Stocks Erase Gains in Late Trading

The market was pulled down by a drop in the tech sector.
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Everything looked pretty good early this afternoon, what with all the major market barometers nicely on the upside.

But the market's key indices came off their highs and fell steadily to the close, led down by the tech sector, which ended with sharp losses as the

Nasdaq Composite Index

fell 36.15, or 1.6%, to 2259.03. The Nasdaq Comp peaked around noon EST, and was the first to fall into the red.

Meanwhile, the

Dow Jones Industrial Average

,

S&P 500

, and

Russell 2000

hit their highs around 12:40 p.m. EST, roughly an hour after

Hewlett-Packard

(HWP)

started trading after its restructuring announcement.

The Dow, which shot to its session high thanks to the sharp rise in Hewlett-Packard, had risen as much as 96.44 to 9421.22. It closed down 27.17, or 0.3%, to 9297.61.

The S&P 500 fell 10.64, or 0.9%, to 1225.52.

Hewlett-Packard rose 2 3/4 to 68 5/8, well off its intraday peak. The company announced it was realigning itself into two independent companies.

In tech news,

Hambrecht & Quist's planet.wall.street

conference continued today.

TheStreet.com

has been providing

coverage of the conference.

The small-cap

Russell 2000

bucked the trend and ended up 0.04 to 394.43.

TheStreet.com Internet Sector

rose 2.63, or 0.5%, to 527.76.

TheStreet.com E-Commerce Index

slumped 0.66, or 0.7%, to 96.90.

On the

New York Stock Exchange

decliners beat advancers 1,554 to 1,413 on 748 million shares. On the Nasdaq, losers beat winners 2,231 to 1,710 on 891 million shares.

On the NYSE, 76 issues set new 52-week lows while 34 touched new highs. On the Nasdaq, 78 issues set new lows while new highs totaled 60.

On the Big Board,

Compaq

(CPQ)

was most active with 32.6 million shares changing hands. It was down 1 23/32, or 5.1%, to 31 13/16.

On the Nasdaq,

Intel

(INTC) - Get Report

was most active on volume of 33.8 million. It was clobbered, falling 7 5/16, or 6.3%, to 109 13/16.

Bonds had an up day. The 30-year Treasury bond was up 27/32, to 94 23/32, yielding 5.617%.

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

2:58 p.m.: Nasdaq Slips into Negative Territory

The

Nasdaq Composite Index

recently slipped into the red while the rest of the market's major averages were on the plus side, but well off their best intraday levels.

The Nasdaq Comp was down 4 to 2292. Tech bellwethers

Intel

(INTC) - Get Report

,

Cisco

(CSCO) - Get Report

,

Microsoft

(MSFT) - Get Report

and

Dell

(DELL) - Get Report

were all lower, with chip titan Intel giving up the most. It was down 4 1/8 to 113.

Intel, which was downgraded yesterday by

Donaldson Lufkin & Jenrette

, was downgraded today by

NationsBanc Montgomery Securities

.

Meanwile, the

Dow Jones Industrial Average

was up 45 to 9370.

Hewlett-Packard

(HWP)

was the leading force behind the Dow's upward mobility, up 3, or 5%, to 68 7/8, on news of its

restructuring, which includes breaking the firm into two separate independent companies.

The Wall Street Journal

first reported the moves by Hewlett-Packard in today's paper.

Meanwhile, the

S&P 500

was up 2 to 1238. The small-cap

Russell 2000

was up 3 to 397.

TheStreet.com Internet Sector

was up 17 to 542.

TheStreet.com E-Commerce Index

was up 1 to 99.

Meanwhile in tech news, out in Utah,

Hambrecht & Quist's planet.wall.street

conference enters its second day.

TheStreet.com

has been providing

coverage of the conference.

The 30-year Treasury bond was up 16/32 to 94 13/32, yielding 5.64%.

A couple of sectors stood out in the market today, said Jay Suskind, head of institutional equity trading at

Ryan Beck

, including the airline stocks, which were soaring thanks to a

Goldman Sachs

upgrade of the industry. The move sent the

Dow Jones Transportation Average

up 2%, while the

American Stock Exchange Airline Index

leapt 4%.

Banks have been doing OK for the last few days, bucking the bond market's marked weakness, Suskind said.

Over the last couple of weeks, Suskind said volume has been light as people have been treading lightly.

Suskind said there's a lot of money in money-market funds just waiting for the market to go down a couple hundred points to put some money to work. However, the market isn't cooperating on that score.

On the

New York Stock Exchange

, advancers were beating decliners 1,553 to 1,371 on 559 million shares. On the

Nasdaq Stock Market

losers were beating winners 1,942 to 1,844 on 666 million shares.

