Pullback Over? Some Dare to Say So as Nasdaq Rallies Anew

After a scant 1 1/2-day pause, the Nasdaq resumed its upward climb behind huge leaps in Microsoft and Oracle.
Author:
Publish date:

The

Nasdaq Composite Index

failed to set a record today and (

egads!

) trailed blue-chip averages for much of the session, but it still produced one of its more impressive performances in recent memory. Rather than the almost rote procedure of higher prices following higher prices, the tech-infatuated index overcame not only

yesterday's fairly considerable setback but sizable early morning weakness as well.

The "Big Three" market averages all closed with solid gains, but blue-chip averages finished well off midday highs as the bond market's afternoon woes subdued the enthusiasm for equities, notably financial stocks.

The price of the 30-year Treasury bond closed down 9/32 to 97 10/32, its yield rising to 6.33%. In reaction, the Philadelphia Stock Exchange/KBW Bank Index fell 0.9%.

Building on blockbuster gains by

Microsoft

(MSFT) - Get Report

and

Oracle

(ORCL) - Get Report

, the Comp was able to follow blue-chip proxies higher and then surpass them. In the process, the index overcome jitters about

Cisco

(CSCO) - Get Report

and weakness in other bellwethers such as

Sun Microsystems

(SUNW) - Get Report

.

After trading as low as 3503.70 early on, the tech-abetted index closed with a flourish, up 49.56, or 1.4%, to 3621.22.

"The selling wave is over," declared Jim Volk, co-head of institutional trading at

D.A. Davidson

in Portland, Ore. " I don't know

why over-the-counter stocks turned the corner. It looks like they just got tired of selling 'em."

Many players attributed the turnaround to excitement over Oracle, which rose 17.5% to an all-time high of 90 3/8 after posting better-than-expected profits

last night. Today, several Wall Street firms upgraded recommendations and/or price targets on the database software giant.

But Volk said the Oracle news was "canceled out" by concerns about Cisco, which fell 2% after including

routine warnings about a potential sales slowdown in a 10-Q filing.

Microsoft proved the determining factor in the Comp's comeback, soaring 9.8% to an all-time high of 108 1/4 amid a variety of news events, including the long-awaited release of Windows 2000 and reports of a strategic alliance with

Excite@Home

(ATHM) - Get Report

, which rose 2.6%.

Also, Microsoft was one of several investors that took a combined $900 million equity stake in

WinStar Communications

(WCII)

, which rose 15.6%.

Microsoft and fellow Dow rookie

Intel

(INTC) - Get Report

finally delivered the kind of "pop" to the

Dow Jones Industrial Average

many expected when they were added to the venerable index

Oct. 26.

The blue-chip average rose as high as 11,282.20 before closing up 65.15, or 0.6%, to 11,225.32.

Recently out-of-favor names such as

Alcoa

(AA) - Get Report

and

Merck

(MRK) - Get Report

also aided the Dow. The

Morgan Stanley Cyclical Index

rose 2.6% while the

American Stock Exchange Pharmaceutical Index

gained 2.1%.

The Dow was restrained most notably by

General Electric

(GE) - Get Report

, which fell 3.1%.

Additionally, older tech components

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

weakened, reflecting the somewhat uneven performance of the tech sector.

While

Nasdaq 100

rose 2.3% and the

Philadelphia Stock Exchange Semiconductor Index

gained 3%,

TheStreet.com Internet Sector

index fell 2.85, or 0.3%, to 1094.58 after trading as low as 1058.68. Additionally,

TheStreet.com

Red Hots index fell 11.02, or 3.2%, to 329.84. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money. (The Red Hots index quote has been adjusted slightly to account for a switch to automated calculation of the index value from the former spreadsheet method. Now you can check quotes on the Red Hots index and its component stocks at

http://www.thestreet.com/redhots.)

The DOT was restrained by weakness in components such as

USWeb/CKS

(USWB)

, down a further 13.2% as investors continue to look unfavorably at its planned merger with

Whittman-Hart

(WHIT)

, which fell 9.8%.

