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Stocks Close Up as Bonds Zoom Higher on Greenspan Testimony

The yield on the 30-year issue fell below the critical 6% level.

The

Nasdaq Composite Index

advanced solidly today (albeit nowhere near yesterday's eye-popping rally), as bonds staged a handsome rally, sending the yield on the 30-year Treasury bond below the critical 6% level.

The Treasury market rallied as market participants interpreted the testimony of

Federal Reserve

Chairman

Alan Greenspan

today thusly: The Fed will raise interest rates when it meets later this month, but the market doubts that more rate hikes are coming down the road.

Meanwhile, major market averages opened slightly weaker in the wake of

yesterday's rally, weighed down in part by

Compaq's

(CPQ)

earnings warning this morning.

The text of Greenspan's testimony was released at around 10 a.m. EDT, and shortly after that, the major market averages rose slightly into positive territory. From that point on, the Nasdaq Comp and

Russell 2000

spent the rest of the session in the plus column. The

S&P 500

had a brief dip into negative territory -- around 10:35 a.m. -- but it didn't last long, and it traded above water the rest of the session.

After the

Dow Jones Industrial Average

rose into positive territory when the text of Greenspan's testimony was released, it traded in a narrow range around unchanged before picking up steam late in the day. The chairman began his testimony roughly 20 to 25 minutes or so after the release of the prepared text of his remarks.

Stocks got a late boost compliments of a soothing report from market strategist Abby Joseph Cohen of

Goldman Sachs

. The widely followed strategist issued a report today titled: "Calming Influences Support Stock Prices."

She wrote: "The fixed income markets have already lifted interest rates by 120 basis points; markets are likely to easily tolerate an

FOMC

-delivered flu shot."

She also wrote: "The ugly inflation news associated with higher oil prices seems to have ended; core inflation remains quiescent." And, "Corporate profit performance improved in the first quarter and we expect second-quarter results to be quite favorable."

Major market averages, however, did close off their best levels of the session.

On the

New York Stock Exchange

, advancers beat decliners 1,819 to 1,165 on 698.9 million shares. On the

Nasdaq Stock Market

, winners beat losers 2,136 to 1,709 on 881.6 million shares.

On the NYSE, 75 issues set new 52-week highs while 54 touched new lows. On the Nasdaq, 79 issues set new highs while new lows totaled 43.

On the Big Board,

Compaq

(CPQ)

was most active with 36.1 million shares changing hands. It was up 1/4 to 22 1/2. Compaq warned it expects to post a loss of up to 15 cents a share in the second quarter, far below Wall Street's expectations.

TheStreet.com

wrote about the situation in a story

this afternoon.

On the Nasdaq,

Oracle

(ORCL) - Get Oracle Corporation Report

was most active with 45 million shares changing hands. It was up 1 15/16 to 34 7/8. Oracle soared yesterday in the wake of its better-than-expected earnings report, which was released on Tuesday after the close.

Market data above are preliminary. Updated numbers and analysis will follow in the Market Roundup

3:03 p.m.: Stocks Cling to Modest Gains as Bonds Skyrocket

Stocks were modestly higher heading into the final hour of trading as the 30-year Treasury bond advanced to its session highs.

The Treasury market has surged today as players for the most part interpreted the congressional testimony of

Federal Reserve

Chairman

Alan Greenspan

today this way: The Fed will raise interest rates when it meets later this month, but it doubts that more rate hikes are coming down the road.

Greenspan, in his testimony before the

Joint Economic Committee

, said that "modest preemptive actions can obviate the need of more drastic actions at a later date."

The Treasury market has priced in a 25-basis-point rate hike. The July fed funds futures contract, used as a benchmark for what direction the Treasury market thinks Fed policy will take, is at 5%.

The

Federal Open Market Committee's

next meeting is slated for June 29-30.

Like the vast majority, Peter Boockvar, equity strategist at

Miller Tabak Hirsch

, thinks the Fed will raise rates when it meets in a couple of weeks. He thinks the market is going to run out of steam, "because the reality is, they'll raise rates."

Corporate profits remain strong, but the interest-rate environment is going to make it tougher for stocks, he said.

With a rate hike looming, "If you rode this rally off its lows I'd begin to lighten up," he said.

