Rumors and Facts Collide to Create a Mixed Day

Merger chatter and strong Net IPOs sent techs skyward, but swelling bond yields restrained blue-chips.
Author:
Publish date:

Bouncing back from the brink of a bond-induced blowoff, stock proxies closed off their intraday bottoms. Equities ended with a negative bias, but losses were buttressed by buoyant tech stocks.

The bond market again hosted Wall Street's biggest drama, falling hard despite

Ford's

(F) - Get Report

cancellation of an offering everybody was worried about but apparently

never existed. The price of the 30-year Treasury bond fell 1 1/32 to 87 27/32, its yield rising to 6.15%.

Beyond Ford's dosey-do, bonds were roiled by rumors a consulting firm -- presumed to be Washington-based

Johnson Smick

-- reported the

Federal Reserve

will raise interest rates 50 basis points next week, instead of the market-pleasing 25. But

CNBC's

Ron Insana, who's been accused of worst-case-scenario-ism by some

pundits, put an end to that, helping spur a late-day recovery in stocks although bonds paid him no nevermind.

The Nasdaq Composite Index gained 17.87, or 0.7%, to 2598.13 after trading as low as 2557.46.

TheStreet.com Internet Sector

index rose 11.69, or 2%, to 588.61 vs. a nadir of 571.13.

The

Dow Jones Industrial Average

fell for a third straight day, falling 54.77, or 0.5%, to 10,666.86 but off its low of 10,616.84. The

S&P 500

dipped 2.82, or 0.2%, to 1333.06 vs. a session low of 1324.32. The

Russell 2000

shed 0.29, or 0.1%, to 447.04 after trading as low as 444.79.

Market averages were aided by tech behemoths such as

Cisco

(CSCO) - Get Report

and

Sun Microsystems

(SUNW) - Get Report

, as well as oil giants such as

Chevron

(CHV)

and

Exxon

(XON) - Get Report

.

The

Nasdaq 100

rose 1.3%; the

Philadelphia Stock Exchange Semiconductor Index

gained 1.8%; and the

American Stock Exchange Oil & Gas Index

rose 0.9%.

Financials, drugmakers and retailers were on the downside. The

Philadelphia Stock Exchange/KBW Bank Index

,

American Stock Exchange Pharmaceutical Index

, and

American Stock Exchange Retailing Index

each fell at least 1.3%.

Within financials,

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were the Dow's biggest negatives. Meanwhile,

Goldman Sachs

(GS) - Get Report

today suffered a fate similar to

Lehman Brothers'

(LEH)

yesterday, falling 4.4% despite posting better-than-expected earnings.

In

New York Stock Exchange

trading, 731.8 million shares were traded while declining stocks led advancers 1,747 to 1,213. In

Nasdaq Stock Market

activity, 955.3 million shares were exchanged while losers led 2,024 to 1,791. New 52-week lows bested new highs 67 to 51 in Big Board action although new highs led 71 to 51 in over-the-counter trading.

Won't Get Fooled Again

With bond yields on the forward march, you'd think growth stocks would hesitate. Instead, a spate of mergers and rumors thereof sent techs higher, with Net names leading.

Chatter that

CMGI

(CMGI)

may buy

Compaq's

(CPQ)

Alta Vista

unit and possibly

Lycos

(LCOS)

was just the biggest of several deal rumors moving stocks. CMGI gained 4.2% and Lycos rose 4.8%, while Compaq slid 1.6%.

DoubleClick

(DCLK)

fell 6.3% on fears a CMGI-Alta Vista deal would cost DoubleClick one of its biggest clients (Alta Vista).

Elsewhere,

Beyond.com

(BYND) - Get Report

rose 27.8% on speculation

Amazon.com

(AMZN) - Get Report

will tender a bid; Amazon.com rose fractionally.

EarthLink

(ELNK)

gained 6.8% on rumblings about a possible

Gateway

(GTW)

buyout; Gateway fell fractionally.

Beyond rumors,

Stanford Telecom

(STII)

gained 9.2% after last night's announcement of a $280 million offer from

Newbridge Networks

(NN)

, which slid 6.5%.

AboveNet Communications

(ABOV)

jumped 11.1% on word

Metromedia Fiber Network

(MFNX)

plans to buy it for about $1.6 billion; Metromedia fell 11.9%.

Meanwhile,

Healtheon

(HLTH)

climbed 6.8% after inking a content and marketing agreement with

Yahoo!

(YHOO)

, which gained 1.9%.

Finally,

Qwest

(QWST)

fell 7.6% after upping its already sizable offers for

U S West

(USW)

, up 1.8%, and

Frontier

(FRO) - Get Report

, higher by 3.2%.

The deals and would-be deals sparked a "who's next?" discussion nearly rivaling the album of the same name in scope and impact.

Rumored potential merger targets included

GoTo.com

(GNET)

, up 6.8%, and

PSINet

(PSIX)

, which rose 7.9%.

Meanwhile, new issue

GlobeSpan

(GSPN)

soared 182% and fellow debutante

Ariba

(ARBA)

jumped 291%.