Beyond the DOT,

Verity

(VRTY)

tumbled 47% after posting lower-than-expected profits last night. Additionally,

Transaction Systems Architects

(TSAI)

slid 14.1% after warning of disappointing earnings.

Conversely,

Z-Tel Technologies

(ZTEL)

gained 95% from its IPO price of $17.

The

S&P 500

rose 10.13, or 0.7%, to 1413.30 after trading as high as 1417.34. Meanwhile, the

Russell 2000

shed 1.43, or 0.3%, to 461.32 after trading as low as 455.39.

"We got the usual 2 o'clock to 2:30 selloff but we held in pretty good," said one equity trader. "It's going to be herky-jerky until the end of the year, but I don't see a reason why it'll selloff" significantly.

Despite another heavily attended session, the trader said he was "doing nothing" except "watching the screen" for much of the day.

"Things are drying up," he said. "A lot of the big boys are saying 'I've had a great year'" and thus aren't anxious to press their luck as 2000 approaches.

Overcoming the Blemishes

In

New York Stock Exchange

trading, 1.034 billion shares were exchanged while declining stocks led advancers 1,636 to 1,449. In

Nasdaq Stock Market

action 1.65 billion shares traded -- the fourth-busiest session in history -- while losers led 2,399 to 1,799. New 52-week lows swamped new highs 433 to 45 on the Big Board and by 180 to 92 in over-the-counter trading.

"This market looks like it wants to go higher, despite some big technical flaws -- breadth in particular -- and renewed weakness in the bond market," said Greg Nie, chief technical analyst at

First Union Securities

in Chicago. "We're close to a classic year-end rally that will probably have enough momentum to overcome the technical flaws out there."

A new closing high for the Dow industrials could be the "spark" for that year-end rally, Nie said. Today, the index closed just 0.9% off its

Aug. 25 record of 11,326.04.

"We're close. We probably need a little more work but maybe we'll get a nudge from expiration" on Friday, he said. "You've got to give the bulls the benefit of the doubt in the short term."

Among other indices,

Dow Jones Transportation Average

rose 10.66, or 0.4%, to 2919.54; the

Dow Jones Utility Average

added 2.99, or 1.1%, to 271.19; and the

American Stock Exchange Composite Index

gained 11.16, or 1.4%, to 838.94.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

gained 54.98, or 0.7%, to 7985.3 and the

Mexican Stock Exchange IPC Index

jumped 117.93, or 1.8%, to 6772.15.

Wednesday's Company Report

By Eileen Kinsella
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Shares of Microsoft rose 9 11/16, or 9.8%, to a record 108 7/16 after it said its new Windows 2000 operating system was released for manufacturing. The system is expected to make Microsoft a stronger competitor in the high end server market.

Warburg Dillon Read

upped its price target on Microsoft to 130 from 110.

Separately, Microsoft and

Excite@Home

(ATHM) - Get Report

said they are negotiating a possible pact that would deploy enhanced TV. Excite@Home gained 1 1/4 to 50 3/16.

Mergers, acquisitions and joint ventures

Ariba

(ARBA)

sank 10 to 224, after

The Wall Street Journal

reported it is negotiating to acquire closely held

Tradex Technologies

for about $1.65 billion.

Bergen Brunswig

(BBC) - Get Report

gained 3/16 to 8 after it said it has inked a five-year primary source pact with

Duane Reade

(DRD) - Get Report

. Shares of Duane Reade lost 1 13/16, or 8.1%, to 20 11/16. Bergen Brunswig said Duane Reade would purchase roughly $1 billion in products throughout the life of the agreement.

CMGI

(CMGI)

dropped 5 5/16 to 199 3/4 after it said it would acquire

yesmail.com

(YESM)

for stock. yesmail nodded up 3 1/8, or 15%, to 24. CMGI said it would issue 0.1252 CMGI shares for each share of yesmail.com.

