Stocks Feel the January Effect, Rallying Behind Good Old Tech
January, chow-ch, chow, chow, chow. For those who love, love the calendar's portents, it looks like 1999 is going to be another up year dominated by technology stocks.
Following today's gains, the
Nasdaq Composite Index
is up 14.3% for the month and in record territory; the
S&P 500
is higher by 4.1% and at an all-time high; and the lumbering
Dow Jones Industrial Average
is up 1.9%. Whether the pattern holds remains to be seen (of course), but the "January barometer" has forecast the broader market's fate with near 90% accuracy since 1950, according to
The Stock Picker's Almanac
.
The overriding positivism was evinced in the success of three IPOs today,
Tut Systems
(TUTS)
, up 218%,
Smith Gardner
(SGAI)
TheStreet Recommends
, which rose 33%, and
Entercom Communications
(ETM) - Get Entercom Communications Corp. Class A Report
, higher by 36.7%.
With PC and related companies at the vanguard, the Nasdaq Comp climbed 28.55, or 1.2%, to 2505.89, notching its third record high of the week and its 11th in 1999.
The
Philadelphia Stock Exchange Semiconductor Index
jumped 3.7% after
BancBoston Robertson Stephens
upped five chip-equipment makers, including
Novellus Systems
(NVLS)
, which gained 7.9%, and
Lam Research
(LRCX) - Get Lam Research Corporation Report
, up 18.4%.
Still, the
Nasdaq 100
rose just 0.9%, saddled by a 12.7% decline in
PeopleSoft
(PSFT)
, which posted disappointing fourth-quarter results
last night.
The Nasdaq Comp was aided by
Amgen
(AMGN) - Get Amgen Inc. Report
, up 6.9% after posting better-than-expected earnings and setting a stock split, and
Uniphase
(UNPH)
, which rose 13% on word of its
merger with Canada's
JDS Fitel
.
Among traditional Nasdaq bellwethers,
Dell
(DELL) - Get Dell Technologies Inc. Class C Report
was the best performer, up 6.2% to an all-time high of 100 after research firm
International Data
reported PC sales expanded 15% in the fourth quarter and 12% in 1998. In
New York Stock Exchange
trading,
Gateway
(GTW)
gained 9.2% to an all-time high of 77 1/4 on the news. Meanwhile,
Hewlett-Packard
(HWP)
rose 6.1% after receiving an upgrade from
Goldman Sachs
and
IBM
(IBM) - Get International Business Machines Corporation Report
rose 2.6%.
The two tech giants were among the leading influences on the Dow Jones Industrial Average, which closed up 77.50, or 0.8%, to 9358.83 after hitting 9383.29 intraday. Other Dow gainers included
Merck
(MRK) - Get Merck & Company Inc. Report
.
The S&P 500 added 14.27, or 1.1%, to end at 1279.64, eclipsing its previous best of 1275.09, set
Jan. 8. In addition to the aforementioned, financials such as
Chase Manhattan
(CMB)
, consumer giants such as
Gillette
(G) - Get Genpact Limited Report
and airlines such as
Delta Air Lines
(DAL) - Get Delta Air Lines Inc. Report
supported the index.
Airlines were inspired by better-than-expected earnings from
Alaksa Air Group
(ALK) - Get Alaska Air Group Inc. Report
, which rose 10.4%, and word
Northwest Airlines
(NWAC)
will match fare increases of its rivals. The
American Stock Exchange Airline Index
surged 8.5%, helping the
Dow Jones Transportation Average
gain 123.39, or 4%, to 3202.50.
"It's back to the old game with the
long bond yield at 5% that stocks are a better play. It does look like it's going to 10,000," said the head listed trader at one Wall Street firm, who requested anonymity. "The good earnings are getting a lot better reaction then the negatives. A company like
Hershey Foods
(HSY) - Get The Hershey Company Report
disappoints and they crush it. But others are inline or even a penny light and the stocks rally."
The trader isn't overly concerned about the market's narrowness, noting that "tech continues strong, financials act well, even some of the dull stocks like publishing are starting to lift a little. Food stocks and cable and wireless are all acting good. I am starting to see signs of the rally starting to broaden out, at least in the listed world. But most of the strength is in the over-the-counter market."
