The bond market may be in need of a little ginger ale to help it gulp down new supply, but as far as the stock market is concerned today, Wall Street's inflation fears were overblown.
That's what the tape is telling you, at least. Those stocks that were beaten down so badly over the past month while the market rotated violently out of growth and toward value are showing signs of life here. Take tech issues. Continued strength in both old-line tech and things Internet were helping boost the
Nasdaq Composite Index
43, or 1.7%, to 2569.
Or look at the drugs -- these stocks are the biggest losers in a shift from growth to value, because unlike the fast growing techs, they show little sensitivity to shifts in the economy. But the
American Stock Exchange Pharmaceutical Index
lately was up 1.3%.
While that doesn't necessarily suggest a resurgence of growth, it does suggest that at least for now the blood-letting is over. That has a lot to do with the Treasuries. Though the 30-year is down 5/32 to 92 5/32 (lifting the yield to 5.81%), that's not so bad considering the
is auctioning off $15 billion in five-year notes this afternoon. (For more on the fixed-income market, see today's early
Bond Focus.) With good productivity figures out today, and a sense that
Federal Open Market Committee
will not move to a tightening bias at next week's meeting, there's a sense that people may be, if not wrong, a little early when it comes to worrying about nascent inflation.
"The consensus is clearly that rates are going higher," said John Manley, equity strategist at
Salomon Smith Barney
. "Maybe they do, but maybe they don't go much higher." Manley thinks that the market may have overdiscounted the rate rise, and he thinks there may be some opportunity in rate-sensitive stocks here -- particularly the financials.
But Manley -- one of the first strategists to see it coming -- doesn't think the rally in cyclicals is done. While he suspects that they may "flop around" for a bit, over the next 6 to 12 months he thinks they'll continue to outperform.
One reason, he said, is that we are just beginning to see the fruits of the money companies invested in technology. "On a very broad basis over the last four or five years a lot of money was spent, ostensibly to improve production," Manley said. "Now you're beginning to see signs that it may be kicking in. If it's kicking in now, don't I want to own the guys who own that technology? You want to own the cyclicals. America's companies you want to hold a bit longer."
Though not quite as rambunctious as their tech counterparts, America's companies were doing pretty well. The
Dow Jones Industrial Average
was up 74, or 0.7% to 11,081. The
was up 18, or 1.4%, to 1358. And the small-cap
was up 5, or 1.1%, to 447.
Breadth was good, but trading was lackluster. On the
New York Stock Exchange
, advancers were topping decliners 1,744 to 1,126 on 481 million shares. On the
Nasdaq Stock Market
, advancers were topping decliners 2,113 to 1,583 on 549 million shares. New 52-week highs were leading new lows 85 to 8 on the Big Board and 97 to 24 on the Nasdaq.
"It's very slow here," said Ned Collins, executive vice president of U.S. stocks at
Daiwa Securities America
. "I don't know why, but it just seems like the business is very dull and people are not very interested in the marketplace right now."
It's a malaise traders have been talking about for a while now, and it points to a market that is still chewing on the gains it made earlier in the year. "I don't know whether we have hit a little plateau here where we need to consolidate and rest and back off or whatever," said Collins.
Internet stocks, however, were anything but dull. Closely followed
Morgan Stanley Dean Witter
analyst Mary Meeker today raised her rating on
to strong buy from outperform, starting a fire in AOL that's ignited the sector. AOL has lately come under pressure, as investors have questioned whether the company will be able to contend with the advent of broadband.
"Over the past week or so, AOL's destiny has, dare we say, bleakened, to a host of doubters ... but, IOHO, it just ain't so," wrote Meeker in a note released this morning.
AOL lately was up 10 9/16, or 8.2%, to 138 7/8. That helped drive
TheStreet.com Internet Sector
index up 18, or 2.9%, to 654.
Tuesday's Midday Movers
As noted above, America Online was flying up 9 5/8, or 7.5%, to 137 15/16 after Morgan Stanley Dean Witter's Mary Meeker upgraded the stock to strong buy from outperform. Separately, AOL said it entered partnerships with four companies to develop its
product. The companies are the
Hughes Network Systems
In other news:
Empire District Electric
was up 4 3/8, or 20.6%, to 25 5/8 after
agreed to buy the company in a stock and cash deal valued at $800 million, including the assumption of debt. UtiliCorp was down 5/16 to 23 7/8.
was up 2 7/8, or 5.3%, to 59 3/8 after
lifted it to attractive from neutral.
was hopping 32 5/8, or 30.6%, to 139 1/4 after late
yesterday saying it plans to seek federal approval to market
to early-stage rheumatoid arthritis patients. Today,
raised the stock to intermediate-term buy from accumulate.
American Home Products
, which owns a majority stake in Immunex, was up 2 3/4 to 62 1/2.
was up 3 1/2, or 5%, to 74 1/16 after
initiated coverage at outperform, setting a price target of 80 a share.
(MAKR:Nasdaq) was popping up 6 15/16, or 53.4%, to 19 15/16 on 4.2 million shares after Lehman Brothers priced its 3.35 million-share IPO top-range at $13 a share. Maker is a semiconductor firm that makes and markets processors, development tools and applications software for use in communications systems.
was soaring 3 5/8, or 104.5%, to 7 3/8 after saying it will acquire
for $85 million in stock. According to the deal, Meridian Data stockholders will receive 0.49 of a Quantum share for each share owned. Separately, Quantum, which was up 13/16 to 20, announced plans to buy back up to $200 million in stock.
was up 4 13/16, or 7%, to 73 15/16 after Merrill Lynch lifted it to accumulate from neutral.
was up 1 1/4 to 83 1/8 after a group of current and former executives bid $1.6 billion for the company's semiconductor parts group. Also,
U.S. Bancorp Piper Jaffray
started coverage of Motorola with a buy and a six-month price target of 105 a share.
was down 1 19/32, or 14.3%, to 9 9/16 after Morgan Stanley Dean Witter downgraded it to neutral from outperform.
was up 8 1/16, or 26.1%, to 39 after setting the launch of a unit called
and saying it would acquire
in a deal whose terms weren't disclosed. Reuters will hold a minority stake in SportsLine Europe, as will
, a unit of
. Reuters was up 2 3/8 to 84 5/8; Intel was up 1 5/16 to 61 15/16; and MediaOne was down 1 1/16 to 77 1/2.
(TSCM:Nasdaq), the publisher of this Web site, was up 47 1/2, or 250%, to 66 1/2 on 7.6 million shares after
priced its 5.5 million-share IPO top-range at $19 a share last night. Yesterday, the offering's price range was lifted to $17 to $19 from $11 to $13.
was up 3, or 12.6%, to 26 3/4 after
started coverage of the stock with a strong buy.
was up 3 1/4, or 13.5%, to 27 9/16 after receiving the same upgrade from the firm.
was up 12 1/4, or 7.9%, to 168 1/16 after unveiling
, a 10-station Internet radio network offering continuous music, in partnership with its pending merger partner
. broadcast.com was up 9 7/16, or 8.3%, to 123 11/16.
was up 15/16, or 9.2%, to 11 1/8 after reporting first-quarter earnings of 19 cents a share, 2 cents better than the 14-analyst estimate and up from the year-earlier 15 cents.
was up 1 7/8 to 47 1/16 after reporting first-quarter earnings of 25 cents a share, 3 cents higher than the 19-analyst expectation and up from the year-ago 18 cents. Same-store sales rose 9.3% year-over-year.