U.S. Bancorp Piper Jaffray

rolled out coverage of CMGI with a strong buy rating. For more on this

acquisition, check out the coverage provided by

TheStreet.com/NYTimes.com

joint newsroom.

Circuit City

(CC) - Get Report

gained 2 3/4, or 7%, to 41 7/8 and

America Online

(AOL)

lost 1 1/2 to 87 5/16 after the companies said they have entered an agreement which calls for Circuit City to market AOL's products and services in its store. U.S. Bancorp Piper Jaffray began coverage of Circuit City with a buy rating and a price target of 57.

DPL

(DPL)

gained 1/8 to 16 3/4 after it announced plans to sell its natural-gas distribution division for $425 million.

General Motors

(GM) - Get Report

gained 7/8 to 71 1/4 after it said it has launched a $5.3 billion to $6.2 billion offer for the financially floundering

Daewoo Motors

, according to wire reports.

Kmart

(KM)

fell 1 1/16 , or 8.7%, to 11 3/16 after it announced plans to start it own Internet company called

BlueLight.com

. CEO Floyd Hall said

Softbank

division

Softbank Venture Capital

would back the Web company with $62.5 million, while

Martha Stewart Living Omnimedia

(MSO)

, which is already in a retail partnership with Kmart, also plans to make a "strategic investment." Shares of Martha Stewart inched up 1/4 to 29 1/4.

Yahoo!

(YHOO)

will provide BlueLight.com with personalized Web content. Other partners in the initiative include Cisco and

Spinway.com

. Yahoo! dropped 5 3/4 to 327 1/2, while Cisco lost 2 to 95 7/8. For more on this

alliance, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

KLM Royal Dutch Airlines

(KLM)

rose 1 9/16, or 6.2%, to 26 5/8 and

Continental Airlines

(CAL) - Get Report

slipped 3/16 to 41 3/8 after the companies said they have agreed to a joint marketing pact. The announcement is seen as progress toward a global alliance between Continental, KLM,

Northwest

(NWAC)

and

Alitalia

. The pact includes passenger and baggage check-in and exchangeable frequent flyer program participation. Shares of Northwest lost 11/16 to 22 1/16.

Lucent Technologies

(LU)

lost 5/16 to 77 and

General Instrument

(GIC)

gained 5 5/8, or 8.3%, to 73 9/16 after the companies said they have agreed to a joint development and marketing deal to design a system for telephone service over cable lines. The two companies said they would combine the software that runs their equipment.

Separately, General Instrument said it received an order from

Charter Communications

(CHTR) - Get Report

for 1 million interactive digital consumer terminals. Charter fell 1/8 to 22 5/8.

Motorola

(MOT)

popped 10 13/16, or 9.1%, to 130 3/16 and

Redback Networks

(RBAK)

fell 7/16 to 140 7/8 after the companies said they have teamed to provide an end-to-end system to reduce the time it takes cable providers to activate new subscribers for cable Internet access.

Nortel Networks

(NT)

climbed 9/16 to 88 5/8 after it said it has agreed to acquire

Qtera

, in a stock deal valued at up to $3.25 billion. Nortel said the price of the deal would be partly determined on Qtera meeting "certain business objectives." The acquisition would not add to fiscal earnings until 2001. For more on Nortel's

acquisition, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

Rexall Sundown

(RXSD)

was unchanged at 10 1/16 after it said it has entered an agreement to purchase closely held

MET-Rx Nutrition

, in a deal valued at $108 million.

Ziff-Davis

(ZD)

lost 1/2 to 15 5/8 after it said it expects to outline the sale of its

ZD Events

trade show and conference business by the end of the month. The possible sale continues to follow the plan of its biggest shareholder,

Softbank

, to sell off parts of the company to concentrate on Web properties.

