Stocks in the Pink as Floyd's Departure Lifts Spirits

New York's clear as a bell Friday as financials reverse their recent swoon, buoying the broader market.
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Expiration. A high put/call ratio. A weakened yen. A short-term oversold condition.

Hardly the Age of Aquarius, but what do you want from this market? A lot of factors aligned to put stocks in pretty good shape at midday.

The major proxies were all positive. The

Dow Jones Industrial Average

was up 104.80, or 1%, to 10,842.26, led by recently beleaguered financials

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

.

The

Nasdaq Composite Index

was up 46.03, or 1.6%, to 2852.75, given lift by index heavyweights

Microsoft

(MSFT) - Get Report

,

Intel

(INTC) - Get Report

and

Cisco

(CSCO) - Get Report

.

Adobe Systems

(ADBE) - Get Report

was up 8.5% after its strong earnings report last night and the attendant analyst upgrades.

Net stocks were looking strong, with

TheStreet.com Internet Sector

index up 13.43, or 2.2%, at 621.28. Bucking that trend was

eBay

(EBAY) - Get Report

, lately off 4.6% on news that a group of companies -- including Microsoft,

Lycos

(LCOS)

and

Excite@Home

(ATHM) - Get Report

-- will come together to form a competing online auction network.

The small-cap

Russell 2000

was 3.33 higher at 433.58. The broad

S&P 500

was up 15.46, or 1.2%, to 1333.94.

Let's begin with the dollar. Its recent slide against the yen has been troubling some in the market with fears that foreign capital might start thinking about parking itself elsewhere in the world. A frightening bear case unfolds from that point, and we don't want to

go there now.

But growing expectations of a possible coordinated currency intervention are making currency traders a little less ready to take long positions on the yen. Yesterday the

Nihon Keizai Shimbun

cited an unnamed senior

International Monetary Fund

official as saying that currency intervention will probably be a topic at the G7's Sept. 25 meeting. Today's news that

Bank of Japan

Governor Masaru Hayami was talking with

New York Fed

President William McDonough fueled speculation that a coordinated intervention was coming, and the dollar went as high as 107.27 yen in London this morning.

The Benjamins were lately quoted at 106.88 yen.

"Last week's pessimism may have gotten a little overdone," said Pete Boockvar, equity strategist at

Miller Tabak

, who noted that the yen's declines, along with a dovish article by

The Washington Post's

John Berry, helped the bond market get off to a strong start today.

The 30-year Treasury was lately up 12/32 to 101, its yield falling to 6.052%.

The strength in bonds ratified stocks' quick jump out of the gates this morning, a jump that looked all the more emphatic because it was underpinned by the strong upside bias to today's triple-witching, which marks the quarterly expiration of stock options, index options and index futures.

The upside expiration bias was presaged by a large jump in the put/call ratio yesterday, according to Joe Barthel, chief investment strategist at

Fahnestock

. The total put/call ratio, which includes both stock and index options, closed yesterday at 0.80. "That's one of the better readings we've had this year," he said.

Boockvar was expecting the bias to stay positive: "Right now, from what we see, it should carry through the afternoon." He was basing that forecast on the large

S&P 500

buy programs he saw this morning. In Boockvar's experience, those programs are often followed up by

S&P 100

buys later in the session.

Another good sign in the market is on the technical level, something that's been looking rather bleak lately. Barthel was impressed by the Dow's rally yesterday afternoon after it broke through its Aug. 10 low of 10,665.

"When you break key support but don't flush it out coming down, that usually means that level was successfully tested," he said. "That, coupled with an upside expiration bias, a high put/call ratio and the strength in the dollar, gives a little bit of credibility to a relief rally. Is it the start of something big? I think not, ahead of the

Fed's Oct. 5 meeting. It just gives us some bargain-hunting, which is what we've become accustomed to."

In other sector news, the

Philadelphia Stock Exchange/KBW Bank Index

was up 6.3%, as financials were taking the yen's weakness as reason enough to bounce from their recent protracted declines. Strengthened DRAM prices were lifting the

Philadelphia Stock Exchange Semiconductor Index

11.29, or 2%, to 563.22.

The

Dow Jones Transportation Average

was lately up just 0.2%, hardly a convincing rally after yesterday's 3.2% bloodletting.

Meanwhile, the oil sector continued to consolidate after its recent run-up. The

American Stock Exchange Oil & Gas Index

was off about 0.3%.

