Retreat Resumes After Modest Early Rally

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Stock traders had trouble all day deciding which way to send stocks, but a consensus arrived in the final hour: Down.

The

Dow Jones Industrial Average

again saw its intraday high come and go in the earliest minutes of trading, rising as much as 37.12 to 8928.35 by 9:40 a.m. EDT. From there the blue-chips dipped into a break-even-hugging trading range that lasted until about 3:15 p.m. And then came the collapse: By 3:40, the Dow had cratered to an intraday low of 8789.85, down 101.38. It bounced back to close down 87.44 at 8803.80, with

Merck

(MRK) - Get Report

,

J.P. Morgan

(JPM) - Get Report

and

Eastman Kodak

(EK)

faring worst. The broad

S&P 500

matched the pattern, splashing down 10.30 to 1082.74. Both indices now are below their late-April closing lows.

"I think we were just kind of sitting there waiting for it to happen," said Dan Baker, codirector of institutional trading at

D.A. Davidson

in Portland, Ore. "It didn't even seem to be trading. It's not a major surprise. We need a little more on the downside to make things healthy."

Making

yesterday's modest rebound look like a mere aberration, the high-tech sector surrendered intraday strength to close right around

Monday's harshly depressed levels.

Intel

(INTC) - Get Report

led the decline, crunching down 3 3/16 to a 52-week low of 65 15/16 amid worries about its earnings outlook and the government's likely antitrust suit.

Hambrecht & Quist

slashed its second-quarter and full-year earnings estimates on Intel. (After the close, Intel said it had no plans to preannounce poor second-quarter earnings or to change its guidance on the numbers.)

The Intel jitters sparked bad stumbles for all of the major tech-focused indices, as the

Nasdaq Composite Index

dropped 19.48, or 1.1%, to 1742.31; the large-cap

Nasdaq 100

sledded 23.17, or 2%, to 1163.98; the

Morgan Stanley High-Tech 35

lost 10.94, or 2.1%, to 523.44; and the

Philadelphia Stock Exchange Semiconductor Index

slammed down 7.88, or 3.1%, to 244.16.

"That may be the reason du jour," Baker said of Intel's drop, "but the techs have been getting battered pretty good for how long now? This didn't just happen today."

Among other indices, the

Dow Jones Transportation Average

hopped 31.28, or 1%, to 3290.58; the

Dow Jones Utilities Average

shed 0.78 to 290.52; and the

American Stock Exchange Composite Index

gave up 1.82 to 704.48.

The small-cap

Russell 2000

, which stayed in positive territory until the last 25 minutes of trading as money rotated into its long-depressed sector, couldn't hold its gains and fell 0.54 to 449.16. Small-cap strength helped advancers lead decliners on both major exchanges for most of the session, but the downs won out in the end.

New York Stock Exchange

decliners beat advancers by 1,544 to 1,410 on 581.5 million shares, with 92 new lows ahead of 49 new highs. On the

Nasdaq Stock Market

, 2,352 decliners topped 1,845 advancers on 736.1 million shares. New Nasdaq lows outpaced new highs by 180 to 60.

"I think the market's weak," Baker said. "Even before this latest wave down, our down days were worse than our up days were good." With that said, Baker reiterated that he considers a pullback prudent at this point, given the market's strong performance in the first quarter. Near-term, he said, traders will wait for Friday's May

employment report

as the next tangible piece of information to trade on.

Philip Tasho, CEO of

Riggs Investment Management

in Washington, also said he was untroubled by the market's recent struggles. "The fundamentals are still extremely positive, and so I believe there's still some more upside for the remainder of the year," he said. "It's not going to be as smooth

as in the first quarter. Things will go in fits and starts."

The bond market attracted some haven-seekers this afternoon, with late buying pushing the benchmark 30-year Treasury up 5/32 to 104 26/32. The yield eased to 5.78%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

lost 40.76 to 7493.24 and the Mexican

Bolsa

slid 24.76 to 4455.24.

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

.)