"I think some of the rumors are B.S.," said Ronny Kraft, CEO of

Gotham Capital Management

, speaking about both mergers and a 50-basis-point rate hike. "Stocks with green are standing apart from the majority -- each one has a story."

Regarding the Fed, "it wouldn't be outrageous for the Fed to raise rates 50 basis points but I don't expect it to happen," he said. "Fifty basis points would really, really hurt this market and I don't think that's what

Alan Greenspan

is trying to accomplish. He'd like to slowly drain the air out of the bubble."

As for the bigger picture, there's "no reason" for either stocks or bonds to go higher, Kraft said. "The market has already adopted the idea the Fed is going to raise rates. By default it's 25

basis points and only one and it's pre-emptive. We could have a problem if the Fed raises 50. If a rumor gets out, spread by people potentially short the bond," it's not surprising to see markets wobble.

Separately, Kraft said his firm is no way associated with the Gotham Capital Management whose CFO was arrested on fraud charges, as reported in today's

New York Times

. (After the close, Kraft's firm came out with a press release saying: "We want to reassure our clients and our colleagues in the media that while our firm does manage a hedge and while we do share the name, the similarities end at that.")

Among other indices, the

Dow Jones Transportation Average

fell 12.72, or 0.4%, to 3378.91; the

Dow Jones Utility Average

slid 1.71, or 0.5%, to 326.68; and the

American Stock Exchange Composite Index

gained 5.69, or 0.7%, to 771.16.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 17.94, or 0.3%, to 6936.97 and the

Mexican Stock Exchange IPC Index

shed 136.18, or 2.4%, to 5637.35.

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.

)

As noted above, Goldman Sachs scratched off 3 to 65 after posting second-quarter earnings of $1.30 a share, topping the 11-analyst outlook for $1.07 and moving ahead of the year-ago $1.

Elsewhere, Beyond.com swelled 7 1/8, or 27.8%, to 32 7/8 on rumors that Amazon.com might be considering purchasing the online software seller. Amazon picked up 1/4 to 117 3/4.

Mergers, acquisitions and joint ventures

AboveNet Communications, an outsourcer of Internet hosting and connectivity services to businesses, reeled in 4 1/16, or 11.1%, to 40 13/16 after fiber-optic network operator Metromedia Fiber Network set plans to buy it for about $1.6 billion in stock. Metromedia slouched 5 1/16, or 11.9%, to 37 1/2.

Iridium

(IRID)

shot up 2 3/4, or 26.8%, to 13 1/16 after last night saying it ended its contract to buy

Claircom Communications

from

AT&T

(T) - Get Report

and

Rogers Cantel

.

EarthLink grew 3 7/8, or 6.8%, to 61 1/4 on continued speculation Gateway is interested in buying the Internet service provider. Gateway lowered 1/8 to 64 5/8.

Multex.com

(MLTX)

tumbled 2 3/4, or 9.4%, to 26 11/16 on word it's acquiring

Market Guide

(MARG)

in a $159 million stock swap. Market Guide sliced off 1 1/4, or 5.5%, to 21 5/8.

Qwest Communications declined 2 11/16, or 7.6%, to 32 9/16 after sweetening its combined takeover bid for both U S West and Frontier to $48 billion from $45.4 billion. Both companies rejected Qwest's original offers and reaffirmed their plans to get together with

Global Crossing

(GBLX)

.

Stanford Telecom flew 2 7/16, or 9.2%, to an annual high of 28 7/8 on last night's news Canada's Newbridge Networks will buy the company for $280 million in stock. Newbridge skidded 2, or 6.5%, to 28 3/4.

Earnings/revenue reports and previews

Canandaigua Brands

(CBRNA)

tacked on 1 to 45 5/8 after reporting first-quarter earnings of 77 cents a share, 3 cents higher than the six-analyst view and above the year-ago 68 cents.

Crown Cork & Seal

(CCK) - Get Report

slid 3 1/2, or 10.8%, to 28 15/16 after warning its second quarter earnings will come in at 75 cents to 77 cents a share, well below the eight-analyst view of 92 cents a share.

Family Dollar

(FDO)

added 1/16 to 23 5/8 after posting third-quarter earnings of 24 cents a share, beating the 11-analyst outlook for 22 cents and moving ahead of the year-ago 18 cents.

FSI

(FSII)

shed 1 1/8, or 12.9%, to 7 11/16 after last night recording recorded a third-quarter loss of 17 cents a share, narrower than the four-analyst outlook for a loss of 18 cents but wider than the year-ago loss of 9 cents. Today,

Banc of America

lowered the stock to hold from buy.

Racing Champions

(RACN)

plunged 10 5/32, or 60.4%, to an all-time low of 6 11/16 after warning it expects to lose 30 cents to 35 cents a share for its second quarter, a far cry from the six-analyst call for earnings of 17 cents a share.