On the NYSE, 65 issues had set new 52-week lows while 33 had touched new highs. On the Nasdaq, 56 issues had set new highs while new lows totaled 59.

On the Big Board,

Compaq

(CPQ)

was most active, with 26 million shares changing hands. It was down 1 15/16 to 32 1/8.

On the Nasdaq,

Xylan

(XYLN)

was most active, with 27 million shares changing hands. It was up 8 15/16, or 33%, to 35 13/16. Today French telecommunications company

Alcatel

(ALA)

said it is buying Xylan, a provider of high-bandwidth switching systems, for $2 billion, or $37 a share. Alcatel was up 3/4 to 22 1/8.

2:02 p.m.: Hewlett-Packard News Boosts Dow

News that

Hewlett-Packard

(HWP)

is breaking in two helped propel its stock and the

Dow Jones Industrial Average

up handsomely, as the rest of the market's major gauges were also higher on the day.

Meanwhile, bonds gained after yesterday's dreadful session.

Dow component Hewlett-Packard announced it was realigning itself into two independent companies. The company's board approved pursuing the plan this morning. In response, Hewlett-Packard surged 4 1/2, or 7%, to 70 3/4.

The 30-year Treasury bond was up 19/32 to 94 16/32, yielding 5.64%.

The Dow was up 62 to 9387. The

S&P 500

was up 6 to 1243. The

Nasdaq Composite Index

was up 9 to 2304.

The

Russell 2000

, meanwhile, was up 3 to 398, and in the odd position of outpacing the other leading market averages percentage-wise, up 1%.

Internet stocks gained.

TheStreet.com Internet Sector

was up 20 to 545.

TheStreet.com E-Commerce Index

was up 2 to 100.

On the

New York Stock Exchange

, advancers were beating decliners 1,588 to 1,285 on 473 million shares. On the Nasdaq, winners losers were beating 1,936 to 1,802 on 567 million shares.

On the NYSE, 60 issues had set new 52-week lows while 32 had touched new highs. On the Nasdaq, 54 issues had set new highs while new lows totaled 50.

On the Big Board,

Compaq

(CPQ)

was most active, with 21 million shares changing hands. It was down 1 to 32 9/16.

On the Nasdaq,

Xylan

(XYLN)

was most active, with 25 million shares changing hands. It was up 9, or 33%, to 35 7/8. Today French telecommunications company

Alcatel

(ALA)

said it is buying Xylan for $2 billion, or $37 a share. Alcatel was up 13/16 to 22 3/16.

Sector Focus: Gaming

Gaming stocks were mostly higher. The

Chicago Board Options Exchange Gaming Index

has jumped 2%.

In the news today,

Circus Circus Enterprises

(CIR) - Get Report

opened its $1 billion 3,700-room-and-suite mega-resort Mandalay Bay in Las Vegas. Shares of Circus Circus rose modestly, up just 3/8 to 17 11/16.

Since bottoming on Oct. 8, the gaming index has surged roughly 59%. Circus Circus closed on Oct. 8 at 7 1/2.

1:00 p.m.: Midday Musings: With Bonds Cooperating, Stocks Add to Gains

11:54 a.m.: Stocks Up as Hewlett-Packard Announces Breakup

It's official.

As expected

Hewlett-Packard

(HWP)

announced that it will break itself up into two publicly traded companies -- one a measurement business and the other a computing and imaging business.

The announcement put a shine on an already positive day. With this morning's announcement that

Alcatel

(ALA)

will buy network-equipment maker

Xylan

(

(XYLN)

for $2 billion, and the bond market cooperating, stocks are higher across the board.

The

Dow Jones Industrial Average

was up 29 to 9354, while the

S&P 500

was up 5 to 1241. The

Nasdaq Composite Index

was up 14 to 2309 and the

Russell 2000

was 3 to 397.

The Street.com Internet Sector

was up 18 to 543.

On the

New York Stock Exchange

, 1,481 advancers were leading 1,170 decliners on 389 million shares.

Nasdaq Stock Market

winners were beating losers 1,725 to 1,608 on 366 million shares.

On the NYSE, 38 issues were at new 52-week lows while 21 were at new highs. On the Nasdaq, 32 issues were at new lows while new highs totaled 43.

The 30-year Treasury bond was up 22/32 to 94 19/32, dropping the yield to 5.63%.

Tech Focus

With HP not open, no doubt people are tearing their hair out trying to figure out a way to play this one.

It seems that one way might be options on the Dow -- that thing that those people in the commercials understand better than any stock they follow. HP accounts for about 3.1% of the Dow, and each point that it moves is worth 4.35 Dow points. The March 94 calls, up just 1/4 to 1 7/8, might seem cheap.

