Record Closes Posted, but Holiday Mood Stifles the Fanfare

The Dow, S&P 500 and Nasdaq all climbed to new record closes ahead of the three-day Fourth of July weekend.
Author:
Publish date:

What in the heck are you still doing here?

Gettattaheah!

Print this out, and then go prep a grill or grab a fireworks-viewing spot on a roof somewhere or something, and start happily relaxing. That's what laid-back traders and strategists -- the ones who stuck around -- seemed to be doing today, as they granted phone lectures, munching on a snack, about what a great thing the American stock market is these days. Apropos patriotism ahead of the July Fourth holiday; appropriate enthusiasm as three major equity indices, including the all-week-rising

Dow Jones Industrial Average

, recorded new highs.

Just as market watchers were impressed by stocks' reaction to Wednesday's

decision by the

Federal Open Market Committee

to raise target interest rates 25 basis points and to yesterday's strong

NAPM

numbers, so were they enthused by today's who-cares response to the June

employment

number.

The jobs figure was stronger than anticipated -- the economy added 268,000 jobs, well above expectations for 220,000. But downward revisions to the May report and an uptick in the unemployment rate (to 4.3% from 4.2%, against economist expectations for it to remain unchanged) helped soothe inflation anxiety. Wages gained 0.4% against expectations of a 0.3% gain. (

TheStreet.com

looked at the 8:30 a.m. EDT release of the jobs report in an early-morning

piece .)

Both the stock and bond markets are closed Monday in observance of the July Fourth holiday. The Treasury market took a half-day today and closed at 2 p.m. The price of the 30-year Treasury bond finished up 8/32 to 89 24/32, yielding 5.993%.

Robert Harrington, co-head of block trading at

PaineWebber

, said he wasn't surprised by the inability of the jobs report to spook either bonds or stocks. "We would have needed 400,000 or some really unusual number" to exert pressure on today's market, still rallying on new-quarter money and the Fed move and set up for a pop as stocks traditionally perform well going into a long weekend, he said. "Fifty-thousand either way could be a statistical error on this report. It's going to take a series of economic numbers to get people thinking."

Harrington, predicting a lot of back-and-forth rangebound trading during July and August, continued: "The market's OK here. One big cloud was removed with the

Fed's

25-basis-point move and neutral stance. The market is feeling that's really enough for now, that we have six, 12 weeks to think about the next movement by the Fed. Even with 25 points, we still have low interest rates. Then we're going to start paying attention to second-quarter earnings, and lots of spots there will be good. ... This is still the best game in town."

The Dow shot up 72.82, or 0.66%, to 11,139.24, less than a point from its intraday high of 11,139.56 and besting its May 13 closing high of 11,107.19. The blue-chip proxy was pretty much locked into ascend mode all day with two small dips, one at 10:10 a.m. and another at 3:35 p.m. Dow gainers were led by

American Express

(AXP) - Get Report

, which jumped 3.4%. The

Philadelphia Stock Exchange/KBW Bank Index

rose 0.6%.

Harrington called AXP "a great growth company, a good financial bellwether. I think now that the Fed's moved, people are more willing to grab those high P/E growth stocks."

Sectorwise, airline and paper names outperformed while gaming stocks were down on last night's earnings warning from

Mirage Resorts

(MIR)

. The

American Stock Exchange Airline Index

grew 2.3% and the

Philadelphia Stock Exchange Forest and Paper Products Index

hopped up 2.7%.

Dow theorists must have been pleased by today's powerful move from the

Dow Jones Transportation Average

, which vaulted 1.4% to 3515.99. Traders said transports generally were oversold and benefited today from playing catch-up.

The broader

S&P 500

climbed 10.26 to a new closing high of 1391.22, and the small-cap

Russell 2000

expanded 2.09 to 456.51.

The tech-driven

Nasdaq Composite Index

excelled 34.84, or 1.3%, to a new closing high of 2741.02. The

Nasdaq 100

swelled 1.1%, with

Cisco

(CSCO) - Get Report

and

SunMicrosystems

(SUNW) - Get Report

displaying notable strength.

While the broader Internet industry was a mix bag,

TheStreet.com Internet Sector

index popped up 24.17, or 3.8%, to 664.32. Recently issued Net names continued to receive the kindness bestowed upon them earlier this week.

Volume was moderate to light, but not all that bad for a preholiday session. In

NewYork Stock Exchange

trading, 588 million shares were traded while advancers led declining stocks 1,681 to 1,224. In

Nasdaq Stock Market

activity, 850.5 million shares were exchanged while gainers led 2,312 to 1,627. New 52-week highs beat lows 122 to 35 in Big Board action and by 182 to 27 in over-the-counter trading.

