Stocks Enjoy Increasing Strength as Leadership Struggle Continues

The major indices are on the plus side, but technicians remain uncertain of the course ahead.
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For those who swore Monday's brick-bursting action meant a quick and easy escape from impossible-to-predict markets and volatile yet range-bound trading, we're disappointed in you. You should've known better. We mean, really.

This morning's meandering and modest gains show that a new leg up for stocks, if it's going to happen, probably won't happen in three-digit increments. Surprise! Still, all the major equity indices were solidly in the green as lunchtime neared.

With little major corporate or economic news, Wall Streeters were left to focus on

Federal Reserve

Chairman

Alan Greenspan

, even if he was delivering the same darn

Humphrey-Hawkins

testimony he delivered

yesterday. Today the chairman spoke to the

House Banking Committee

, yesterday to the

Senate Banking Committee

.

The

Dow Jones Industrial Average

lately was up 33 to 9578, closer to its intraday high of 9600.13 than to its session low of 9526.82. Lending a hand to the bulls' cause were stalwarts

Citigroup

(C) - Get Report

,

IBM

(IBM) - Get Report

and

Coca-Cola

(KO) - Get Report

. Pumping some negativity into the blue-chip index were

United Technologies

and

Boeing

, down a fraction after

The Wall Street Journal

said a quarter of the $13 billion the aerospace giant is investing in its product lines will produce no meaningful returns.

The broader

S&P 500

was up 9 to 1280 and the small-cap

Russell 2000

was up 1 to 400. The

Dow Jones Transportation Average

was flying up a handsome 2.9%.

The tech-lovely

Nasdaq Composite Index

was climbing up 21 to 2398, off its session low of 2375.89.

Microsoft

(MSFT) - Get Report

continued to rebound from last week's pressure. The

Morgan Stanley High-Tech 35

was up 1% and the

Philadelphia Stock Exchange Semiconductor Index

was up 2.4%.

TheStreet.com Internet Sector

index was up 7 to 521, and

TheStreet.com E-Commerce Index

was up a fraction to 98. Word that

Charles Schwab

(SCH)

customers couldn't trade through the discount brokerage's Web site for an hour apparently didn't meant much to investors of the company. The stock was up 2 1/8 to 74 15/16.

Market internals were showing moderate improvement. On the

New York Stock Exchange

, advancers were beating decliners 1,525 to 1,237 on 383 million shares. But the downs still had the ups 1,882 to 1,765 on 483 million shares in

Nasdaq Stock Market

activity.

Like stocks, the bond market continued to masticate Greenspan's testimony. The 30-year Treasury was unchanged at 97 13/32, its yield at 5.43%. (For more on the fixed-income market, see today's early

Bond Focus.)

Ed Nicoski, chief market strategist at

Piper Jaffray

in Minneapolis, said he's got yesterday's action down: The bond market caught that cold everyone has from Greenspan-induced anxiety about interest rates, which in turn spooked the majority of stocks, already tired from

Monday's 212.73-point ascent. But today, he's not so sure about.

"I find it quite confusing," he said. "It looked like we were meandering to the top, we had a good rally out of the blue, and we had the potential for a small leg up. But the breadth has not been so good with a couple stocks making new highs in this oversold condition we're still in, where the vast popular majority is oversold. It'll be hard for stocks to do anything meaningful until we have a good rally in the bond market. There are still questions for bonds. And the fear is starting to show itself in the stock market."

That's backwards, argued Philip Roth, chief technical analyst at

Morgan Stanley Dean Witter

. Roth says bonds won't rally until stocks fall apart. He expects stocks to exhibit the same characteristics they have since last summer -- with narrow, selective and rotational trading -- and then to be in "big trouble." That's when bonds will come back, he said. "In the last year, when was the only time bonds had a strong rally?" he asked. "When stocks got clobbered."

Right now, Roth believes we're stuck in the "narrow mature trends" of the ending phases of a cyclical bull market, and he's waiting to see strength in basic materials, capital goods and energy stocks to signal the very final stage. Until then, Roth sees major equity indices making new highs of several percentage points.

As for Greenspan's comments, particularly the chairman's wondering whether last fall's cuts were "appropriate," Nicoski is in the camp of those who think the next time there's a policy change it will be to move interest rates higher.

"The economy is stronger than most thought it would be, and so we'll see this short-term move to

cyclical stocks," Nicoski said. "Tech is still overextended -- we continue to see people move out of those and we haven't seen any new highs. But they're probably not going to fall into the tank. We're struggling for leadership."

Wednesday's Midday Movers

By Aaron L. Task
Senior Writer

Ciena

(CIEN) - Get Report

became the latest firm to benefit from the

BancBoston Robertson Stephens Technology '99 Conference

. Ciena was lately up 2 5/8, or 10.7%, to 27 5/16 after the brokerage upped its recommendation to buy from long-term attractive, following a Ciena conference presentation.

TheStreet.com

has been providing

coverage of the confab throughout the week.

Twinlab

(TWLB)

was down 2 1/4, or 23.8%, to 7 3/16 despite reporting fourth-quarter earnings of 26 cents a share, down from 29 cents a year ago but 3 cents ahead of the four-analyst estimate. However, the company restated downward results for the first three quarters of 1998 and said its first-quarter 1999 profits will be down "significantly" from year ago results. Restated first-quarter 1998 earnings totaled 27 cents a share while the estimate for first quarter 1999 is currently 29 cents.

