Stocks Decline at Long Last, but No One's Too Worried

Wall Streeters are unruffled by today's pullback, which they call perfectly natural after the recent frenzy of buying.
Publish date:

Sure, they had to consolidate eventually. But those who have been making that call every morning for the last six mornings would be batting a miserable .141, way below the Mendoza line. And that won't keep you in the league for long.

Stocks' early strength turned faster than a cat on carpet, and all the major benchmarks were underwater at midsession.


Dow Jones Industrial Average

was down 99, or 0.9%, to 10,619, while the

S&P 500

was sinking 12, or 0.9%, to 1365. Weighed down by its largest stocks, particularly


(MSFT) - Get Report

, the recently record-setting

Nasdaq Composite Index

was 26 lower to 3118.

Net shares were also under pressure. Internet Sector

index was down 8 to 833.

(AMZN) - Get Report

was off about 6.6% despite making a "significant announcement" to launch four new shopping sites. That's not too bad, considering that the company's preparatory press release "signified" a 20.1% rise in the stock yesterday.

The small-cap Russell 2000 was also resting from its recent runup. Having gained about 8.8% since Oct. 18, the Russell was lately down a fraction to 445.

"The market's just taking a breather," said Pete Boockvar, equity strategist at

Miller Tabak

. "The Nasdaq's been up seven days in a row. It shouldn't surprise anybody that we're down. Even if we're down tomorrow, it shouldn't surprise anybody."

"It's the normal profit-taking that you would expect," concurred Tony Dwyer, chief market strategist at

Kirlin Holdings

. "I'd use it as a buying opportunity."

Quite normal, even if you're not focusing on the very narrow measure of technology strength. The 1370-1380 level have been extremely tough resistance areas for the S&P 500 this year, with approaches in April, May and August all followed by heavy consolidation.

Today's downturn was also prefigured by the relatively high level of complacency in the market as measured by the

Chicago Board Options Exchange Market Volatility Index

. Every sharp selloff this year has been accompanied by a VIX approaching 20. The VIX was at sitting smugly at 21.34 when the market opened this morning, down from yesterday's close of 21.52. It was lately at 22.59.

Timing downturns is tougher to do than rationalizing them in retrospect, though. Looking forward, market observers were generally seeing more good things for the market. For one thing, according to both Dwyer and Sam Ginzburg, managing director of equity trading at


, much of the cash that portfolio managers raised this summer has yet to hit the market, despite the fine run that tech stocks have had lately. "Two weeks isn't enough time for that money to get involved," Dwyer said. "You still have investors looking to put money to work."

There's also the matter of the bond market. "With interest rates going back to 6%," Boockvar said, "certainly the environment has gotten more friendly for stocks."

The bonds were lately shedding some strength ahead of the results of today's $15 billion five-note auction, which the

Treasury Department

will announce at 1:30 p.m. The 30-year Treasury was lately off 11/32 to 100 20/32, putting its yield at 6.08%. (For more on the fixed-income market, see today's early

Bond Focus.)

Tomorrow, the

Producer Price Index

will give the market it's latest read on inflation. That number, along with Friday's retail sales report and third-quarter productivity figures, may help clarify a still-divided debate over whether the


will raise interest rates on Nov. 16.

Ginzburg has got a hunch. "Just from a gut feel, I'd say that they probably raise and go neutral, and then we have a melt-up. I'm looking to make a play long into the number. I'll take a shot at that."

In addition to financial stocks, Ginzburg said he's looking at "retailers, drugs, the drug retailers -- the usual sectors."

Finding strong sectors wasn't as easy today as it has been recently. Oil and oil service stocks were extending yesterday's rally, the

American Stock Exchange Oil & Gas Index

up 1.4% and the

Philadelphia Stock Exchange Oil Service Index

up 4%.

Meanwhile, the

S&P Chemical Index

was up 2.4% after

Credit Suisse First Boston

analyst James Hickman reiterated his overweight recommendation on the sector, citing quickening demand from global industry.


(DD) - Get Report

, which Hickman upgraded, was one of the Dow's few areas of strength, lately up about 3.4%.

Tech was deep in the market's rear-guard, the

Morgan Stanley High-Tech 35

down 0.4%. Personal computer stocks were taking it especially hard, with the

Philadelphia Stock Exchange Computer Box Maker Index

off about 1.1%.

Brokers and banks continued to consolidate after their recent astonishing run higher. the

Philadelphia Stock Exchange/KBW Bank Index

was down 2.2%. Brokers were having a worse time of it, the

American Stock Exchange Broker/Dealer Index

off 1.4%.

Market Internals

Breadth was negative on good volume.

