Gauging Wall Street is not supposed to be simple. Today's action proved it isn't.
Even before the market opened today, players and pontificators warned afternoon profit-taking would hit the expected rally once the focus shifted to tomorrow's
employment report. Like clockwork, the rally emerged following the announcement of a seven-year, $16 billion (and you thought
got a huge contract?) partnership between
. Then, as advertised, so too did the profit-taking.
But in the final stanza of trading, investors did something that was not expected -- engaging in what can only be described as profit-forsaking. The
Dow Jones Industrial Average
recovered from its midafternoon funk, established a new intraday high of 9480.71 and closed with an impressive gain. The blue-chip proxy once again
outpaced broader market averages, but they also ended on a positive note.
"The market acted great heading into the jobs number tomorrow," said Robert Harrington, co-head of block trading at
. "You still saw some people moving out of PC stocks, but you're certainly seeing some strength in big consumer stocks and retailers, and oil stocks have been acting better. Plus, the way the banks have acted and the utility sector held up today, that's telling you rates haven't been acting well, but maybe we're near the high end of the range even if the
did tighten once."
After rising as high as 9448.66 around 12:35 p.m., the most public face of equities settled back a bit in the afternoon, dropping to just 80 points above break-even. The Dow then regained its footing to close up 191.52, or 2.1%, to 9467.40.
In addition to Big Blue, which gained 2.4%, the index was led by
. Sears named a new CFO and said same-store sales rose 0.8% in February. GM upped its first-quarter production estimates, and American Express got a buy recommendation from
Salomon Smith Barney
Recently shellacked bellwether technology stocks initially leapt with joy at the IBM-Dell announcement. Then either everyone realized the deal was really good only for IBM, or names got to levels that bade anxious holders to sell. But at day's end, the optimism resurfaced.
Nasdaq Composite Index
raced as high as 2311.18 in the first hour of trading, then slowly and inexorably faded until it dipped below break-even around 2:30 p.m. In the final 90 minutes of the session, however, the tech-riddled index recovered its balance (if not its dignity), closing up 27.69, or 1.2%, to 2292.89.
The index was paced by
proved to be a hindrance. The
rose 1.8% while the
Philadelphia Stock Exchange Semiconductor Index
Internet names never really got on track and finished mixed.
TheStreet.com Internet Sector
index rose 2.26, or 0.4%, to 523.39 while
TheStreet.com E-Commerce Index
slid 1.49, or 1.6%, to 94.50.
closed up 18.94, or 1.5%, to 1246.64, just below its afternoon apex of 1247.91. The
closed up 2.07, or 0.5%, to 394.02 after rising as high as 394.24.
Acknowledging a "really strong" employment figure could "put a cloud on things, short-term," Harrington does not believe today's move will prove to be a head fake. "People are worried about interest rates, and with interest rate-sensitive groups acting better, maybe the bond will follow," he said. "We've had strong job numbers and inflation hasn't really reared its head. The fundamentals seem OK right now. As you get through the preannouncement stage, you may see people a little more constructive."
The trader was most impressed today by the action in financial-services stocks such as
, which rose 8.5%, while the
American Stock Exchange Broker/Dealer Index
gained 4.2%. Additionally, the
Dow Jones Utility Average
rose 4.14, or 1.4%, to 2907.11, while the bond market was in a stupor, he noted.
The benchmark 30-year Treasury bond ended off 2/32 at 93 18/32, its yield at 5.70%.
New York Stock Exchange
trading, 771 million shares traded while advancers bested declining stocks 1,713 to 1,183. In
Nasdaq Stock Market
activity, 894.2 million shares were exchanged while gainers led 2,009 to 1,867. New 52-week lows led new highs 78 to 28 on the Big Board and by 89 to 36 in over-the-counter trading.
Now for Something Completely Different
With the unanimity on Wall Street about today's action, it was refreshing to speak with Tom McManus, equity portfolio strategist at
NationsBanc Montgomery Securities
First, McManus denied the rally had anything to do with IBM's deal with Dell. "Overall macro trends are positive here," he said. "The huge spike up in interest rates is, at least, slowing."
With many fearing a spike in bond yields tomorrow if the employment data prove robust, McManus is not only sanguine about such a development, but downright hopeful.
"I think that would be wonderful," he said. "Whatever would spook the bond market to give me a higher yield would be all to the good. It's only bad if I thought bond yields were going up because inflation was rising. I think bond yields are re-establishing a fair value over inflation that had disappeared."
But Tom, you might ask (as we did), won't it be bad for stocks if bond yields rise, regardless of the reason?
