Stocks Ignore Bonds' Downdraft, End on the Upside - TheStreet

Stocks Ignore Bonds' Downdraft, End on the Upside

Most of the major stock indices ended higher today, even with the weakness in the bond market.
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SAN FRANCISCO -- Investors straddled the fine line between bravery and stupidity today, bidding up blue-chip stocks in the face of another big downturn for bonds.

The price of the 30-year Treasury bond fell 19/32 to 97 12/32 its yield rising to 6.32%, its highest level since Oct. 1997.

Retail sales

for September rose 0.1% vs. expectations they would be unchanged. Additionally, retail sales excluding autos rose 0.6%, twice the consensus estimate. Lower-than-expected jobless claims data further fueled concerns about inflation ahead of tomorrow's key

producer price index

report.

Today's Market Roundup: Join the discussion on

TSC

Message Boards.

Nevertheless, the

Dow Jones Industrial Average

ended a volatile session up 54.45, or 0.5%, to 10,286.61. The blue-chip proxy fell as low as 10,133.69 shortly before lunchtime on Wall Street, then rose as high as 10,342.97 around 1:30 p.m. EDT. The index then dipped within 10 points of breakeven before rising as high as 10,324.29 and falling back to as low as 10,268.57 in the final hour.

The Dow was aided by strength in cyclical names such as

DuPont

(DD) - Get Report

as well as monster gains by

IBM

(IBM) - Get Report

and

J.P. Morgan

(JPM) - Get Report

. The average's biggest boost came from

Boeing

(BA) - Get Report

, up 7.7% after posting better-than-expected third-quarter profits and making positive comments about forward demand.

Tech proxies stabilized from the harsh shelling of the past two days thanks -- in part -- to better-than-expected earnings from companies such as

Apple

(AAPL) - Get Report

and

Altera

(ALTR) - Get Report

.

The

Nasdaq Composite Index

closed up 5.57, or 0.2%, to 2806.84, well off its intraday low of 2766.46. The

Nasdaq 100

rose 0.7% while the

Philadelphia Stock Exchange Semiconductor Index

gained 1.6% behind a rebound by

Intel

(INTC) - Get Report

.

TheStreet.com Internet Sector Index

gained 3.88, or 0.6%, to 696.09. Additionally,

TheStreet.com

Red Hots index was up 1.06, or 0.5%, to 210.36. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money.

The

S&P 500

closed off 2.13, or 0.2%, to 1283.42 after trading as high as 1289.59 and as low as 1267.75. The

Russell 2000

slid 0.01 to 419.31.

"We were due for a bounce given the velocity of the downturn in the past two days. I thought it would be a better up opening. It was up for about 30 seconds and then they slammed 'em," said Timothy Heekin, director of equity trading at

Thomas Weisel Partners

in San Francisco.

Heekin will "continue to sell rallies" until market action tells him the tide has turned.

However, the trader took some solace that both the Dow and S&P avoided declines which would have brought the averages over 10% from respective highs, or official "correction" levels. The Dow is down 9.2% from its all-time high while the S&P is off 9.5%.

He also was "semi-impressed" by the action in bond futures. The December bond futures contract fell as low as 110.31 but closed at 111.09, he noted, dubbing 111 a "critical level." Similarly, the S&P December futures contract bounced off its session low of 1275.80 which "could have been a retracement of the old low a couple weeks ago," Heekin said. "If that's the case, and bonds did find a significant hold, we could be OK. But I'm not convinced."

While skeptical, the trader did recount hearing "whispers" of a stronger-than-expected PPI report for tomorrow and suggested perhaps the bond market has already priced that in.

Strange Days, Indeed

To some, the Dow's advance in the face of continued rising interest rates seemed peculiar. Contributing to the irregular patterns was action in individual names such as

Tyco International

(TYC)

, which fell 10.3% although company officials denied published reports of accounting irregularities. The company's comments and supportive action by several analysts did little to aid options trading either, as reported in today's

Options Buzz.

Additionally,

Unisys

(UIS) - Get Report

declined 37% despite posting third-quarter earnings in excess of expectations. Still, the company's revenues and projections for future revenue growth disappointed investors.

TheStreet.com

reported on Unisys in a

story earlier today. Conversely,

Maytag

(MYG)

gained 11.7% after its earnings bested expectations, but only after they had been lowered when the company warned last month.