Volume was moderate, and breadth was positive. A moderate 479 million shares had traded on the

New York Stock Exchange

, while 543 million shares changed hands on the

Nasdaq Stock Market

. Advancers were topping decliners 1,536 to 1,170 on the NYSE, where there were 26 new 52-week highs against 93 new lows. In Nasdaq action, advancers were beating decliners 1,979 to 1,413, with 67 new highs and 38 new lows.

Friday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified

.)

eBay can expect some serious competition in its online auction business. High-tech behemoths including Microsoft, Lycos and Excite@Home have agreed to get together to create a new auction network, according to published reports. The news was reported in

The New York Times

and

The Wall Street Journal

. Shares of Microsoft were up 1 7/8 to 95 7/8, while Lycos was climbing 1 1/4 to 44 1/4. Excite@Home shares were up 7/16 to 37 13/16 and eBay was falling 7 to 144 3/8.

Adobe Systems was popping 8 1/16, or 8.2%, to 105 7/8 after it set a 2-for-1 stock split last night. The company also posted third-quarter earnings of 80 cents a share, ahead of the 11-analyst estimate of 74 cents.

Advest

upgraded Adobe to strong buy from market perform, while

J.P. Morgan

upped its rating to a buy from a long-term buy.

Mergers, Acquisitions and Joint Ventures

Kalamazoo

said that it has forged a pact with

IBM

(IBM) - Get Report

to provide consulting services to the automotive retail channel in Europe. Shares of IBM were up 3/4 to 130 3/4.

Offerings and Stock Actions

Vitria

(VITR)

was soaring 28, or 173%, to 44 3/16 in its trading debut.

Credit Suisse First Boston

priced the 3 million-share IPO above its $13 to $15 range at $16.

Earnings/Revenue Reports and Previews

Fort James

(FJ)

was sliding 7 13/16, or 22.2%, to 27 5/16 after it said earnings per share could be up to 20% below year-ago levels in the second half and 25% lower in the third quarter. Fort James attributed the earnings drop to significant systems and workflow changes as it merged two predecessor companies, and increased costs for distribution and warehousing.

Material Sciences

(MSC) - Get Report

was advancing 3/4, or 5.5%, to 14 3/8 after it posted second-quarter earnings of 28 cents a share, beating both the two-analyst estimate of 25 cents and the year-ago 13 cents.

Nike

(NKE) - Get Report

was slipping 3 5/16, or 6%, to 51 7/16 despite posting first-quarter earnings of 70 cents a share, better than the 15-analyst estimate, and up from 56 cents a year ago. The company said a cost-cutting plan improved its bottom line despite flat revenue. Earlier today,

Morgan Stanley

raised its fiscal 2000 earnings estimate to $2.05 a share from $2.

TheStreet.com

wrote about Nike's earnings in a

story yesterday.

Ogden

(OG)

was declining 7 15/16, or 40.7%, to 11 9/16 after it said it plans to "pursue the sale or other dispositions" of its aviation and entertainment concerns and warned that it expects earnings for the third quarter will be "substantially below" expectations. The two-analyst estimate calls for the company to earn 64 cents a share.

Select Comfort

(AIRB)

was skidding 1 1/14, or 16%, to 6 5/8 after it said that it expects to report a third-quarter loss and miss the four-analyst earnings estimate of 4 cents a share. The company will post results by Oct. 19.

Universal Health Services

(UHS) - Get Report

was falling 4 7/8, or 15.8%, to 25 7/8 after it warned investors that that third-quarter results could be weak due to slowness in its Las Vegas and Amarillo, Texas, hospital businesses. The company said results could be off as much as 40% from the year-ago profit of 51 cents a share, greatly missing the consensus estimate of 58 cents a share.

Analyst Actions

Aflac

(AFL) - Get Report

was up 1 13/16 to 43 15/16 after

PaineWebber

upgraded its shares to buy from attractive.

Agile Software

(AGIL)

was jumping 3 7/8, or 7%, to 59 1/8 after

Deutsche Banc Alex. Brown

rolled out coverage of the stock with a buy rating.

Albertson's

(ABS)

was off 11/16 to 45 1/8 after

Lehman Brothers

cut its rating to neutral.

Blue-Square Israel

(BSI)

was unchanged at 15 after Lehman Brothers cut the stock's rating to neutral from buy, citing flat sales in a tough economic climate.

Diageo

(DEO) - Get Report

was climbing 1 to 43 1/8 after

HSBC

upgraded it to hold from sell, following its annual profit report.