Ciena

(CIEN) - Get Report

took in 4 3/16, or 7.3%, to 61 3/4 after

Tellabs

(TLAB)

agreed to buy it in a $7.1 billion stock deal. Tellabs dropped 2 1/16 to 63 13/16. As

TheStreet.com

noted

yesterday, rumors of a pending acquisition sent Ciena leaping higher late in yesterday's session.

TSC

had a closer look at the deal in another story

today.

Mergers, acquisitions and joint ventures

Allied Life Financial

(ALFC)

rose 2 5/8, or 10.1%, to a high of 28 3/4 on news that its directors will recommend acceptance of a $30-per-share takeover offer from

Nationwide Mutual Insurance

. Nationwide already owns 56% of Allied Life. Yesterday, Nationwide and

Allied Group

(GRP)

, an affiliate of Allied Life, said they are in talks that could lead to a friendly $1.7 billion merger. Allied Group today scored 3 5/16, or 7.7%, to 46 3/16.

QuadraMed

(QMDC)

swelled 2 1/8, or 8.7%, to 27 after saying yesterday that it will buy privately held

Pyramid Health Group

for $66.8 million in stock to expand services.

Earnings reports and previews

Kewaunee Scientific

(KEQU) - Get Report

soared 3 3/16, or 31.9%, to 13 3/16 after reporting fourth-quarter earnings of 36 cents per share compared to the year-ago 18 cents. First Call did not have estimates for the company.

Komag

(KMAG)

skidded 1 9/16, or 16.3%, to 8 after late

yesterday warning of a big second-quarter loss.

Newbridge Networks

(NN)

tumbled 4 5/8, or 15.4%, to 25 3/8 after late

yesterday reporting fourth-quarter earnings in line with First Call expectations.

Artesyn Technologies

(ATSN)

lost 2 1/4, or 14.3%, to 13 1/2 after warning that it expects to report second-quarter earnings of 15 cents per share, short of the 10-analyst view of 27 cents and the year-earlier 23 cents. The power-conversion equipment company said lower end-use demand in its major market segments hurt sales.

Integrated Device Technology

(IDTI) - Get Report

dived 1 1/4, or 14.3%, to 7 17/32 after saying it sees a first-quarter operating loss of $15 million. The three-analyst estimate calls for a break-even quarter compared to the year-ago profit of 2 cents per share.

Martek Biosciences

(MATK)

lowered 1 3/16, or 10.1%, to 11 1/8 after recording a deeper-than-expected second-quarter loss late

yesterday.

Tech Data

(TECD) - Get Report

sank 3 7/8, or 9.8%, to 35 5/8 after late

yesterday reporting first-quarter earnings in line with expectations.

Handleman

(HDL)

slipped 1/16 to 11 151/16 after saying a restructuring program would cause nonrecurring first-quarter charges of $90 million to $110 million. The two-analyst outlook for the quarter, ending July, calls for an operating loss of 15 cents per share versus the year-earlier profit of 19 cents. Also, Handleman reported fourth-quarter earnings of 8 cents, a penny better than the two-analyst estimate and up from the year-ago 1 cent.

Giant Cement

(GCHI)

fell 1 1/8 to 23 1/8 after late

yesterday warning of a second-quarter shortfall.

Superior Telecom

(SUT)

picked up 7/8 to 39 3/4 after

Bankers Trust Alex. Brown

started coverage with a buy. Late

yesterday, the company reported positive fourth quarter earnings.

Offerings and stock actions

Arco Chemical

(RCM) - Get Report

descended 3 1/4, or 5.8%, to 53 1/16 after

Atlantic Richfield

(ARC) - Get Report

said it would cut its stake in Arco Chemical to 50% from 82% through a secondary offering and a sale of shares to Arco Chemical. Atlantic Richfield lost 5/16 to 77 3/4.

Navistar

(NAV) - Get Report

slid 1/16 to 27 1/16 after saying that its 19.9 million-share offering was priced at $26.50 per share.

Analyst actions

Applebee's

(APPB)

stumbled 2 1/4, or 9.2%, to 22 1/8 after

Raymond James

cut it to neutral from accumulate.