Earnings/revenue reports and previews

Boston Scientific

(BSX) - Get Report

added 1, or 5.3%, to 20 after it said it expects fiscal 2000 sales growth to slow to about 8% and set an earnings-per-share target for the year of $1.20. For more on Boston Scientific's woes, take a look at the

story written today by

TheStreet.com/NYTimes.com

joint newsroom.

Here's something for the much-ado-about-nothing category. Reports that Cisco said it expects "that in the future, our net sales may grow at a slower rate than experienced in previous periods, and that on a quarter-to-quarter basis, our growth in net sales may be significantly lower than our historical quarterly growth rate," according to its

10-Q

filing with the

Securities and Exchange Commission

filed yesterday, hurt the stock ahead of the open. However, the language cited in reports has been standard language for the company in recent SEC filings. Cisco slid 2 to 95 7/8.

TheStreet.com/NYTimes.com

joint newsroom covered the Cisco silliness in a

story today.

General Mills

(GIS) - Get Report

gained 1 1/16 to 34 11/16 after it said it sees slower unit volume growth in the fourth quarter. The company said it was on track for low double-digit earnings growth in 2000.

Oracle leapt 13 7/16, or 17.5%, to 90 3/8 after it reported second-quarter earnings of 26 cents a share, beating the 30-analyst estimate of 22 cents and the year-ago 19 cents. For more on Oracle's

earnings, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom. Earlier today,

Deutsche Banc Alex. Brown

raised its rating on Oracle to strong buy from buy.

Pentair

(PNR) - Get Report

was unchanged at 34 3/8 after it said it is on track to meet or beat the fiscal 1999 nine-analyst consensus estimate of $2.86 a share. The company also said it agrees with the nine-analyst estimate of $3.64 a share.

Transaction Systems Architects

(TSAI)

tanked 4 1/2, or 14.1%, to 27 9/16 after it warned investors that it expects first-quarter and fiscal 2000 earnings to greatly miss consensus estimates, citing Y2K woes. The company expects to post first-quarter earnings of 2 cents to 9 cents a share and fiscal 2000 earnings of $1.29 to $1.46. The eight-analyst estimate is forecasting first-quarter earnings of 38 cents and the nine-analyst estimate sees fiscal 2000 earnings at $1.70.

Offerings and stock actions

Citizens Utilities

(CZN)

inched up 3/16 to 13 3/8 after it said it set a share repurchasing plan for up to $100 million.

Equity Office Properties Trust

(EOP)

gained 1/16 to 21 1/16 after it said it has set a $250 million stock-buyback program.

Golf Trust of America

(GTA)

slipped 7/8 , or 5.7%, to 14 1/2 after it set a share buyback of up to 1 million shares.

Oakley

(OO)

climbed 15/16, or 15.6%, to 6 15/16 after it set a $20 million share-repurchasing program.

Time Warner

(TWX)

slipped 1/16 to 66 7/16 after it said it has established a $500 million fund to support new digital media. The company said the fund will concentrate on non-controlling equity investments in e-commerce, interactive content and other digital-media-related activities.

Xtra

(XTR)

rose 5/8 to 41 5/8 after it said it repurchased 720,000 shares from its biggest shareholder

Tiger Management

for $30 million. Tiger still holds a 26% interest in the company.

Analyst actions

Goldman Sachs

added

Abercrombie & Fitch

(ANF) - Get Report

to its recommended list. Shares of Abercrombie & Fitch popped 3 1/8, or 12.8%, to 27 3/8.

U.S. Bancorp Piper Jaffray cut its fourth-quarter earnings forecast on

Advantage Learning

(ALSI)

to 8 cents a share from 17 cents while Merrill Lynch sliced the stock's rating to intermediate-term neutral from accumulate. The downgrades followed yesterday's fourth-quarter earnings warning. Shares of Advantage Learning slid 11 3/8, or 50.2%, to 11 5/16.

J.P. Morgan

raised its rating on

eBay

(EBAY) - Get Report

with a buy rating and a price target of 230. Shares of eBay fell 4 3/4 to 145 15/16.