New York Stock Exchange:

1,198 advancers, 1,698 decliners, 512 million shares. 58 new 52-week highs, 70 new lows.

Nasdaq Stock Market:

1,730 advancers, 2,006 decliners, 903 million shares. 175 new highs, 57 new lows.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter

Mergers, acquisitions and joint ventures


(T) - Get Report

fell 1 1/4 to 46 3/8 despite announcing it won a $125 million contract from


(CVS) - Get Report

for voice and data services. CVS rose 1/8 to 37 3/8.


(CSCO) - Get Report

slipped 7/16 to 74 7/8 after it saying it will buy

Aironet Wireless Communications


in a deal valued at about $799 million. Cisco says it expects a charge of between 3 cents and 8 cents a share from the merger. Shares of Aironet gained 2 15/16, or 6.8%, to 46 3/16.



inched up 15/16 to 63 1/16 and



dropped 4 3/8, or 10%, to 39 5/8 after the companies said they will offer a Net-based service for health-care payers.

First Consulting Group


rose 1 1/2, or 15%, to 11 1/2 after it signed a seven-year deal worth about $228 million to provide information technology and telecommunications services to

New York-Presbyterian Hospital

. Under the terms of the deal, FCG Management, a newly formed entity, will hire 432 employees of the hospital's current IT staff.


(MTC) - Get Report

rose 1 3/4 to 45 1/2 after

The Wall Street Journal

reported it has held talks with Swiss drugmaker


about a possible sale of all or part of Monsanto.

Nortel Networks


fell 1 3/16 to 68 5/16 after saying it will slash router prices and make Internet networking technology work with all types of systems. Nortel said it was allying with


(INTC) - Get Report

to add elements of the new open Internet platform to Intel's Internet products.

United Airlines

, a unit of


(UAL) - Get Report

said it will launch a travel portal with

Delta Air Lines

(DAL) - Get Report



(CAL) - Get Report

. UAL lost 1 1/2 to 66 5/16, Delta slipped 7/8 to 51 1/8 and Continental fell 1/2 to 40 7/8.

Earnings/revenue reports and previews

Ackerly Group


was unchanged at 17 1/8 after it posted a third-quarter loss of 11 cents a share, narrower than the single-analyst estimate of a 15-cent loss but down from the year-ago 1-cent profit.

Allied Waste


was falling 7/16 to 9 13/16 after it reported third-quarter earnings of 38 cents a share, excluding charges. The seven-analyst estimate called for earnings of 28 cents a share. Year-ago results were not available as the company said the figures aren't comparable because of an acquisition.

Goldman Sachs

cut its rating on Allied Waste to market performer from the recommended list.

Capital Re

(KRE) - Get Report

slipped 1/16 to 15 after it posted third-quarter operating earnings of 51 cents a share, in line with the single-analyst estimate, and up from a year-ago 40 cents a share.

Dollar General

(DG) - Get Report

climbed 1/16 to 25 5/16 after it reported third-quarter earnings of 19 cents a share, in line with the 14-analyst estimate and up from a year-ago 15 cents a share.

Donna Karan

(DK) - Get Report

inched up 5/8, or 7.7%, to 8 3/4 after it posted third-quarter earnings of 46 cents a share, a penny better than the three-analyst estimate and up from a year-ago 35 cents a share.

Equity Residential Properties

(EQR) - Get Report

gained 7/16 to 42 1/16 after it reported third-quarter funds from operations of $1.13 a share, a penny better than the 18-analyst estimate and up from a year-ago $1.02 a share.

Modis Professional Services


shed 2 7/16, or 18.1%, to 11 1/8 after it reported third-quarter earnings of 30 cents a share, missing the 12-analyst estimate of 32 cents, but up from a year-ago 19 cents. Modis said it sees disappointing fourth-quarter earnings of between 15 cents and 18 cents a share, citing a slowdown of information technology projects ahead of the millennium. The 10-analyst estimate currently calls for earnings of 33 cents a share. Modis also said it was exploring strategic alternatives, including a spinoff or IPO of its information technology unit. Modis also said its board approved the repurchase of up to $65 million of common stock.



slipped 1/16 to 6 5/16 after it reported third-quarter earnings of 14 cents a share, in line with the 14-analyst estimate, but down from 27 cents a year ago.



lost 1/16 to 10 1/4 after it reported third-quarter earnings of 17 cents a share, a penny shy of the three-analyst estimate. Year-ago restated earnings were 14 cents a share.

Overseas Shipping Group

(OSG) - Get Report

fell 1/8 to 13 5/8 after it posted third-quarter earnings of 9 cents a share, beating the single-analyst estimate of 7 cents but down from the year-ago 14 cents.