Earnings movers

Aftermarket Technology

(ATAC)

was down 1 3/4, or 26.4%, to 4 7/8 after warning

last night it sees a 1998 loss of 40 cents a share, including charges, and operating earnings of 50 cents a share, excluding charges. The three-analyst outlook called for earnings of 81 cents for the year vs. 1997's $1.19.

BEA Systems

was up 1 11/16, or 10.6%, to 17 5/8 after posting fourth-quarter earnings of 5 cents a share, a penny better than the nine-analyst consensus and up from a penny a share a year ago.

Lehman Brothers

,

BT Alex. Brown

and

Goldman Sachs

separately upped recommendations on the stock.

Budget Group

(BD)

was down 1 7/8, or 13.7%, to 11 13/16 after posting a fourth-quarter loss of $1.28 a share (before charges), far in excess of the 9-cent shortfall of a year ago and wider than the 90-cent loss expected in the seven-analyst consensus.

Labor Ready

(LRW)

was up 1 3/4, or 7.2%, to 25 7/8 after posting fourth-quarter earnings of 27 cents a share, better than the four-analyst outlook of 22 cents and up from the year-ago 9 cents.

Nvidia

(NVDA) - Get Report

was up 1 3/4, or 7.9%, to 23 7/8 after posting fourth-quarter earnings of 27 cents a share, 3 cents better than the three-analyst estimate and up from 6 cents a year ago.

Vlasic Foods

(VL)

was down 2 7/8, or 16.6%, to 14 7/16 despite posting second-quarter earnings of 24 cents a share (excluding one-time items), exceeding the eight-analyst estimate of 20 cents, but down from the year-ago 26 cents. The company said it will begin to explore strategic alternatives involving its

Swift-Armour

Argentine beef business. Vlasic said it is comfortable with Wall Street's operating earnings estimates for fiscal 1999, adjusted for Argentina.

In other news:

American Greetings

(AM) - Get Report

was down 11 1/4, or 31.9%, to 23 7/8 after forecasting its fiscal 2000 revenues would fall by $100 million from 1999 results.

Atlas Air

(CGO) - Get Report

was up 1 7/8, or 6.6%, to 30 7/16 despite revising terms of a service contract signed with

FDX

(FDX) - Get Report

just last November. Terms were not disclosed by Atlas Air executives, who said the change would not have an "adverse financial impact" on their firm. FDX was up 6 15/16, or 7.7%, to 96 13/16;

Schroder

upped its recommendation to outperform significantly from perform in line.

Biomatrix

(BXM)

was up 8 11/16, or 15.6%, to 64 1/2 after BancBoston Robertson Stephens upped its earning estimate on the biotech concern.

Brio Technology

was down 4 3/16, or 17.7%, to 19 5/8 a day after agreeing to buy privately held

Sqribe Technologies

in a deal valued at $270 million.

Credit Suisse First Boston

cut its recommendation to buy from strong buy.

Capital Re

(KRE) - Get Report

was up 2 15/16, or 19.8%, to 17 3/4 after

ACE

(ACL)

agreed to invest about $75 million in the insurer. Earlier, Capital Re reported fourth-quarter earnings of 69 cents a share (excluding one-time items and its loss reserve), a dime better than the nine-analyst consensus and up from 52 cents a year ago. ACE was up 11/16 to 29 7/16.

CSFB Bancorp

(CFSB)

was up 5 15/16, or 28.4%, to 26 7/8 after agreeing to be acquired by

Old Kent Financial

(OK)

in a stock swap valued at $242 million. Old Kent was off 5/16 to 45 1/8.

Delta Air Lines

(DAL) - Get Report

was up 3, or 5.3%, to 61 after

Merrill Lynch

named the carrier its focus one stock of the week and set an $80 price target.

El Paso Energy

(EPG)

was up 2, or 5.7%, to 37 1/4 a day after agreeing to acquire 50% of

CalEnergy's

(CE) - Get Report

generating facilities unit for $259.6 million. CalEnergy was lately down 3/16 to 28 7/8.

Industrial Scientific

(ISCX)

was up 7, or 34.2%, to 27 1/2 after agreeing to be acquire for $28.50 a share by

ISC Acquisition

, a newly formed corporation wholly owned by Industrial Scientific's majority shareholders. Following the transaction, Industrial Scientific shares will no longer be publicly traded.

Inco

(N)

was up 15/16, or 8.4%, to 12 1/8 after Goldman Sachs upped its rating on the nickel mining firm to market perform from underperform.

Infoseek

(SEEK)

was up 3 5/8, or 5.1%, to 75 on word it has launched

GO Shop

, which it says is a comprehensive one-stop online shopping service. GO Shop can be found via the GO Network portal site. Infoseek launched the GO Network in January, in partnership with

Disney

(DIS) - Get Report

. Meanwhile,

Bluefly

(BFLY)

was up 3 1/2, or 33.5%, to 13 3/4 after saying it has signed a pact under which GO Network will "prominently" feature Bluefly's selection of clothing and fashion accessories.

Nine West

was up 1 5/8, or 8.3%, to 21 3/16 after

NationsBanc Montgomery Securities

raised its rating to buy from hold.

Pameco

(PCN) - Get Report

was down 1/2, or 6.9%, to 6 3/4 after Montgomery cut its recommendation to hold form buy.

Telescan

(TSCN)

was down 3, or 18%, to 13 7/8 after canceling previously announced plans to spin off its non-financial-services operations. The spinoff plans were scuttled because of consistent improvement in its operations and value in the Internet industry, the company said.