But Hugh Johnson, chief investment officer at

First Albany

, said there was more "consistency" in the market today than a surface glance indicates.

"Look at breadth -- it's fairly, clearly negative," Johnson said. "Even though the

Dow is up, it's probably a fair reflection of this market saying there's less there than meets the eye. It's not a good market and hasn't been all day long. The stock market is not fairing well and it's largely because the bond market is declining."

In

New York Stock Exchange

trading, 892.3 million shares were exchanged while declining stocks bested advancers 1,839 to 1,141. In

Nasdaq Stock Market

action 1.04 billion shares traded while losers led 2,053 to 1,758. New 52-week lows bested new highs 344 to 25 on the Big Board and by 122 to 58 in over-the-counter trading.

Still, the volatility and "directionless tone" of trading was "probably good," he said, because "the market doesn't have the downside momentum that it's had the last couple of days."

Johnson agreed the uncertainty about tomorrow's PPI report could have contributed to the relatively modest final moves for major averages today. However, "my work says stock prices need to correct lower," he said. "The stock market will have to fully adjust to the realization of rising inflation and interest rates."

The fund manager foresees the long bond yield rising as high as 6.50% near-term and said the Dow could decline to as low as 8500. But sticking in a trading range of between 9500 and 10,400 "would take care of all the adjusting that's necessary," he said.

Among other indices, the

Dow Jones Transportation Average

lost 7.02, or 0.2%, to 2914.49; the

Dow Jones Utility Average

rose 2.89, or 1%, to 299.38; and the

American Stock Exchange Composite Index

fell 3.46, or 0.4%, to 785.95.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

slipped 67.31 to 6969.70 and the

Mexican Stock Exchange IPC Index

fell 45.53 to 5030.61.

Thursday's Company Report

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Intel recovered 1 1/4 to 73 after it agreed to buy

DSP Communications

(DSP)

for around $1.5 billion in cash. Intel is paying $36 a share for DSP, a hefty premium over DSP's closing price of 28 yesterday. DSP racked up 6 15/16, or 24.7%, to 34 15/16.

Earnings/revenue reports and previews

Apple Computer

(AAPL) - Get Report

shined up 9 1/8, or 14%, to 73 3/16 after posting fourth-quarter earnings last night of 51 cents, beating the downwardly revised 17-analyst estimate of 45 cents, but down from the year-ago 68 cents.

Donaldson Lufkin & Jenrette

upped Apple to top pick from buy, while

Credit Suisse First Boston

raised its 2000 earnings estimates to $3.20 from $3.15 per share.

AlliedSignal

(ALD)

mounted 1 1/16 to 59 3/8 after posting third-quarter operating earnings of 68 cents a share, in line with the 14-analyst estimate and up from the year-ago 58 cents.

Bausch & Lomb

(BOL)

lost 4 1/4, or 6.4%, to 61 7/8 despite reporting third-quarter earnings of 78 cents a share, well above the 10-analyst estimate of 63 cents and up from the year-ago 64 cents.

Boise Cascade

(BCC) - Get Report

edged up 13/16 to 36 9/16 after posting third-quarter earnings of 74 cents a share, beating the 11-analyst estimate of 70 cents and up from the year-ago operating earnings of 14 cents.

General Motors

(GM) - Get Report

dwindled 1/8 to 65 after posting third-quarter earnings of $1.33 a share, beating the 13-analyst estimate of $1.24.

Champion International

(CHA) - Get Report

chalked up 3 1/4, or 6%, to 57 1/8 after it posted third-quarter earnings of 80 cents a share, which excludes a charge of 2 cents, well above the 13-analyst estimate of 63 cents and up from the year-ago 32 cents.

Deluxe

(DLX) - Get Report

slid 2 1/8, or 6.1%, to 32 9/16 after posting third-quarter earnings of 65 cents a share, in line with the four-analyst estimate.

Greenpoint Financial

(GPT)

stumbled 5/8 to 25 3/4 after posting third-quarter earnings of 63 cents a share, above the 14-analyst estimate of 58 cents and up from the year-ago 57 cents.

Intermet

(INMT)

climbed 5/8, or 6.7%, to 10 after reporting third-quarter earnings of 29 cents a share, a penny better than the six-analyst estimate, but down from the year-ago 36 cents.