"It's not really a zero-sum game because I don't think inflation has risen," he'd reply (as he did to us). "I don't think stocks are any less attractive. Bonds may be slightly more attractive, but I think stocks are undervalued relative to inflation and bonds flat."
With inflation in check, McManus sees the potential for multiple expansion. Moreover, "the earnings outlook has been improving," he said. "For a couple of months in a row we're hearing from the manufacturing sector that things are picking up. The consumer has been resilient. All we need is a little stimulus in Europe and we can see a resumption of some balanced growth, which is positive for earnings. I'm still bullish."
Among other indices, the
Dow Jones Transportation Average
rose 6.49, or 0.2%, to 3255.18; and the
American Stock Exchange Composite Index
gained 4.07, or 0.6%, to 698.52.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
jumped 88.37, or 1.4%, to 6268.71 and the
Mexican Stock Exchange IPC Index
soared 90.64, or 2.2%, to 4218.02.
Thursday's Company Report
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.
IBM surged 4 1/4 to 171, off its session high of 177, and Dell picked up 15/16 to 81 7/8, off its intraday high of 84 3/4, after, as noted above, confirming a $16 billion, seven-year technology agreement. The deal calls for Dell to buy storage, microelectronics, networking and display technology from IBM for integration into Dell computer systems. Eventually, the deal may include IBM's copper, silicon-on-insulator and other technologies. The deal also calls for broad patent cross-licensing between the two companies and collaboration on the development of future product technology. Despite insisting it sees no negative impact from the deal,
fell 1 5/8, or 5.5%, to 28.
Retailers generally rallied on reports of hearty February same-store sales.
- Dayton Hudson (DH) rose 2 1/2 to 65 7/8 on sales up 8.3%.
Dollar General (DG) - Get Report rose 2 1/2, or 8.2%, to 32 15/16 on sales up 4%.
Goody's Family Clothing (GDYS) lost 3/8 to 10 5/8 despite sales up 0.4%.
J.C. Penney (JCP) - Get Report rose 2, or 5.5%, to 38 5/16 despite sales down 0.4%.
Limited (LTD) rose 9/16 to 37 13/16 on sales up 13%.
Neiman Marcus (NMG) rose 1 1/8 to 26 1/16 on sales up 3.3%.
Saks (SKS) lost 2, or 5.6%, to 34 on flat sales.
Sears rose 3 1/8, or 7.7%, to 43 3/4 on sales up 0.8%.
ShopKo (SKO) rose 3/8 to 31 1/4 on sales up 6%.
Staples (SPLS) rose 1/2 to 28 1/2 on sales up 10%. The company also posted fourth-quarter earnings of 22 cents a share, beating the 20-analyst view by 2 cents and moving ahead of the year-ago 16 cents.
Ann Taylor (ANN) rose 2 3/4, or 7.1%, to 41 3/4 on sales up 21.4%.
Wal-Mart (WMT) - Get Report rose 2 to 89 3/8 on sales up 10.3%.
Mergers, acquisitions and joint ventures
hopped 5/8, or 5.6%, to 11 7/8 after entering an alliance with
to provide nonprime automobile financing to Chase-customer automobile dealers. Financial terms of the deal were undisclosed. Chase added 2 11/16 to an all-time high of 83 3/8.
sank 3 1/8, or 19.9%, to 12 9/16 after entering a marketing agreement with
calling for Bluefly's online store to be integrated throughout
and the Excite co-branded channels of
sites through a combination of commerce, advertising and promotional programs. Excite lifted 2 1/4 to 109; Netscape lifted 1/16 to 76 3/8.
LVMH Moet Hennessy Louis Vuitton
climbed 1 15/16 to 43 1/4 after last night announcing it ended efforts to put a representative on
board. The company also said it canceled a special shareholders meeting slated for March 23. LVMH launched a hostile bid for Italy's Gucci earlier this year, but the company's stake in Gucci was lowered to 26% after Gucci instituted an employee stock option plan. Gucci added 1/16 to 67 1/8.
, Canada's largest facilities-based competitive local exchange carrier, swelled 3, or 7%, to an all-time high of 46 1/4 after agreeing to merge with
Canadian unit in a deal valued at $4.6 billion. AT&T rung up 1 1/16 to 84 7/16.
increased 7/16 to 25 after
The New York Times
in preliminary talks with the company about paying $1.2 billion for its unit that sells networking equipment to phone companies. The newspaper also reported that Siemens plans to buy
for about $300 million in cash and
for roughly $240 million in cash.
shot up 3 5/8, or 11.2%, to an all-time high of 36 1/2 after
selected the company as its exclusive Web host provider for its
services. Under the marketing agreement, AOL will receive guaranteed payments of a minimum of $42.5 million from Verio. AOL slid 13/16 to 86 1/4.
jumped 15/16, or 5.4%, to 18 5/16 after saying it will hold a special board meeting March 23 to consider an unsolicited $777 million takeover bid from
. Philips lowered 7/8 to 67 5/8.
