rebounded to as high as 1237.16 late in the day, before closing off 2.70, or 0.1%, at 1229.23. The index climbed 26.8% for the year, an unprecedented fourth consecutive year of more than 20% returns. In the fourth quarter, the unreachable dream (a.k.a. nightmare) of many fund managers jumped 21%.

The most public face of equities, the

Dow Jones Industrial Average

, slid 93.21, or 1%, to 9181.43 after climbing within 25 points of break-even during a failed late-day rally.

American Express

(AXP) - Get Report

was the biggest drag on the Dow today.

Still, the blue-chip proxy rose 16.1% for the year after a 17% appreciation in the fourth quarter. Despite trailing the Nasdaq and S&P 500, the Dow defied most prognosticators, who said a year ago the index would struggle to achieve double-digit performance in 1998.

If 1999 is going to be the year small-caps

finally

benefit from the valuation edge many experts are heralding, perhaps today was a portent. The

Russell 2000

got the better of its large-cap counterparts, rising 10.04, or 2.1%, to 421.95. But for the year, the small-cap proxy stumbled 3.4%, despite a 15.7% rise in the fourth quarter.

That newest but most major of major indices,

TheStreet.com Internet Sector

index, fell as low as 397.49 before closing up 0.45, or 0.1%, to 406.42. For the year, the index surged 159.4% after gaining 103% in the final stanza of 1998.

Today's session was busier than expected given that most major accounts had already closed their books on 1998 and market players of all stripes were looking to get a head start on the New Year's celebrations. Amid the decent volume, the advance/decline line posted one of its most impressive days in recent memory.

In

New York Stock Exchange

trading, 749.5 million shares were traded while advancers bested declining stocks 2,308 to 779. In

Nasdaq Stock Market

activity, 894.6 million shares were traded while gainers led 3,094 to 1,331. New 52-week highs bested new lows 140 to 28 on the Big Board and by 176 to 90 in over-the-counter trading.

"It's a mixed bag, there's really no trend," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee. "It's kind of a sloppy day and very difficult trying to figure where this thing is headed."

Herrick noted the Nasdaq and the Russell did better than the Dow due to some window dressing in smaller names by investors who may also be trying to get a jumpstart on the so-called January effect in that group. Also, some cyclical stocks, such as

Caterpillar

(CAT) - Get Report

, improved in the wake of yesterday's impressive report on the index of leading economic indicators.

Like small-caps, cyclical names had been largely shunned this year but performed well today; the

Morgan Stanley Cyclical Index

rose 0.7%.

Regarding specific stocks, Herrick mentioned only

America Online

(AOL)

, which fell as low as 142 before closing up 5.1% at 155 in late composite trading as it entered the S&P 500 after the New York close.

Herrick said he'd heard there were about $33 million in buy-on-close orders on AOL today. "I think people are a little perplexed about how they're trying to match that up," he said.

Most market players were unconcerned about the Dow's losses and attributed the recent struggles to the pre-holiday atmosphere.

"Although the market has endured some bumps and bruises over the past several days, the trend heading into the new year remains promising, if not out-and-out bullish," Brian Belski, market strategist at

Dougherty Summit Securities

in Minneapolis, wrote today. "The market seems to be digesting the every other day swings in the Internet stocks without much strain, while managing to maintain a stronghold on its leading upside engines like the major technology and financial stocks. With many cyclical areas and small- to mid-cap stocks well positioned for a strong bounce during at least the early part of

first-quarter 1999, stocks look to be in very good shape."

The very fact many market players and prognosticators are predicting a correction as 1999 ensues lends further support to the optimistic outlook, Belski contends. "It sure seemed to us that when the emotions and opinions peaked this year, the trend reversed itself and moved in the opposite direction," he wrote. "Avoid jumping on the correction bandwagon too soon this time."

Finally, proving dedicated investors never rest, Belski offers a trading tip for those enjoying the New Year's revelry tonight.