Still, the bulk of buying was concentrated in a select few, mainly big-cap tech. Internet stocks were largely absent from the tech advance as volatility in the sector continues to simmer down.
TheStreet.com Internet Sector
index rose more than 38% for the month but gained just 5.12, or 0.9%, to 557.52 Friday. At the extremes of the evenly-weighted index were
Open Market
(OMKT)
, up 15.2%, and
Security Dynamics
(SDTI)
, which fell 16.1% after
Prudential Securities
cut its recommendation to hold from accumulate.
Meanwhile, the
Russell 2000
rose a modest 3.24, or 0.8%, to 427.21, finishing the month up 1.2%.
In NYSE trading, 917.1 million shares traded while gainers led declining stocks 1,681 to 1,330. In
Nasdaq Stock Market
activity, advancers led 2,381 to 1,840 while 1.063 billion shares traded. New 52-week highs led new lows 96 to 84 on the Big Board and by 129 to 44 in over-the-counter trading.
Today's gains notwithstanding, market internals "do concern me," said Rao Chalasani, chief investment strategist at
Everen Securities
in Chicago. "This is not conducive for the stock market to go up and stay up. I would like to see some broadening of the market but as it was broadening we got the Brazilian problems and it has been shattered. As long as it stays narrow, there's a cloud over the market."
Still, Chalasani remains bullish, noting the "beginning of some interest in consumer staples," as well as the "very good" economic news reported today. The
Commerce Department
reported fourth-quarter gross domestic product rose 5.6%, well above the 4.4% expected. The backdrop for the GDP blowout is even more favorable, Chalasani said.
"The employment cost index has been very weak and at the same time you have the GDP deflator lower than in the third quarter," he said. "Without inflation, inventories are being drawn down and the consumer is still spending. The momentum is there and nobody has to be worried because there's no inflation."
Regarding the market's apparent dwindling angst about Brazil, Chalasani said: "I don't know how they can be so unconcerned about the real breaking 2 to the dollar. I can't say it's a positive." The real fell another 7.1% today to a record low 2.10 to the dollar.
However, "it's not a big enough negative to get out" of stocks, the strategist said.
Among other indices, the
Dow Jones Utility Average
fell 0.39, or 0.1%, to 302.80; and the
American Stock Exchange Composite Index
rose 0.93, or 0.1%, to 714.86.
The price of the 30-year Treasury bond rose 4/32 to 102 10/32, its yield falling to 5.09%.
Friday'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, Tut Systems -- which develops products that enable high-speed data to travel over copper infrastructure -- shot up 39 1/4, or 218%, to 57 1/2 after
Lehman Brothers
priced its 2.5-million-share IPO top-range at $18 a share last night. Earlier this week, the offering's range was upped to $16 to $18 from $14 to $16.
In other offerings, Entercom Communications, a radio broadcaster, soared 8 1/4, or 36.7%, to 30 3/4 after
Credit Suisse First Boston
priced its 13.6 million-share IPO at $22.50 a share last night. The expected price range was raised to $21 to $23 from $18 to $21. Smith Gardner, a marketing firm, lifted 3 15/16, or 32.8%, to 16 after
BT Alex. Brown
priced its 4.4 million-share IPO above range at $12 a share. The offering price range was increased to $10 to $11 from $8 to $10.
American Axle & Manufacturing
(AXL) - Get American Axle & Manufacturing Holdings Inc. Report
slipped 7/16 to 16 9/16 after
Merrill Lynch
priced its 7 million-share IPO mid-range at $17 a share last night.
Mergers, acquisitions and joint ventures
Supreme
(SUPI)
took in 1 1/8, or 7.8%, to 16 after agreeing to acquire privately held
Perry Ellis
in a $75 million deal.
Uniphase jumped 10 3/8, or 13%, to an all-time high of 91 1/8 after agreeing
last night to merge with Canada-based JDS FITEL in a deal valued at $6.1 billion.
Earnings/revenue reports and previews
Alaska Air flew 4 3/4, or 10.4%, to 50 3/8 after yesterday reporting fourth-quarter earnings of $1.02 a share, beating expectations for 82 cents.
Alza
(AZA)
picked up 4 7/8, or 10.7%, to 50 9/16 even after last night missing fourth-quarter earnings estimates by a penny a share.