Merrill's Bernstein thinks globally, favors value to growth, low quality to high quality

Richard Bernstein, chief quantitative strategist at

Merrill Lynch

, shared his thoughts on the FOMC in a research note today, saying the Fed committee's switch to a neutral bias "signals that they are very conscious that their raising short-term interest rates could ruin the rejuvenating global economy, and replay 1994 and 1997." Bernstein called the rate hike "very bullish" for Merrill's global value strategy.

"The combination of raising short-term interest rates and a move to a neutral stance (more commonly called jawboning) seems very logical," he said. "On the one hand, the Fed has increased short-term interest rates, but on the other they are attempting to prevent a quick and strong rally in the dollar that might hurt the rejuvenating global economy. The risk to our global value theme is that the Fed has little tolerance for some reflation in the global economy, and tightens quickly and aggressively."

The strategist recommends investors "continue to overweight value, lower-quality and smaller-capitalization stocks in most countries," arguing emerging markets will outperform developed ones. Bernstein said he's particularly encouraged by Korea's

KOSPI Index

, which is trading above 900 for the first time in more than three years.

Among other U.S. indices, the

Dow Jones Utility Average

flew 2.01 to 320.33 and the

American Stock Exchange Composite Index

surged 7.47 to an all-time high of 802.42.

For the week, the Dow industrials screamed up 586.68, or 5.6%; the S&P 500 advanced 75.75, or 5.8%; the Comp sizzled up 188.37, or 7.4%; the Russell 2000 grew 13.40, or 3.0%; and the DOT flourished 95.88, or 16.9%. Additionally, the Dow transports rallied 199.88, or 6.0%; the Dow utilities shaved off 1.71, or 0.5%; and the Amex Composite flew 30.40, or 3.9%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

rose 127.73, or 1.8%, to 7137.80 and the

Mexican Stock Exchange IPC Index

added 33.01 to 5887.61. For the week, the TSE picked up 198.55, or 2.9%, while the IPC tacked on 372.37, or 6.8%.

Friday's Company Report

By John J. Edwards III
Markets Editor

Earnings estimates from First Call. Earnings reported on a diluted basis unless otherwise specified

.

Mergers, acquisitions and joint ventures

Brazilian beverage behemoth

Brahma

(BRH)

jumped 2 5/16, or 20.7%, to 13 1/2 after late

yesterday agreeing to merge with Brazil's other bevvy behemoth,

Antarctica

. Brahma shareholders will receive one share of the combined company for each share held while Antarctica shareholders will receive 46.63 shares in the new company for each share held.

Glenayre Technologies

(GEMS)

powered up 1 3/32, or 27.6%, to 5 3/32 after yesterday inking a pact with

Lucent

(LU)

unit

AG Communication Systems

to form a venture to sell a platform supporting prepaid wireless telephone call services. Lucent was up 2 5/8 to an all-time high of 70 11/16.

Scotsman Industries

(SCT)

soared 10 13/16, or 49.6%, to an all-time high of 32 5/8 after the U.K.'s

Berisford

agreed to acquire it for $364 million, or $33 a share, in cash. Berisford will also assume $348 million in Scotsman debt.

Swiss Army Brands

(SABI)

sharpened 2 3/8, or 26.4%, to 11 7/16 on a

Business Week

Inside Wall Street report that investment adviser Charles LaLoggia expects

Victorinox

will make an offer of at least $15 a share for the company. All the products Swiss Army Brands carries are made by Victorinox, which is Europe's largest cutlery maker and is also the largest Swiss Army shareholder, the column reports.

Earnings/revenue reports and previews

Mirage Resorts

(MIR)

slumped 1 1/2, or 9%, to 15 1/4 after late yesterday warning it sees second-quarter earnings of 7 cents to 10 cents a share, below the 21-analyst forecast of 24 cents. The company, which earned 18 cents in the year-ago period, cited competition in the Las Vegas market, low table-games win percentages and a slow start with a new resort in Mississippi.

Deutsche Banc Alex. Brown

dropped Mirage to market perform from buy and

Donaldson Lufkin & Jenrette

cut it to market performance from top pick.

Down in sympathy were

Mandalay Resort Group

(MBG)

, the former Circus Circus, off 1 9/16, or 7.5%, to 19 3/8; and

Harrah's Entertainment

(HET)

, off 1 3/16, or 5.5%, to 20 3/8.

ADAC Laboratories

(ADACE)

ascended 1/4 to 7 9/16 despite late yesterday reporting a second-quarter loss of 39 cents a share, in a different millennium than the six-analyst prediction for a 18-cent profit. The company, which made 27 cents in the year-ago period, said it expects third-quarter revenue coming in 12% to 18% below second-quarter revenue. The company cited more stringent revenue recognition policies and increased competition in certain markets.

ConAgra

(CAG) - Get Report

added 1/8 to 27 7/16 after late yesterday posting fourth-quarter earnings of 41 cents a share, on target with the 15-analyst forecast and above the year-ago 36 cents.