"If you are venturing out tonight, try out this indicator: The more nonfinancial or stock market-related people who either lend their opinion about the market's direction next year or attempt to pinpoint a date for the next 'crash,' the more likely that stocks will continue to go up," he said.

Among other indices, the

Dow Jones Transportation Average

rose 19.47, or 0.6%, to 3149.31; the

Dow Jones Utility Average

gained 1.38, or 0.4%, to 312.30; and the

American Stock Exchange Composite Index

climbed 16.92, or 2.5%, to 688.99.

The Dow transports fell 3.3% for the year but gained 19% in the fourth quarter; the Dow utilities rose 14.4% for the year and 1.8% for the quarter; and the Amex gained 0.6% following an 11% rise in the quarter.

For the week, the Dow industrials fell 36.56, or 0.4%; the S&P 500 gained 4.32, or 0.3%; the Nasdaq Comp climbed 29.52, or 1.4%; the Russell 2000 jumped 15.10, or 3.7%; the

TSC

Internet index fell 23.35, or 5.4%; the Dow transports gained 105.23, or 3.5%; the Dow utilities shed 2.24, or 0.7%; and the Amex rose 22.57, or 3.3%.

The price of the 30-year Treasury bond fell 4/32 today to 102 11/32, sending its yield up to 5.10%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

advanced 55.89, or 0.9%, to 6485.94 and the

Mexican Stock Exchange IPC Index

slipped 1.12 to 3959.66. For the year, the TSE 300 shed 213.50, or 3.2%, and the IPC plunged 1269.69, or 24.3%. For the fourth quarter, the TSE leapt 871.80, or 15.5%, and the IPC jumped 389.78, or 10.9%.

Thursday's Company Report

By

John J. Edwards III

and

Aaron L. Task

Staff Reporters

We've had the "we're going on the Internet, buy our stock!" moves and even "we're thinking about launching a Web site, buy our stock!" gains for certain stocks. Today launches a new level in the Internet house of cards:

Geerlings & Wade

(GEER)

soared 1 15/16, or 26.7%, to a three-year high of 9 3/16 after announcing it will make improvements to its existing Web site. Folks, we can't make this stuff up.

Still, some other recent Internet darlings suffered again today.

SkyMall

(SKYM)

was slammed 7 1/8, or 25.5%, to 20 7/8 on word CEO Robert Worsley has doubled his equity stake to 4.6 million shares, giving him 54% of the company's outstanding shares. To complete the deal, Worsley sold 675,000 shares of stock, then used the proceeds to exercise options to acquire all of co-founder Alan Ashton's stock as well as shares of other large holders, including 50% of the stock owned by investor Bert Getz.

Among other e-commerce and would-be e-commerce names,

Active Apparel Group

(AAGP)

lost 3 11/16, or 31.4%, to 8 1/8;

Genesis Direct

(GEND)

lost 2 1/32, or 20.7%, to 7 13/16; and

G-III Apparel

(GIII) - Get Report

was down 1 1/8, or 23.4%, to 3 3/4.

On the sunny side of the Internet street,

Lycos

(LCOS)

jumped 2 1/4 to 55 9/16 on word it has signed a deal to be the main sponsor of the

National Football League's

Super Bowl site.

Mergers, acquisitions and joint ventures

AirTouch Communications

(ATI) - Get Report

ran up 3 1/16 to an all-time high of 72 7/16 after

CNBC

reported that the wireless giant is in talks with

Bell Atlantic

(BEL)

about a $45 billion buyout. Bell Atlantic downshifted 3 1/2, or 6.1%, to 54.

Amoco

(AN) - Get Report

gushed up 5 1/8, or 9.4%, to 59 7/8 and

British Petroleum

(BP) - Get Report

rose 7 9/16, or 9.1%, to 90 3/4 on news the U.S. government has approved their merger pact. Both names fell sharply yesterday.