Kimball International

(KBALB)

declined 1 13/16, or 9.7%, to 17 after posting first-quarter earnings of 29 cents a share, below the three-analyst estimate of 32 cents and the year-ago 31 cents.

KLA-Tencor

(KLAC) - Get Report

dwindled 1 1/4 to 72 5/8 after posting first-quarter earnings of 38 cents a share, better than the 19-analyst estimate of 33 cents, and up from a year ago 11 cents.

McGraw-Hill

(MHP)

bounced 2 1/16 to 53 5/16 after it posted third-quarter earnings of 96 cents a share, beating the 10-analyst estimate of 92 cents.

Polaroid

(PRD)

slipped 3 3/16, or 12.5%, to 22 3/16 after reporting third-quarter operating earnings of 50 cents a share, in line with the nine-analyst estimate and up from the year-ago 40 cents.

Schwab

(SCH)

mounted 1 7/8, or 6.6%, to 29 15/16 after it posted third-quarter earnings of 15 cents a share, in line with the 10-analyst estimate and up from the year-ago 12 cents.

Unisys

(UIS) - Get Report

plummeted 15 5/8, or 36.9%, to 26 5/8 despite reporting third-quarter earnings of 40 cents a share, above the 11-analyst estimate of 36 cents and up from 25 cents a year ago.

PaineWebber

downgraded Unisys to neutral from attractive.

USFreightways

(USFC)

skidded 1 1/4 to 42 5/8 after reporting third-quarter earnings of $1.07 a share, well above the nine-analyst estimate of $1 and up from a year-ago 74 cents.

Westinghouse Air Brake

(WAB) - Get Report

fell 5/16 to 16 5/8 after posting third-quarter earnings of 48 cents a share, in line with the five-analyst estimate and up from 42 cents a year ago.

Westpoint Stevens

(WPSN)

lost 3/8 to 22 after reporting third-quarter earnings of 67 cents a share, in line with the 11-analyst estimate and up from a year-ago 57 cents. The company said weather problems reduced income by about $700,000, or 1 cent a share.

Offerings and stock actions

Timberline Software

(TMBS)

declined 2 3/8, or 12%, to 17 1/4 after it announced that it set a 4-for-3 stock split.

Analyst actions

Starwood Hotels & Resorts Worldwide

(HOT)

faltered 9/16 to 20 7/16 after PaineWebber downgraded it to neutral from buy.

Tyco

(TYC)

skidded 9, or 9.2%, to 88 after

Credit Suisse First Boston

restated its strong buy opinion. Earlier today, Tyco management refuted rumors of accounting problems, which caused the stock to plummet 6% during yesterday's trading session.

United Technologies

climbed 7/8 to 54 1/16 after PaineWebber initiated coverage with an attractive rating.

Miscellany

Kmart

(KM)

advanced 1/4 to 10 1/2 after unveiling plans to add 400 new store to the retail chain over the next five years, with plans to open 70 stores in metropolitan areas by 2000.

MGM Grand

(MGG)

hopped 1/8 to 49 3/8 after chairman and CEO Terrence Lanni said he was stepping down from his roles at the end of the year to spend more time with his family. CFO Jim Murren said that Lanni would continue to serve as a board member and will have a hand in selecting a successor.

priceline.com

(PCLN)

fell 2 3/8 to 70 after it filed suit in federal court against

Microsoft

(MSFT) - Get Report

and its

Expedia

unit, claiming that

Expedia.com's

recently introduced hotel service infringes on priceline.com's patent. Shares of Microsoft slipped 3/8 to 90 11/16.

Separately, Microsoft formed an alliance with

British Telecommunications

(BTY)

, which bounced 3 1/16 to 163 5/16, to combine resources to develop handheld wireless devices using

Windows CE

as the operating system.

Sony

(SNE) - Get Report

leaped 3 7/16 to 156 13/16 after saying it was planning a $150 million holiday marketing budget for its Playstation including tie-ins with

Pizza Hut

, a unit of

Tricon Global Restaurants

(YUM) - Get Report

and

MTV

, a unit of

Viacom

(VIA) - Get Report

.

York

(YRK)

added 1 1/2, or 6.1%, to 25 7/8 after it said it has tapped its President and COO John Tucker to replace the retiring Robert Pokelwaldt as CEO.