Earnings/revenue reports and previews
climbed 6 3/4, or 5.5%, to 129 after
said the company is comfortable with fourth-quarter earnings estimates of $1.02 a share.
expanded 3 1/6 to an all-time high of 86 3/4 after reporting second-quarter earnings of 66 cents a share, topping both the 19-analyst view of 64 cents and the year-ago 56 cents.
popped up 13/16, or 7.4%, to 11 7/8 even after last night recording fourth-quarter earnings of 31 cents a share, 1 cent below the nine-analyst forecast and behind the year-ago 42 cents.
advanced 2 7/8, or 6.4%, to 48 3/16 after posting fourth-quarter earnings of 39 cents a share, on target with the 14-analyst view and above the year-ago 33 cents. The company also announced plans to create a separately traded division for its existing surgical products business.
sliced off 2 7/16, or 10%, to an annual low of 22 after posting fourth-quarter earnings of 31 cents a share, nowhere near the six-analyst outlook for 56 cents and repeating the year-ago figure.
tanked 2 9/16, or 31.1%, to 5 11/16 after saying that although it resolved complications with its daily prescription pricing technology it may still incur a loss of $1 million to $2.5 million.
grew 2 3/4, or 12%, to 25 3/4 after posting fourth-quarter earnings of 15 cents a share, in line with the four-analyst estimate but below the year-ago 49 cents.
International Game Technology
skidded 3 5/8, or 19.8%, to an annual low of 14 11/16 after warning that, because of a slower rate of replacement sales and uncertain timing of new casino openings, it might miss 1999 earnings estimates. The 11-analyst forecast called for earnings of $1.54 a share vs. the year-ago $1.33.
Credit Suisse First Boston
slashed the stock to hold from buy.
excelled 5/8 to 92 1/2 after its CFO said at an analyst conference that he expects moderate revenue growth this year in the company's semiconductor business.
flew up 3 7/8, or 7.2%, to 57 3/4 after saying just before the closing bell that its interactive division, led by Monster.com, posted an operating profit of $1.2 million in fiscal 1998.
Offerings and stock actions
dropped 1 1/2, or 10%, to 13 5/8 after
priced the Greece-based company's 7.7 million-share IPO above range last night.
Level 3 Communications
rose 2 15/16, or 5.3%, to 57 15/16 after last night raising an existing stock offering to 25 million shares from 20 million shares.
RF Micro Devices
grew 4 3/4, or 5.9%, to an all-time high of 85 15/16 after last night announcing a 2-for-1 stock split.
American Express hopped up 5 3/16 to 113 after Salomon Smith Barney initiated coverage with a buy.
shed 4 5/16, or 12.2%, to 31 1/2 after Lehman Brothers lowered the stock to neutral from outperform. Yesterday,
, which added 3 to 91 1/8, filed suit against the company for allegedly violating a contract agreement.
soared 3 7/8, or 16.6%, to 27 1/4 after
upped it to accumulate from hold.
Level One Communications
closed at 27 1/8 before being halted following the closing bell. The company, which was lowered by
to accumulate from strong buy during the day, will be acquired by Intel for $2.2 billion in stock, it was announced around 4:15 p.m. EST.
climbed 3/8 to 53 after
upped the stock to strong buy from buy, saying recent weakness in the sector is providing a good buying opportunity.
shot up 4 5/16, or 11.2%, to 42 7/8 after Salomon Smith Barney lifted it to buy from outperform.
vaulted 6 5/16, or 15.1%, to an all-time high of 48 1/4 on positive results from trials of its anti-HIV drug,
Encouraged by lower weekly inventory data reported by the
American Petroleum Institute
and hopes that
will cut production at a March 23 meeting, oil-service stocks took in another rally today:
jumped 4 5/8, or 8.9%, to 56 3/8, and
jumped 1 41/64, or 5.4%, to 32 1/16.
slid 3 7/16, or 22.5%, to 11 7/8 after
temporarily delayed the beginning of Phase III clinical trials of the company's migraine treatment. Lilly picked up 1 5/8 to 94 1/2.
lowered 11/16 to 30 5/16 after announcing plans -- about which
reported yesterday -- to begin flying to North Carolina's Raleigh/Durham airport. The move threatens
, which dropped 3/4, or 5.9%, to 12 1/16.