AT&T slid 1 1/16 to 75 3/4 and

TCI

(TCOMA)

was up 5/16 to 55 5/16 after the

Justice Department

approved their merger. As a condition of approval, TCI must unload its approximately 23.5% stake in

Sprint's

(FON)

Sprint PCS

(PCS)

wireless venture. Sprint edged up 1/16 to 84 1/8, while Sprint PCS surged 1 7/8, or 8.8%, to a post-offering high of 23 1/8.

Earnings/revenue reports and previews

American Coin Merchandising

(AMCN)

plummeted 2 13/16, or 32.9%, to a nearly two-year low of 5 7/8 after saying its fourth-quarter earnings will be "markedly lower" than those of the third quarter and the prior fourth quarter. The two-analyst consensus called for fourth-quarter results of 18 cents a share vs. 14 cents in the third quarter and 26 cents a year ago.

BankAmerica

(BAC) - Get Report

declined 1 9/16 to 60 1/8 after

The Wall Street Journal

reported the company could post a loss in the fourth quarter totaling as much as $190 million from its trading relationship with

D.E. Shaw

. Also, BankAmerica next week plans to disclose how many executives chose to take advantage of severance benefits triggered by the merger of the old BankAmerica and

NationsBank

, the newspaper said.

Eagle Geophysical

(EGEO)

turned around and added 1/4, or 7.1%, to 3 7/8 despite warning last night it expects to report a fourth-quarter loss of 13 cents to 16 cents a share, missing the eight-analyst estimate of a 5-cent profit and down from the year-ago profit of 14 cents. The company cited reduced spending for seismic services among its oil and gas customers.

Electromagnetic Sciences

(ELMG)

sledded 2 1/8, or 13.2%, to 14 after last night's warning it expects to report "near break-even" fourth-quarter earnings, missing the two-analyst First Call profit estimate of 31 cents a share and the year-earlier 27 cents. The company cited order delays.

Analyst actions

Deutsche Bank Securities

lowered fourth-quarter and 1999 earnings estimates on several oil companies. The firm trimmed fourth-quarter numbers on Amoco and British Petroleum (see above), along with

Exxon

(XON) - Get Report

, down 1 1/2 to 73 1/8. Deutsche lowered 1999 numbers on BP, Exxon,

Mobil

(MOB)

, down 7/8 to 87 1/8, and

Royal Dutch/Shell

(RD)

, down 5/8 to 47 7/8.

Northwest Airlines

(NWAC)

surrendered 1/2 to 25 9/16 after

Morgan Stanley Dean Witter

said it expects the airline to report a larger-than-forecast fourth-quarter loss.

Romac

(ROMC)

gained 1/4 to 22 1/4 despite a downgrade to attractive from buy at

Prudential Securities

.

Offerings and stock actions

First Banks America

(FBA)

leapt 2 11/16, or 16%, to 19 1/2 after its majority shareholder,

First Banks

, said it will commence a Dutch auction tender offer for up to 400,000 shares, beginning Monday.

Miscellany

Business Week's

often-specious Inside Wall Street column boosted

Fore Systems

(FORE)

1 11/16, or 10.2%, to 18 5/16. A money manager told the column he sees Fore in the 20s in six to 12 months, calling it an indirect Internet play. Also benefiting were

Data Broadcasting

(DBCC)

, up 3 9/16, or 25%, to an all-time high of 17 7/8, and

CBS

(CBS) - Get Report

, up 15/16 to 32 13/16. Inside Wall Street mentioned the advance buzz on the companies' pending

MarketWatch.com

IPO. Finally,

Spacehab

(SPAB) - Get Report

rose 5/8, or 6.3%, to 10 1/2 after the column pointed to the positive effect of the new international space station on its prospects.

Maxxim Medical

(MAM)

jumped 2 1/4, or 8.2%, to 29 3/4 on word of its addition to the

S&P SmallCap 600

.

Monsanto

(MTC) - Get Report

increased 1 3/16 to 47 1/2 after receiving

Food and Drug Administration

approval for its

Celebrex

arthritis drug.