Providing the biggest boosts to the

Dow Jones Industrial Average

were

Procter & Gamble

(PG) - Get Procter & Gamble Company Report

and

Goodyear

(GT) - Get Goodyear Tire & Rubber Company Report

.

This afternoon, the

S&P 500

was only 2% off its all-time closing high.

On the

New York Stock Exchange

, advancers were leading decliners 1,630 to 1,262 on 542 million shares. On the

Nasdaq Stock Market

, winners were beating losers 1,974 to 1,718 on 698 million shares.

On the NYSE, 64 issues had set new 52-week highs while 51 had touched new lows. On the Nasdaq, 67 issues had set new highs while new lows totaled 38.

Meanwhile in the news,

News Corp.

(NWS) - Get News Corporation Class B Report

, owner of

HarperCollins Publishers

, has agreed to acquire

William Morrow

and

Avon Books

from

Hearst

, which is privately held, for an undisclosed amount. News Corp. was up a hair to 35 5/8.

Elsewhere,

Circus Circus Enterprises

(CIR) - Get CIRCOR International, Inc. Report

said shareholders approved changing the company name to

Mandalay Resort Group

and will begin trading on the Big Board under the new corporate name Monday under the symbol "MBG." Circus Circus was up 1 1/16, or 5%, to 22.

1:56 p.m.: Stocks Modestly Higher as Bonds Rally on Greenspan Testimony

While stocks got their massive rally out of the way

yesterday, today it's the bond market's turn to soar, as the 30-year Treasury bond's yield has fallen below the key 6% level.

The Treasury market surged as players for the most part interpreted the congressional testimony of

Federal Reserve

Chairman

Alan Greenspan

today this way: The Fed will raise interest rates when it meets later this month, but it doubts that more rate hikes are coming down the road.

Greenspan, in his testimony before the

Joint Economic Committee

, said that "modest preemptive actions can obviate the need of more drastic actions at a later date."

Meanwhile, major stock market averages were slightly higher, led by the

Nasdaq Composite Index

, which yesterday enjoyed its largest point increase ever.

Oil, oil service, and bank stocks were standouts on the upside. The

Philadelphia Stock Exchange Oil Service Index

and the

Philadelphia Stock Exchange/KBW Bank Index

were up 2%.

TheStreet.com Internet Sector

index gained, with

CMGI

(CMGI)

giving the index its biggest boost. It was up 6 7/16, or 7%, to 99 5/8.

Notable on the downside were forest and paper product stocks and airline issues. The

Philadelphia Stock Exchange Forest & Paper Products Index

was down 2%, while the

American Stock Exchange Airline Index

was also off 2%.

On the

New York Stock Exchange

, advancers were beating decliners 1,552 to 1,299 on 452 million shares. On the

Nasdaq Stock Market

, winners were beating losers 1,876 to 1,681 on 597 million shares.

On the NYSE, 59 issues had set new 52-week highs while 47 had touched new lows. On the Nasdaq, 59 issues had set new highs while new lows totaled 33.

On the Big Board,

Compaq

(CPQ)

was most active with 30 million shares changing hands. It was up 1/16 to 22 5/16, off its worst levels of the session. Compaq, citing pricing pressures in the PC segment, inadequate revenue growth and a noncompetitive cost structure, warned it expects to post a second-quarter loss of up to 15 cents a share. The

First Call

30-analyst consensus estimate called for the company to earn a profit of 20 cents. Compaq also set a $2 billion cost-cutting plan.

TheStreet.com

wrote about the situation in a story

this afternoon.

On the Nasdaq,

Oracle

(ORCL) - Get Oracle Corporation Report

TheStreet Recommends

was most active, with 34 million shares changing hands. It was up 1 5/8 to 34 1/2. Oracle soared yesterday in the wake of its better-than-expected earnings report, which was released on Tuesday after the close.

1:03 p.m.: Midday Musings: What a Relief it Is: Market Hails Greenspan's Measured Tones

12:17 p.m.: Bond Rally on Greenspan Testimony Sends Yield Under 6%

The 30-year Treasury bond rallied, sending its yield back below the 6% level, as market players' fears of a series of interest rate hikes eased after parsing comments by

Federal Reserve

Chairman

Alan Greenspan's

.

The chief, who recently concluded his testimony, did intimate a rate hike may be in the offing later this month when the

Federal Open Market Committee

meets, stating that "modest preemptive actions can obviate the need of more drastic actions at a later date."