Day Runner

(DAYR)

plunged 2 1/2, or 20.2%, to 10 after late yesterday warning of a fourth-quarter loss of 14 cents to 18 cents a share. The company blamed tightened inventories. The five-analyst estimate called for earnings of 10 cents vs. the year-ago profit of 39 cents.

Evans & Sutherland Computer

(ESCC)

was down 1 1/2, or 10.8%, to 12 3/8 after warning it expects to report a second-quarter loss in the range of 35 cents to 40 cents a share, a world away from the four-analyst consensus estimate of a profit of 11 cents a share.

Food Lion

(FDLNA)

was up 1/4 to 11 13/16 after late yesterday reporting second-quarter earnings of 14 cents a share, in line with the 14-analyst estimate and a penny ahead of the year-ago figure.

Ha-Lo Industries

(HMK)

plummeted 3 13/16, or 38.6%, to a three-year low of 6 1/16 after late yesterday warning of a second-quarter earnings shortfall.

Credit Suisse First Boston

downgraded the stock to hold from buy and

Barrington Research Associates

did the same.

Jostens

(JOS)

rusted 1 9/16, or 7.1%, to 20 7/16 after warning its 1999 earnings would be $1.55 to $1.65 a share, below the two-analyst consensus estimate of $1.67.

Rogue Wave Software

(RWAV)

was slammed 1 15/16, or 21%, to 7 3/8 after late yesterday warning that it expects to report third-quarter earnings of 4 cents a share, matching the year-ago figure. The four-analyst outlook called for 13 cents. Rogue Wave blamed poor European sales.

SG Cowen

knocked the stock to neutral from strong buy.

Ryder System

(R) - Get Report

skidded 1 11/16, or 6.5%, to 24 3/8 after warning it expects to report second-quarter earnings of 42 cents to 47 cents a share. The nine-analyst estimate called for 51 cents vs. the year-ago 61 cents. The company blamed lower-than-expected profitability in its integrated logistics and truck leasing units.

Merrill Lynch

was ahead of the curve, yesterday downgrading Ryder to long-term accumulate from buy.

24/7 Media

(TFSM)

jetted 3, or 8%, to 40 5/8 on news it booked $13 million in direct-marketing packages in the past two months.

U.S.A. Floral Products

(ROSI)

wilted 15/16, or 12.5%, to 6 9/16 after late yesterday warning it sees second-quarter earnings of 10 cents to 15 cents a share, including a gain from antidumping duties. The six-analyst forecast called for operating earnings of 26 cents vs. the year-ago 34 cents. The company cited global pricing pressure for the expected shortfall.

Walgreen

(WAG)

slipped 1/4 to 28 3/4 despite reporting a June same-store sales increase of 13%.

Offerings and stock actions

Sun Community Bancorp

(SCBL)

improved 1/8 to 16 1/8 after

Everen Securities

priced its 1.65 million-share IPO midrange at $16 a share.

Analyst actions

Aspect Development

(ASDV)

soared 3 1/2, or 17.9%, to 23 1/8 after

Credit Suisse First Boston

upgraded it to buy from hold. The firm boosted 1999 and 2000 earnings estimates on Aspect and set a 12-month price target of 28.

Caribiner

(CWC)

fell 13/16, or 13.7%, to 5 1/8 after Merrill Lynch slapped it to near-term neutral from accumulate.

Crane

(CR) - Get Report

declined 2 7/16, or 7.7%, to 29 1/8 after DLJ cut it to market performance from buy.

Intermet

(INMT)

gave up 1 11/16, or 11.4%, to 13 1/16 after DLJ lowered it to market performance from buy.

Jefferson Smurfit

(JS)

added 1 to 25 1/4 after

Morgan Stanley Dean Witter

initiated coverage at outperform.

NextCard

(NXCD)

rose 3 15/16 to 37 after

First Union Capital Markets

started coverage at buy with a 12-month price target of 60.

Nortek

(NTK)

increased 1/4 to 30 15/16 after

PaineWebber

upped it to buy from attractive.

Parametric Technology

(PMTC)

rose 3/8 to 14 1/8 after Credit Suisse First Boston started coverage at buy with a six- to nine-month price target of 20.

PMI Group

(PMA)

dropped 1 1/16 to 66 7/8 after PaineWebber trimmed it to attractive from buy.

Unilever

(UN) - Get Report

improved 1 3/8 to 69 13/16 after DLJ raised it to buy from market performance.

Miscellany

GoTo.com

(GOTO)

bounded 13 7/8, or 38%, to a postoffering high of 50 1/2 after late yesterday announcing a deal to provide search services to

America Online's

(AOL)

Netscape

unit. AOL was up 3 1/8 to 115 1/4.

RealNetworks

(RNWK) - Get Report

advanced 12 1/8, or 15.6%, to 89 15/16, benefiting from yesterday's news that the company will supply software to

Microsoft's

(MSFT) - Get Report

WebTV Networks

unit. Mister Softee was up 3/4 to 91 7/8.