Publish date:

Rally Caps a Day That 'Could Have Been Much Worse'

Still, the market appears to have begun its annual summer slowdown, a strategist says.

Strains of

Billy, don't be a hero. Don't make a fool of your life (or your portfolio)

could be heard from Wall Street today as an early upswing faded. With

Federal Reserve


Alan Greenspan

scheduled to address


tomorrow and

yesterday's selloff fresh in traders' memories, many seemed content to sit out the action, and the cautious outlook (if not the song) seemed appropriate.

But, lo and behold, some bold investors stepped into the breach in the late going to lift blue-chip averages modestly higher and leave tech gauges with decent gains.


Dow Jones Industrial Average

rose as high as 11,055.97 at midmorning, but quickly retreated and traded as low as 10,945.48. After spending most of the afternoon in negative territory, the index rallied toward the close to finish up 6.65, or 0.1%, to 11,002.78. Similarly, the

S&P 500

rose 2.18, or 0.2%, to 1379.28 after trading as high as 1386.59 early and as low as 1372.64 later. The

Russell 2000

added 1.07, or 0.2%, to 454.62 after trading as low as 452.04.


Nasdaq Composite Index

failed to sustain its early push to as high as 2769.60, but resisted the downdraft throughout and helped inspire the blue-chips' comeback efforts. The tech-infested index couldn't nearly erase yesterday's 98-point shellacking, but closed up a solid 29.48, or 1.1%, to 2761.66. Similarly, Internet Sector

index rose 21.58, or 3.6%, to 615.31 after trading as high as 617.73.

"Today could have been much worse," said Scott Bleier, chief investment strategist at

Prime Charter

. "It looks like this is all just an attempt to hammer out the bottom of a new trading range at higher levels. It looks like we're bottoming on the S&P and the Nasdaq

did OK."

Still, with options expiration and the anticipation of favorable second-quarter earnings having passed, the market has begun its "summer slowdown" phase," Bleier said. "The summer rally is over. But let's put things in perspective: From June 15 to July 15, the Nasdaq Comp and

Nasdaq 100

rallied 20% and the S&P and Dow rallied around 9%. We've had a nice run; now it's time to consolidate."

The strategist said major averages could easily "retest" their "breakout" levels of 2650 for the Nasdaq, 2250 for the NDX and 1370 for the S&P 500. The Dow, however, did not break out "in any significant fashion" and "looks like it's making a double top" after establishing only a "marginal" new high last week, he said.

Bleier believes the fundamental backdrop for stocks "remains good," but a 10% reversal from recent highs is "totally within the realm and is an opportunity to buy quality names on weakness."

In terms of names moving major averages,


(GT) - Get Report

was the biggest drag on the Dow, falling 5% after posting weaker-than-expected earnings.



, recovering from yesterday's beating, was the Dow's best performer.

Among tech favorites,


(MSFT) - Get Report



(MU) - Get Report




led traditional bellwethers. The NDX rose 1.5%, the

Morgan Stanley High-Tech 35

gained 1.3% and the

Philadelphia Stock Exchange Semiconductor Index

rose 1.8%.

Meanwhile, Internet standards such as




(AMZN) - Get Report

bounced back from recent weakness.

America Online


rose 2.4% before the online service provider posted fiscal fourth-quarter earnings of 13 cents a share vs. the 30-analyst estimate of 11 cents and year-ago earnings of 6 cents.

Underscoring the positive implications of the comeback by major averages, it was another stellar session for new issues. Leading the pack was


, which leapt 126% from its IPO price of $28.

Wake Me Up Before You Go, Go

"This tells me

yesterday was more a correction than a wholesale 'let's be the first out the door' selloff," said one veteran trader. "It's not like the game is over."

However, he noted trading activity was extremely modest today, attributable both to concerns about Greenspan's testimony tomorrow and to normal late-summer forces.


New York Stock Exchange

trading, 768.9 million shares were exchanged while advancers edged declining stocks by 1,487 to 1,403. In

Nasdaq Stock Market

action 1.01 billion shares traded, while gainers led by 2,060 to 1,848. New 52-week lows matched new highs at 46 on the Big Board, with new highs leading by 90 to 37 in over-the-counter trading.

"I'm trying to stay awake," the trader continued, while acknowledging an increase in activity in the final hour. "It's getting quiet. Volume is down already and August will be sedate. I've got orders on the desk, but there's not an awful lot going on."

Somewhat behind the scenes, traders were emboldened by a 0.5% decline in crude oil futures, sending the price down to $19.66 a barrel. The decline was largely attributed to a higher-than-expected oil inventories report.

Oil stocks weren't badly damaged by the news, though the anti-inflationary implications of the action in crude prices may have made investors more comfortable in swapping bonds for stocks. The price of the 30-year Treasury bond fell 8/32 to 90 28/32, its yield rising to 5.91%.

In addition, bond traders were clearly warier about being long headed into Greenspan's


testimony. "The average change

up or down in reaction to the testimony over the past six years has been 33/32," Tony Crescenzi, chief bond market strategist at

Miller Tabak

, wrote in a research note today.

"Greenspan's testimony has usually had a resonating effect," he wrote. "Expect Greenspan to avoid language that would spark a rally in the markets so as to avoid further cannibalization of the Fed's

June 30 rate hike. After all, the Fed's objective is to SLOW growth, not help it."