Warburg Dillon Read sliced its ratings on

Pharmaceutical Product Developement

(PPDI)

, to hold from buy,

Mylan Laboratories

(MYL) - Get Report

, to hold from strong buy, and on

ICN Pharmaceuticals

(ICN)

, to buy from strong buy. Shares of Pharmaceutical Product were off 3/4, or 5.9%, to 13, while Mylan was down 1/4 to 19 1/2. ICN shares were off 1/8 to 18 11/16.

Electro Scientific

(ESIO) - Get Report

was hopping 4 1/16, or 8.1%, to 52 15/16 after Warburg Dillon Read raised its rating to strong buy from buy.

First Industrial Realty

(FR) - Get Report

was slipping 1/8 to 25 5/16 after Warburg Dillon Read upgraded it to strong buy from buy.

Gateway

(GTW)

was advancing 2 7/8, or 6.1%, to 49 3/4 after PaineWebber upgraded it to buy from attractive.

KLM Royal Dutch Airlines

(KLM)

was down 3/16 to 25 5/16 after Credit Suisse First Boston started coverage with a hold rating, saying the airline cycle had peaked and North American yields remain depressed, while fuel and operating costs have risen.

LHS

(LHSG)

was sliding 3/8 to 32 5/8 after Morgan Stanley rolled out coverage with a neutral rating.

Paychex

(PAYX) - Get Report

was skidding 3/16 to 31 after

Merrill Lynch

upped its rating to intermediate-term buy from accumulate.

Pechiney

(PY) - Get Report

was declining 1/4 to 28 3/4 after Merrill Lynch raised its rating to near-term buy from accumulate.

Raytheon

(RTN) - Get Report

was off 1/2 to 53 1/8 after CSFB sliced the shares rating to buy from strong buy.

Research in Motion

(RIMM)

was unchanged at 34 after CSFB began coverage with a hold rating.

THQ

(THQI)

was bouncing 2 7/8, or 7.2%, to 26 3/16 after

U.S. Bancorp Piper Jaffray

boosted its third-quarter earnings estimates to 31 cents a share from 29 cents a share and set a price target of 46.

Miscellany

CMS Energy

(CMS) - Get Report

was up 5/16 to 37 1/4 after it said it discovered a sizable natural gas pool in its

Garrett 1701H

exploratory well outside of Midland, Texas. CMS said it is set to start oil production immediately and that a development well program for the reservoir has begun.

The

International Petroleum Exchange

tapped Richard Ward to serve as its CEO.

In a 9-2 vote, an

FDA

advisory committee, questioning the effectiveness of

Liposome's

(LIPO)

breast-cancer treatment, suggested that the FDA deny the drug marketing approval. Shares of Liposome were plummeting 8, or 49%, to 8.

Investors who bought stocks 18 months ago in companies that fix Y2K problems have gotten pounded and would've been better off shorting those stocks, the Heard on the Street column in

The Wall Street Journal

said. The column mentions a bunch of stocks that money managers and analysts like as Y2K plays, among them:

Whittman-Hart

(WHIT)

,

Siebel Systems

(SEBL)

,

Oracle

(ORCL) - Get Report

,

EMC

(EMC)

,

Infinity Broadcasting

(INF) - Get Report

,

Clear Channel Communications

(CCU) - Get Report

and

Micron Technology

(MU) - Get Report

.

Shares of Whittman-Hart were down 1 3/4, or 5.4%, to 30 7/8 and Oracle was up 1 1/4 to 43 3/8, while Siebel shares were advancing 2 to 72 5/16. EMC was hopping 2 1/2 to 70 1/4 and shares of Infinity were jumping 1 1/8 to 28 5/16, while Clear Channel was up 2 5/8 to 79 1/2. Micron shares were off 2 1/16 to 75 1/2.

Separately, Taiwan said it would slap a 61.85% antidumping tax on Micron for selling what it said were poor-quality DRAM computer chips that had hurt the local semiconductor industry.

The Inside Wall Street column in

Business Week

, penned by Gene Marcial, is all about takeover talk. Companies mentioned as buyout targets in the column this week are

ZDNet

(ZDZ)

,

Chiron

(CHIR) - Get Report

and

Rite Aid

(RAD) - Get Report

. Shares of ZDNet were jumping 3 5/8, or 23%, to 17 3/8, while Chiron was advancing 1 15/16, or 5.8%, to 35 1/4. RiteAid shares were up 3/4 to 18.