Salomon Smith Barney

upped its rating on

Emerson Electric

(EMR) - Get Report

to outperform from neutral. Yesterday, Emerson said that it has agreed to purchase

Jordan Industries

telecom products division for $980 million. Emerson Electric share mounted 3 3/16, or 5.8%, to 58.

Piper Jaffray upped its price target on

Factset Research

(FDS) - Get Report

to 77 from 63. Shares of Factset jumped 4 3/4, or 6.9%, to 73 1/4.

Morgan Stanley Dean Witter

upped its rating on

Ford

(F) - Get Report

to an outperform to a neutral. Shares of Ford gained 15/16 to 49 7/16.

Credit Suisse First Boston

cut its fiscal 1999 estimates on

Inacom

(ICO)

to a 40-cent loss from a loss of a penny and lowered its rating to a hold from a strong buy. Shares of Inacom lost 2 1/8, or 23.6%, to 6 7/8.

Goldman Sachs began coverage of

Infospace.com

(INSP) - Get Report

with a market outperformer rating. Shares of Infospace.com shed 6 1/8 to 137 1/8.

SoundView Technology

began coverage of

Motorola

(MOT)

with a strong buy rating and a price target of 175. Shares of Motorola skidded 10 5/8, or 8.9%, to 130.

Warburg Dillon Read upped its fiscal 2000 earnings estimate for

Provant

(POVT)

to 84 cents from 80 cents a share. Shares of Provant bounced 5/16 to 24 3/4.

SoundView Technology upped its price target on

Rational Software

(RATL)

to 75 from 48. Shares of Rational Software added 3 1/2, or 7.8%, to 48 1/8.

PaineWebber

upgraded

Sallie Mae

(SLM) - Get Report

to attractive from neutral. Shares of Sallie Mae edged up 1 1/8 to 43 11/16.

Deutsche Banc Alex. Brown raised its rating on

Tekelec

(TKLC)

to strong buy from buy. Shares of Tekelec bounced 3, or 16.7%, to 20 7/8.

Merrill Lynch sliced its rating on

Thomas & Betts

(TNB)

to intermediate-term neutral from accumulate. Shares of Thomas & Betts declined 11 3/16, or 28.5%, to 28.

Banc of America Securities

cut shares of

Verity

(VRTY)

to market perform from buy after the company posted second-quarter earnings below its year-ago report. Shares of Verity plummeted 23 1/8, or 46.9%, to 26 1/8.

Miscellany

Bethlehem Steel

(BS)

was unchanged at 7 5/8 after it said its chairman and CEO, Curtis Barnette, is retiring on April 25. Longtime employee Duane Dunham was elected chairman, president and CEO upon Barnette's retirement.

Boeing

(BA) - Get Report

advanced 5/16 to 38 13/16 after it said the 163 previously unreported commercial airplane orders it announced Wednesday have a total value of about $9 billion. Boeing is on track to meet its goal of 5% operating margin for commercial jets in 1999 and will do better than that in 2000, the company said.

Dun & Bradstreet

(DNB)

is expected to vote on management's plan to split its

Moody's Investors Service

unit into a separate firm, people familiar with the matter said, according to the

Journal

. Shares of Dun & Bradstreet climbed 2 11/16, or 9.9%, to 29 3/4. For more on this

story, check out the coverage provided by

TheStreet.com/NYTimes.com's

joint newsroom.

A group of U.S. and French farmers filed a class-action lawsuit in federal court in Washington against

Monsanto

(MTC) - Get Report

, charging it with attempting to monopolize genetically modified crops and with not thoroughly testing the products for safety. Monsanto said the allegations are "absolutely baseless." Shares of Monsanto lost 1 7/16 to 40 7/16.

Viacom's

(VIA) - Get Report

MTV Networks

is under investigation by the

Justice Department

for alleged antitrust violations in dealings with big music companies, the

Journal

reported. Shares of Viacom skidded 7/16 to 54 13/16.