Amgen grew 8 3/16, or 6.9%, to an all-time high of 127 13/16 after last night recording fourth-quarter earnings of 90 cents a share, 6 cents ahead of the 25-analyst estimate and above the year-ago 67 cents. The company also set a 2-for-1 stock split. Today, BT Alex. Brown raised the stock's price target to 136 from 125 a share.
Aspect Development
(ASDV)
shaved off 1 5/16 to 28 7/8 despite last night beating fourth-quarter earnings estimates by 4 cents a share.
Broadcast.com
undefined
dropped 12 1/8, or 6.8%, to 167 after last night reporting a first-quarter loss three cents a share wider than the year-ago loss but 4 cents better than expected.
CEC Entertainment
(CEC)
climbed 5 1/8, or 20.7%, to 29 7/8 after last night forecasting fourth-quarter earnings will outpace year-ago results of 30 cents a share as well as the 10-analyst estimate of 32 cents.
Dialogic
(DLGC)
tanked 3 3/8, or 11.7%, to 25 1/2 even after last night meeting fourth-quarter earnings projections of 43 cents a share.
FDC
(FDC) - Get First Data Corporation Class A Report
brought in 2 3/16, or 6.1%, to an annual high of 38 5/16 after last night reporting fourth-quarter earnings of 48 cents a share, in line with expectations.
Deutsche Bank Securities
upped it to buy from hold.
FVC.com
undefined
swelled 2 9/16, or 23.4%, to 13 5/8 after last night reporting fourth-quarter earnings of 8 cents a share, double the three-analyst consensus and up from a loss of 3 cents a year ago. The company also said
Lucent
(LU) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report
has agreed to act as a buyer and reseller of all of FVC.com's voice, video, and data products.
Gencor Industries
(GX)
lost 1 1/16, or 13.8%, to an annual low of 6 5/8 after last night saying it will restate figures for fiscal 1998 due to accounting irregularities and other improprieties at its U.K.-based unit. The company said the accounting irregularities and other improprieties may amount to between $4 million and $6 million.
Lam Research advanced 5 15/16, or 18.4%, to an annual high of 38 3/8 after last night reporting a fourth-quarter loss 30 cents a share narrower than expected. Today,
Morgan Stanley Dean Witter
upgraded it to outperform from neutral and Credit Suisse First Boston upped it to buy from hold. BancBoston Robertson Stephens lifted five semiconductor equipment stocks, including Lam Research to buy from long-term attractive, citing an upward movement in Asian business.
Advanced Energy Industries
(AEIS) - Get Advanced Energy Industries Inc. Report
rose 3 1/8, or 12%, to 29 1/8 after also being upped to buy from long-term attractive; and
Applied Materials
(AMAT) - Get Applied Materials Inc. Report
rose 4 1/8, or 7%, to 63 3/16, Novellus rose 5 5/16, or 7.9%, to 73 1/8, and
Teradyne
(TER) - Get Teradyne Inc. Report
rose 6 1/2, or 11.1%, to an all-time high of 65 after all were upped to strong buy from buy.
LSI Logic
(LSI) - Get Life Storage Inc. Report
jumped 3 3/16, or 12.9%, to 27 15/16 after last night posting break-even fourth-quarter results, above the expected loss of 3 cents a share. Today, Credit Suisse First Boston raised the stock to buy from hold, setting a price target of 35 a share, and BT Alex. Brown pushed it up to strong buy from market performer.
Mercury International
(MERQ)
vaulted 6, or 10.5%, to 63 1/8 after last night posting fourth-quarter earnings of 47 cents a share, up from 28 cents a year ago and ahead of the 10-analyst estimate of 41 cents. The company also announced a 2-for-1 stock split.
Micros Systems
(MCRS)
expanded 2 3/8, or 8.1%, to 32 after last night topping second-quarter earnings by a penny a share.
Herman Miller
(MLHR) - Get Herman Miller, Inc. Report
skidded 5 5/8, or 22.9%, to 18 15/16 after last night warning it expects third-quarter earnings to fall short of the seven-analyst prediction for 39 cents a share due to weak order entry in December and January. The company earned 36 cents in the year-ago period. Today, Merrill Lynch slashed the stock to near-term neutral from buy.