Among other indices, the

TST Recommends

Dow Jones Transportation Average

rose 3.65, or 0.1%, to 3438.59; the

Dow Jones Utility Average

rose 0.36, or 0.1%, to 321.68; and the

American Stock Exchange Composite Index

added 0.91, or 0.1%, to 806.81.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

slipped 18.09 to 7136.35 while the

Mexican Stock Exchange IPC Index

rose 42.66 to 5857.63.

Wednesday'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.


Three Dow components reported second-quarter earnings today with varying success.

  • Eastman Kodak (EK) gave up 1/4 to 73 after posting hot earnings of $1.52 a share, topping the 11-analyst estimate by a penny and moving up from last year's $1.38.
  • Goodyear Tire skidded 2 7/8, or 5%, to 54 3/4 after it said it earned 41 cents a share, missing the seven-analyst call of 45 cents and falling below the previous year's $1.25.
  • Finally, Exxon (XON) - Get Report picked up 3/16 to 78 1/8 after recording second-quarter earnings of 49 cents a share, in line with the 20-analyst consensus and down from the year-ago 65 cents.

Mergers, acquisitions and joint ventures



swelled 7 7/8, or 15.9%, to an all-time high of 57 3/8 after

Johnson & Johnson

(JNJ) - Get Report

set plans to buy the biotech company for $4.9 billion in stock, or about $61 a Centocor share, based on yesterday's closing prices. Separately, Centocor recorded second-quarter earnings of 13 cents a share, on target with the 22-analyst view and above the year-ago 3 cents.

Fiber optic carrier

IXC Communications


gained 3 3/8, or 9.3%, to 39 3/4 on news

Cincinnati Bell


is buying it for about $3.2 billion, including assumed debt. Under terms of the deal, each share of IXC stock will be converted into 2.098 shares of Cincinnati Bell stock. Cincinnati Bell fell 3 3/4, or 15.9%, to 19 13/16.

Earnings/revenue reports and previews


(ALL) - Get Report

shed 1 11/16 to 34 15/16 after posting second-quarter earnings of 75 cents a share, 4 cents below the 18-analyst view but a penny higher than last year's figure.

Bristol-Myers Squibb

(BMY) - Get Report

shaved off 1 3/8 to 70 1/8 after reporting second-quarter earnings of 47 cents a share, in line with the 23-analyst estimate and up from the year-ago 41 cents.

CB Richard Ellis Services


sank 3 3/16, or 16.4%, to 16 1/4 after warning it expects to report second-quarter earnings of 16 cents a share, saying U.S. sales and leasing revenue fell below expectations. The three-analyst forecast called for 33 cents vs. the year-ago 38 cents.

Banc of America Securities

lowered the stock to hold from buy.



expanded 3 1/4, or 5.4%, to 63 5/16 after posting second-quarter earnings of 27 cents a share, topping both the 18-analyst estimate of 24 cents and the year-ago 18 cents.


lowered 1 3/16 to 49 1/4 after reporting a second-quarter loss of 36 cents a share, excluding special items. The single-analyst estimate called for a loss of 43 cents vs. the year-ago loss of 31 cents.

Nabisco Group Holdings


sloughed off 1/16 to 19 3/8 after recording second-quarter earnings of 18 cents a share vs. the year-ago 15 cents. First Call didn't have estimates for the company.



picked up 1/8 to 52 3/4 after saying it earned 37 cents a share in its second quarter, beating the 23-analyst estimate of 36 cents and moving up from the year-ago 31 cents.

In other earnings news:

Offerings and stock actions

Ahead of its earnings report scheduled for this evening,



said it will buy back 50 million shares at $22.25 each in a Dutch auction. The stock dropped 1 3/16, or 5.3%, to 21 3/16. rocketed 35 5/16, or 126.1%, to 63 5/16 after its IPO was priced by

Credit Suisse First Boston

at a whopping $28 a share, above its range of $24 to $26.

Among other new issues today:

  • Art Technology (ARTG) climbed 6, or 50%, to 18 1/16 in its first day of trading, having been priced at $12 a share last night by lead underwriter Hambrecht & Quist.
  • Hoover's (HOOV) , an online provider of business information, climbed 8 1/16, or 57.6%, to 22 in its trading debut. Lead underwriter J. P. Morgan priced the stock last night at $14 a share, the top of its pricing range.
  • Insight Communications (ICCI) climbed 5 7/16, or 22.2%, to 29 15/16 in its first day on the market. Lead underwriter Donaldson Lufkin & Jenrette priced Insight yesterday at $24.50 a share, above its expected range of $21 to $23.

Weatherford International

(WFT) - Get Report

flourished 1 3/16 to 37 5/8 after setting plans to spin off its oilfield drilling products division,

Grant Prideco

, to its shareholders.

Analyst actions

Boston Scientific

(BSX) - Get Report

tumbled 2 11/16, or 5.9%, to 42 11/16 after

ABN Amro

downgraded it to hold from buy. Late yesterday, the company beat second-quarter earnings estimates by a penny a share.

DSP Group

(DSPG) - Get Report

shot up 9 1/8, or 24.8%, to an all-time high of 46 1/16 after

SG Cowen

upgraded it to strong buy from buy with a price target of $55 to $60.

IDEC Pharmaceuticals


grew 1 1/16 to 83 3/8 after

Morgan Stanley Dean Witter

cut it to neutral from outperform.



(AGN) - Get Report

declined 17 11/16, or 16%, to 92 9/16 after an advisory committee of the

Food and Drug Administration

recommended against approval of the company's drop developed to treat dry eye disease.