Polo Ralph Lauren

(RL) - Get Report

fell 5/8 to 16 5/8 after it posted second-quarter earnings of 56 cents a share, in line with the 13-analyst estimate and up from a year-ago 48 cents a share.



gained 1, or 22.2%, to 5 1/2, after it posted a third-quarter loss of 47 cents a share, wider than the two-analyst estimate of a loss of 30 cents a share but down from the year-ago loss of $1.88 a share. Sunbeam said it would sell backpack division


and other nonessential assets, and expects to receive about $200 million in net proceeds, which will be used primarily to pay down debt.


(WMT) - Get Report

fell 1 9/16 to 56 15/16 despite reporting third-quarter earnings of 29 cents a share, a penny better than the 17-analyst estimate and up from a year-ago 23 cents. The company said same-store sales for the period rose 7%, representing a 7.4% comparable increase at Wal-Mart stores and a 5.8% comparable increase at Sam's Club stores.

Merrill Lynch

added Wal-Mart to its Focus One list.

Offerings and stock actions


(ALO) - Get Report

was falling 1 15/16, or 5.8%, to 31 3/16 after it said it entered into an agreement with

Bear Stearns

to sell 2 million shares of its Class-A common stock.


(CLS) - Get Report

said it priced its public offering of 7 million subordinate voting shares at $60.625 per share for a total of $424.4 million. Lead managers are

Morgan Stanley Dean Witter


RBC Dominion Securities

. Shares of Celestica were climbing 1 11/16 to 62 5/16.

Analyst actions

Banc of America Securities

started coverage of


(ACV) - Get Report

with a market performer rating. Alberto Culver was slipping 3/16 to 23 3/8.

Salomon Smith Barney sliced its rating on

AmerUs Life Holdings

(AMH) - Get Report

to neutral from outperform. AmerUs Life Holdings was falling 5/16 to 24.

Salomon Smith Barney

cut its rating on


(AAPL) - Get Report

to outperform from buy based on valuation. Apple shares were sinking 6 1/4, or 6.4%, to 90 1/16.

Morgan Stanley Dean Witter

raised its rating on


(CLX) - Get Report

to a strong buy from outperform. Clorox was bouncing 2 11/16, or 6.65, to 43.

Credit Suisse First Boston

raised its ratings on DuPont and

PPG Industries

(PPG) - Get Report

to buy from hold. Shares of DuPont were climbing 1 13/16 to 62 3/8, while PPG Industries hopped 5/8 to 59 5/16.

Lehman Brothers

started coverage of

Franklin Resources

(BEN) - Get Report

at outperform and set a price target of 39. Franklin Resources was gaining 1/4 to 31 7/8.

Bear Stearns initiated coverage of

Network Solutions


with a buy rating and set a price target of 182. Network Solutions was stumbling 2 9/16 to 146 1/2.

Lehman Brothers upped its price target for



to 85 from 75. Razorfish was tumbling 3/8 to 71 3/8.

Goldman Sachs raised its price target on



to 80 from 60. Sandisk was adding 4 5/8, or 6.7%, to 73 5/8.

Salomon Smith Barney started coverage of Networks

(WOMN) - Get Report

with a buy rating and a price target of 35. shares were sliding 1 1/16, or 5.2%, to 19 5/16.

Miscellany was retreating 5 3/16, or 6.6%, to 72 13/16 after it said it would launch four new stores on Nov. 10, including home improvement, software, video games and gift ideas. The company also said it acquired

Tool Crib of the North

, a tools and equipment catalog company.


(MSFT) - Get Report

, whose stock is proving to be quite

resilient amid a less-than-favorable legal

opinion, said it is set to begin offering office software over the Internet. Shares of Microsoft were losing 2 15/16 to 87 15/16.



was slipping 13/16 to 16 5/16 after it named Christina Johnson president and CEO of

Saks Fifth Avenue


Standard & Poor's



(TER) - Get Report

will replace



in the

S&P 500

index after the close of trading Nov. 12. Case is being acquired by

New Holland

(NH) - Get Report

for about $4.6 billion.

CheckFree Holdings


will replace Teradyne in the

S&P MidCap 400


Waste Management


is expected to name A. Maurice Myers as its new CEO, the


reported. Myers, currently CEO of



, would be the sixth man to serve as CEO at Waste Management since May 1996, according to the


. Shares of Waste Management was falling 1/2 to 28 1/4.

The Heard on the Street column in the


said the

Securities and Exchange Commission

is examining why

Chase Manhattan


accumulated a discrepancy, which started at $40 billion, in an internal tracking system. However, the irregularity is not expected to affect Chase's reported financial results and no restatement of earnings is foreseen, the story said. Shares of Chase were sliding 1 5/8 to 82 3/4.