Finland's
Nokia
(NOKA)
slid 9 7/8, or 6.4%, to 144 1/8 after posting fourth-quarter earnings in line with expectations. The company also said its board will propose a 2-for-1 stock split.
PeopleSoft slouched 2 7/8, or 12.7%, to 19 13/16 after last night reporting fourth-quarter earnings of 16 cents a share, a repeat of the year-ago figure and 1 cent below the 25-analyst forecast. The company also said it will cut 430 jobs, or 6% or its workforce, amid competition from
SAP
and
Oracle
(ORCL) - Get Oracle Corporation Report
. Today, Bear Stearns lowered PeopleSoft to neutral from buy.
Reltec
(RLT)
sliced off 7 5/16, or 28.3%, to 18 1/2 after last night missing fourth-quarter earnings estimates by 3 cents a share.
Scientific-Atlanta
(SFA)
added 1 1/8 to 31 1/8 after last night beating second-quarter earnings estimates by 4 cents a share.
Sequent Computer
(SQNT)
tumbled 1 1/8, or 8.3%, to 12 3/8 after last night posting fourth-quarter earnings 1 cent below expectations.
Starbucks
(SBUX) - Get Starbucks Corporation Report
perked up 3 1/16, or 6.3%, to 52 1/16 after last night announcing its same-store sales rose 25% for the four weeks ended Jan. 24.
Wisconsin Energy
(WEC) - Get WEC Energy Group Inc. Report
slipped 2 3/8, or 8.4%, to an annual low of 26 after last night falling short of fourth-quarter earnings estimates by 13 cents a share. Today, Merrill Lynch cut the stock to near-term neutral from accumulate and long-term accumulate from buy.
In other earnings news:
Analyst actions
Collagen Aesthetics
(CGEN) - Get Compugen Ltd. Report
shot up 3, or 30.8%, to 13 after Lehman Brothers initiated coverage with a buy and a 12-month price target of 20 a share.
Cytyc
(CYTC)
gave up 4 1/8, or 17.7%, to 19 1/8 after
NationsBanc Montgomery Securities
lowered it to hold from buy.
Eastman Kodak
(EK)
picked up 1 13/16 to 65 3/8 after Goldman Sachs raised it to buy from market outperform.
Flextronics
excelled 2 7/8, or 7.4%, to 42 3/8 after Morgan Stanley Dean Witter started coverage with an outperform and set a price target of 55 a share.
Hewlett-Packard added 4 1/2, or 6.1%, to 78 3/8 after Goldman Sachs pushed it up to market outperformer from market performer.
Restoration Hardware
(RSTO)
swelled 2 5/16, or 12.7%, to 20 9/16 after NationsBanc Montgomery Securities upgraded it to buy from hold.
Security Dynamics Technologies slipped 4, or 16.1%, to 20 7/8 after
Prudential Securities
slashed it to hold from accumulate.
Silicon Graphics
(SGI)
took in 1 5/8, or 8.6%, to an annual high of 20 9/16 after Merrill Lynch boosted its price target to 23 from 18 a share and increased its 2000 earnings estimate for the company to 80 cents a share from 60 cents after management said revenue should grow by more than 20%.
Tandy
(TAN) - Get Invesco Solar ETF Report
brought in 4 7/8, or 9.9%, to 54 after
Dain Rauscher Wessels
upped it to strong buy from buy.
Miscellany
Compaq
(CPQ)
rose 7/16 to 47 5/8, apparently not getting much help from word of its new division focused on selling products over the Internet.
Inktomi
(INKT)
powered up 3 15/16, or 5.8%, to 71 7/8 after the
oft-wrong Inside Wall Street column in
Business Week
said some Wall Streeters are bullish on the stock even after
Microsoft
(MSFT) - Get Microsoft Corporation Report
dumped the search service as the primary platform for Microsoft's Web network. And
Cash Technologies
(CHNG) - Get Change Healthcare Inc. Report
, a company that makes machines that deal with loose coins, rung up 1, or 9.5%, to an all-time high of 11 3/4 on a positive mention in the column. Casey Stern, an analyst at
Starr Securities
, told the magazine the coming of the euro has produced a big potential market for the company's unusual coin-processing machines.