3Com

(COMS)

lost 4 3/8, or 13.9%, to 27 1/8. Last night, the networker's CFO said 3Com expects its revenue for the first and third quarter of 2000 to come in below year-ago figures. 3Com posted fourth-quarter earnings of 24 cents a share, 1 cent higher than the 25-analyst view and ahead of the year-ago 18 cents. The company also approved a 15 million-share repurchase plan.

Gruntal

downgraded the stock to hold from strong buy and dropped its 2000 earnings estimate for the company to $1.15 from $1.38 a share.

XL Capital

(XL)

dwindled 1 11/16 to 56 5/16 after announcing second-quarter earnings of $1.16, above the 12-analyst call for a repeat of the year-ago $1.11.

Offerings and stock actions

Ariba torpedoed up 67, or 291.3%, to 90 after

Morgan Stanley Dean Witter

priced its 5 million-share IPO above range at $23. Ariba's software is used to automate purchasing of operating resources such as office supplies and computer products.

GlobeSpan rocketed 27 1/4, or 181.6%, to 42 5/16 after

BancBoston Robertson Stephens

priced its 3.25 million-share IPO top-range at $15. The company is a developer of advanced digital subscriber line integrated circuits.

TD Waterhouse

(TWE)

hopped up 1 5/8, or 6.8%, to 25 5/8 after its 42-million share IPO priced top-range at $24. The initial offering for the company, the discount brokerage unit of

Toronto-Dominion

(TD) - Get Report

, originally was set for 32 million shares.

Lead underwriter

Goldman Sachs

raised the price range for

Juniper Networks'

(JNPR:Nasdaq) 4.8 million-share IPO to $28 to $30 a share from $21 to $23 a share. The company provides high-speed Internet routers.

Analyst actions

Albertson's

(ABS)

fell 2 3/4, or 5.1%, to 51 5/8 after

J.P. Morgan

slashed it to market performer from long-term buy. Morgan Stanley Dean Witter lowered its 1999 earnings view for the company to $2.60 from $2.72 a share. Last night, Albertson's announced plans to sell 144 stores to complete its merger with

American Stores

(ASC) - Get Report

.

AudioCodes

(AUDC) - Get Report

jumped 2 1/16, or 8.9%, to 25 3/8 after

Warburg Dillon Read

started coverage with a buy and a price target of 29, saying it sees the company's earnings growing by 35% in the next five years.

Cyberian Outpost

(COOL)

sloughed off 1 9/16, or 13.7%, to 9 27/32 after

Deutsche Banc Alex. Brown

lowered it to buy from strong buy.

DoubleClick slipped 5 11/16, or 6.3%, to 84 15/16 after

Janney Montgomery Scott

cut it to accumulate from buy because of a potential deal between CMGI and Compaq.

International Paper

(IP) - Get Report

tacked on 13/16 to 53 7/16 after Morgan Stanley Dean Witter upgraded it to outperform from neutral with a price target of 65. The firm also raised its 1999 and 2000 earnings estimates for IP.

MedImmune

(MEDI)

rose 9/16 to 70 1/4 after Morgan Stanley Dean Witter increased its price target for the company to 83 from 70, saying "there is still upside potential for the stock, based on increasing U.S. and European

Synagis

revenues and the potential for accretive product acquisitions." Synagis is the company's drug designed to fight lower respiratory tract diseases in children.

Qualcomm

(QCOM) - Get Report

climbed 3 3/16 to 133 7/8 after

Lehman Brothers

raised its price target on stock to 165 from 150, saying the company continues to experience strong trends across its core businesses.

Miscellany

Best Buy

(BBY) - Get Report

advanced 2 9/16 to an all-time high of 63 5/16,

Network Appliance

(NTAP) - Get Report

advanced 3 1/2, or 7.8%, to 48 5/16 and

Vulcan Materials

(VMC) - Get Report

advanced 4 1/4, or 10%, to 46 15/16 on last night's news they all will move into the S&P 500.

CheckFree

(CKFR)

collapsed 9, or 23.9%, to 28 3/4 after

Chase

(CMB)

,

First Union

(FTU)

and

Wells Fargo

(WFC) - Get Report

set plans to form a competing electronic bill payment company called

The Exchange

. The banks said the company will be ready for business by the end of the year.

Claire's Stores

(CLE)

shaved off 2 3/8, or 8.4%, to 26 after reducing its stake in

Gadzooks

to 6.5% yesterday and down to 2.2% today. Claire's also said it sees its June same-store sales in the mid- to high-single digits and that it sees second-quarter earnings meeting or exceeding estimates for 33 cents a share.

Friede Goldman

(FGI)

slid 1 5/16, or 8.5%, to 14 1/18 after announcing two rigs under construction at its Friede Goldman Offshore shipyard in Pascagoula, Miss., will be delayed. The rigs are now scheduled to be delivered in the second quarter of next year.

Guidant

(GDT)

added 2 1/16 to 48 1/16 after an advisory panel to the

Food and Drug Administration

backed, with conditions, the company's device used to repair abdominal aortic aneurysms.

Staff reporter Mavis Scanlon contributed to this report.