But while there may be such a thing as a free lunch on Wall Street, this isn't one of them, according to

Salomon Smith Barney

options strategist Kevin Murphy. "I don't see a play in the Dow Jones, because

HP is such a small part of it," he said. "You just have too much of a tracking error to try and play it in any other vehicle. Our customers just want more of a pure play."

There are other problems, too, said Murphy. First, Dow options are pretty illiquid -- moving into them often means moving them. And then it seems likely that anyone already trading the Dow futures has already accounted for a positive HP. And the options trade off the futures more than they trade off the index itself. "What you're going to see is a big jump in the Dow and then the options don't move up," he said.

--

Justin Lahart

11:01 a.m.: Stocks Remain Higher; Braverman Joins Monty

Something akin to stability in the bond market, along with the good vibes from

Alcatel's

(ALA)

announcement that it will take out network-equipment maker

Xylan

(XYLN)

and a report in

The Wall Street Journal

that

Hewlett-Packard

(HWP)

will split itself into at least two publicly traded companies, has put a shine on stocks this morning.

Hewlett-Packard remains closed pending news.

"Right now, my screen is looking very green," said Doug Myers, vice president of equity trading at

Interstate/Johnson Lane

. "You still have cross currents -- we have only a handful of new highs and a 100 and some new lows every morning, and that has been going on for weeks. The bear is not dead. But on the other hand, there is just nothing that looks like it's going to dislodge the American economic engine."

All in all, Myers is hopeful that the market is nearing the time when it will finally break out of its range. "We've been moving sideways for a while here, but we seem to be forming the base for our next rally," he said.

The

Dow Jones Industrial Average

was up 21 to 9346, while the

S&P 500

was up 3 to 1239. The

Nasdaq Composite Index

was up 9 to 2304 and the

Russell 2000

was up 3 to 397.

The Street.com Internet Sector

was up 16 to 541.

On the

New York Stock Exchange

, 1,458 advancers were leading 1,025 decliners on 197 million shares.

Nasdaq Stock Market

winners were beating losers 1,636 to 1,405 on 258 million shares.

On the NYSE, 28 issues were at new 52-week lows while 16 were at new highs. On the Nasdaq, 25 issues were at new lows while new highs totaled 33.

The 30-year Treasury bond was up 9/32 to 94 6/32, dropping the yield to 5.66%.

In other news, Alan Braverman has joined

NationsBanc Montgomery Securities

as its Internet analyst, according to a Montgomery internal memorandum.

Braverman's hiring is another example of the

bull market for Internet analysts. It also shows San Francisco-based Montgomery's strong desire to beef up its ranks after the departure of dozens of workers, including many who joined a firm started by Montgomery founder Thom Weisel. In fact, Braverman, who will be a senior managing director, succeeds David Readerman, who joined

Thomas Weisel Partners

.

Braverman had been the Internet analyst at

Deutsche Bank Securities

.

Braverman couldn't be reached for comment. Montgomery and Deutsche Bank declined to comment.

--

Justin Lahart

9:51 a.m.: Stocks Up Modestly at Open

Stocks were mostly higher early on as the 30-year Treasury bond firmed modestly this morning after yesterday's swoon.

The

Dow Jones Industrial Average

was up 4 to 9329. The

S&P 500

was up 1 to 1237.

The

Nasdaq Composite Index

was up 7 to 2302. The

Russell 2000

was up 2 to 396.

TheStreet.com Internet Sector

was up 10 to 535.

TheStreet.com E-Commerce Index

was up 2 to 99.

The 30-year Treasury bond was up 1/32 to 93 30/32, yielding 5.68%.

Most Up at Open -- NYSE

IBM (IBM) - Get Report, up 2 1/8 to 170 1/2

.

Most Up at Open -- Nasdaq

Visx (VISX) , up 11 to 71 1/2

: The company yesterday said it expects to beat analysts' estimates for the first quarter thanks to demand and license fees for its

Star S2 Excimer Laser System

.

BancBoston Robertson Stephens

upgraded Visx to buy from long-term attractive.

Most Down at Open -- NYSE

Telebras (TBH) , down 2 1/16 to 61 7/16

.

Most Down at Open -- Nasdaq

Micron Electronics (MUEI) , down 2 11/16 to 11 3/4

: Yesterday the company warned it sees second-quarter earnings and sales falling below first-quarter figures because of slower PC sales. The 15-analyst

First Call

outlook called for earnings of 14 cents a share vs. the year-ago loss of 23 cents. In the first quarter, the company made 12 cents.

--

Brian Louis