Major market averages were recently modestly off their intraday highs.

Greenspan said that "immediately ahead, inflationary pressures still seem well contained."

"Nonetheless, the persistence of certain imbalances pose a risk to the longer-run outlook," he cautioned later. "Strong demand for labor has continued to reduce the pool of available workers. Data showing the percent of the relevant population who are not at work, but would like a job, are around the low for this series, which started in 1970."

On the

New York Stock Exchange

, advancers were beating decliners 1,491 to 1,174 on 306 million shares. On the

Nasdaq Stock Market

, winners were beating losers 1,780 to 1,449 on 413 million shares.

On the NYSE, 51 issues had set new 52-week highs while 39 had touched new lows. On the Nasdaq, 48 issues had set new highs while new lows totaled 28.

Tech Focus

Dominating news in techland,

Compaq

(CPQ)

, citing pricing pressures in the PC segment, inadequate revenue growth and a noncompetitive cost structure, warned it expects to post a second-quarter loss of up to 15 cents a share. That's dramatically lower than the current

First Call

30-analyst consensus estimate, which calls for a profit of 20 cents. Compaq also set a $2 billion cost-cutting plan.

Compaq was down 3/16 to 22 1/8, well of its session low of 20.

Meanwhile, chip giant

Intel

(INTC) - Get Intel Corporation (INTC) Report

was taking a bit of a hit, and was down 1 13/16 to 57 13/16.

Credit Suisse First Boston

cut its earnings estimates on Intel to $2.25 from $2.32 for fiscal 1999 and to $2.55 from $2.65 for fiscal 2000. The firm is keeping its 12-month price target of 75. The firm said "Intel should report in the lower end of its guidance" for the second quarter of 1999, roughly 53 cents a share, "owing to both lower processor ASP and lower unit shipments. While costs reductions and a higher gross margin percentage had mostly outweighed this effect earlier, we believe this trend and its impact will persist into" the fourth quarter of 1999.

Elsewhere in tech news,

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

is acquiring privately held

TransMedia Communications

of San Jose, Calif. Under the terms of the deal, between 3.15 million and 3.85 million shares of Cisco stock will be exchanged for all outstanding shares and options of TransMedia. Based on Cisco's closing price yesterday of $116.25, the stock exchanged would have a value of about $407 million, Cisco said.

Separtely, Cisco and

Qwest Communications

(QWST)

announced an extension of their strategic alliance with a multi-year pact to develop a communications platform to support the migration of traffic from traditional "legacy" networks to Qwest's high-speed IP network. Qwest was up 9/16 to 36 5/16, while Cisco was up 1 7/16 to 117 5/8.

The

Philadelphia Stock Exchange Computer Box Maker Index

was down 1%. The

Nasdaq 100

was up 1%. The

Morgan Stanley High-Tech 35

was up 1%.

The

Philadelphia Stock Exchange Semiconductor Index

was down 1%.

On the Nasdaq,

Oracle

(ORCL) - Get Oracle Corporation Report

was most active, with 27 million shares changing hands. It was up 1 7/8 to 34 3/4.

Company Focus: Diamond Offshore Gets Boost

Diamond Offshore

(DO) - Get Diamond Offshore Drilling, Inc. Report

today announced a letter of intent for a three-year contract to drill for

Petrobras

offshore Brazil.

Shares of Diamond got a boost on the news and was up 5/8 to 29 7/16.

The contract for the

Ocean Clipper

, a drillship capable of drilling in water depths of 7,500 feet, was expected, as

TheStreet.com

wrote in a

story last week. The daily rental rate, at $94,000 per day, is lower than expected. Diamond expects revenues of at least $103 million over the life of the contract, but the rental rate may increase depending on the water depth of the drilling area. Also written into the contract are performance bonuses, said a Diamond spokeswoman.

-- Mavis Scanlon

11:05 a.m.: Stocks Mostly Higher in Choppy Trading Amid Greenspan Testimony

Major market averages shook off early weakness, rose into the plus column, but have now turned mostly on the mixed side amid

Federal Reserve

Chairman

Alan Greenspan's

testimony before the

Joint Economic Committee

of

Congress

.

Meanwhile, the Treasury market was modestly higher.