CD Radio

(CDRD)

shot up 2 11/16, or 8.1%, to 36 1/2 after

Lehman Brothers

raised its price target to 66 from 45.

SportsLine USA

(SPLN)

jumped 1 5/8, or 7.2%, to 24 after

Bear Stearns

initiated coverage at buy.

Remedy

(RMDY)

climbed 1, or 6.4%, to 16 7/8 after

NationsBanc Montgomery Securities

upgraded it to buy from hold.

Gasonix

(GSNX)

sank 5/8, or 6.1%, to 9 5/8 after

CIBC Oppenheimer

cut it to hold from buy.

ASM Lithography

(ASML) - Get Report

, also in the semiconductor fabrication business, added 3/4 to 36 3/8 despite a downgrade from the firm to buy from strong buy.

Dendrite

(DRTE)

advanced 1 9/16, or 5.4%, to 30 3/4 after

Salomon Smith Barney

began coverage at buy.

Trigon Healthcare

(TGH) - Get Report

tacked on 1/2 to 35 5/8 after Salomon Smith Barney initiated coverage at outperform.

Miscellany

AT&T

(T) - Get Report

grew 15/16 to 59 5/8 after announcing that at least 14,000 managers will voluntarily retire. That puts the company a year ahead of its plan to cut its workforce by 18,000 over two years. AT&T also said it's comfortable with 1998 earnings estimates of $3.25 to $3.35 per share even though it will take a bigger-than-expected charge of more than $1.2 billion to pay for the early retirements.

FastComm Communications

(FSCX)

plunged 13/16, or 59.1%, to 9/16 after saying it will file for Chapter 11 bankruptcy.

Zonagen

(ZONA)

collapsed 5 5/8, or 15.4%, to 31 1/4 on concerns about trial results for its impotence drug

Vasomax

.

TheStreet.com's

Jesse Eisinger, covering the

American Urological Association

conference in San Diego, looked at Zonagen and other companies battling to find the next

Viagra

in a

story today.

TransTexas Gas

(TTG)

sprung 1 1/8, or 11.8%, to 10 11/16 after announcing the extension of the Eagle Bay natural gas field.

America Online

(AOL)

flourished 1 5/8 to 79 despite a

Wall Street Journal

"Heard on the Street" piece criticizing its "fancy accounting methods." Word of the negative article leaked all over Wall Street yesterday and sent AOL down then; investors seem to be concluding that enough damage was done.

General Motors

(GM) - Get Report

rose 2 1/8 to 75 1/8 after it reported a 19.6% gain in light-truck sales and a 7.2% rise in car sales.

Ford

(F) - Get Report

fell 1 3/8 to 55 5/8 after saying its May light-truck sales rose 7.6% while car sales fell 3.3%.

Chrysler

(C) - Get Report

, which yesterday reported a truck sales leap of 39% and a car sales gain of 5%, added 3/16 to 56 3/16.

Medtronic

(MDT) - Get Report

ascended 1 1/2 to 55 9/16 after the

Food and Drug Administration

approved commercial distribution of its Wiktor Rival stent system.

ReliaStar

(RLR)

leapt 1 7/16 to 43 11/16 and

AccuStaff

(ASI)

leapt 1 5/16 to 33 3/4 after the

news that both companies will be added to the

S&P MidCap 400

.

3Com

(COMS)

tacked on 1 to 25 after saying it will hire a new executive to manage day-to-day operations and relieve CEO Eric Benhamou of some of his responsibilities.

PepsiCo

(PEP) - Get Report

slipped 7/16 to 40 3/4 after ending a 32-year franchise agreement with one of its largest independent bottlers because it had threatened to intervene in Pepsi's lawsuit against

Coca-Cola

(KO) - Get Report

.

Genesco

(GCO) - Get Report

grew 1/4 to 14 1/8 after saying late

yesterday that it will open 80 Journeys stores this year and that it expects a second-quarter charge of up to $900,000 to cut expenses.

Impath

(IMPH)

fell 3/4 to 30 3/8 after denying rumors circulating on the Internet that the company is being investigated by the

Securities and Exchange Commission

.