The text of the chairman's testimony was released at about 10 a.m. EDT, and major market averages surged. Ahead of the release, major indices were all underwater. Shortly after the release of the text, leading indices all eventually climbed into positive territory. However, the blue-chip

Dow Jones Industrial Average

has fallen now into the red. The

S&P 500

also turned negative briefly before climbing back into the plus column. The chairman began his testimony roughly 20 to 25 minutes after the release of the text of his testimony.

"For the period immediately ahead, inflationary pressures still seem well contained," said Greenspan.

"Nonetheless, the persistence of certain imbalances pose a risk to the longer-run outlook," he cautioned later. "Strong demand for labor has continued to reduce the pool of available workers. Data showing the percent of the relevant population who are not at work, but would like a job, are around the low for this series, which started in 1970.

"Despite its extraordinary acceleration, labor productivity has not grown fast enough to accommodate the increased demand for labor induced by the exceptional strength in demand for goods and services."

Ahead of the Greenspan testimony, the market was softened in part on atrocious news out of

Compaq

(CPQ)

. Compaq, citing pricing pressures in the PC segment, inadequate revenue growth and a noncompetitive cost structure, warned it expects to post a second-quarter loss of up to 15 cents a share. That's dramatically lower than the current

First Call

30-analyst consensus estimate, which calls for a profit of 20 cents. Compaq also set a $2 billion cost-cutting plan.

Compaq was down 9/16, or 3%, to 21 11/16.

Despite the Compaq news and word of the slicing of earnings estimates by

Credit Suisse First Boston

on

Intel

(INTC) - Get Intel Corporation (INTC) Report

, the

Nasdaq Composite Index

has been outperforming the rest of the market's key barometers. Intel was down 2 3/16 to 57 9/16.

On the

New York Stock Exchange

, advancers were beating decliners 1,245 to 1,201 on 211 million shares. On the Nasdaq, winners were beating losers 1,499 to 1,455 on 286 million shares.

On the NYSE, 41 issues had set new 52-week highs while 30 had touched new lows. On the Nasdaq, 36 issues had set new highs while new lows totaled 22.

On the NYSE, Compaq was most active with 19 million shares changing hands.

On the Nasdaq,

Oracle

(ORCL) - Get Oracle Corporation Report

was most active with 19 million shares changing hands. It was up 1 to 33 15/16.

9:54 a.m.: Stocks Down Modestly After Compaq Warning

Compaq's

(CPQ)

warning that it will post a loss in the second quarter was helping to weigh on stocks early on as the markets brace for this morning's testimony from the

G-Man

.

At 10 a.m. EDT,

Federal Reserve

Chairman

Alan Greenspan

is slated to testify on monetary policy before the

Joint Economic Committee

of

Congress

.

Compaq, citing pricing pressures in the PC segment, inadequate revenue growth and a noncompetitive cost structure, warned it expects to post a second-quarter loss of up to 15 cents a share. That's far lower than the current

First Call

30-analyst consensus estimate, which calls for a profit of 20 cents. Compaq also set a $2 billion cost-cutting plan.

Compaq was down 1 3/4, or 8%, to 20 1/2.

All this comes in the wake of

yesterday's dramatic rally, which came thanks to a market-friendly inflation report. Yesterday the

Labor Department

said the overall

Consumer Price Index

was unchanged after jumping 0.7% in April. The core CPI, which excludes food and energy prices, rose a slight 0.1% after climbing 0.4% in April. The figures were weaker than economists expected.

Most Up at Open -- NYSE

Marsh & McLennan (MMC) - Get Marsh & McLennan Companies, Inc. (MMC) Report, up 2 to 77 15/16

.

Most Up at Open -- Nasdaq

eToys (ETYS) , up 2 3/16 to 39 11/16

:

Merrill Lynch

initiated coverage of eToys with a near-term accumulate rating and a long-term buy rating. Merrill was an underwriter on eToys' IPO in May.

Most Down at Open -- NYSE

SAP (SAP) - Get SAP SE Sponsored ADR Report, down 1 3/4 to 34 1/8

.

Most Down at Open -- Nasdaq

CareInsite (CARI) , down 4 1/16 to 26 7/8

: The stock soared yesterday in its trading debut, jumping 80% to 32 1/2 after being priced Tuesday at $18 a share.