There's a classic (aren't they all?) Bugs Bunny toon where Elmer Fudd goes off the edge of a cliff in another unsuccessful effort to catch that
. In the gravity-defying moment (which apparently only happens in cartoons) before he plummets to earth, Elmer turns into a big lollipop with the word "sucker" tattooed on his forehead.
With stocks running higher thus far today behind a rebound in bonds, many traders are warning that those who get too excited will end up suffering the same fate. If not later today, then soon enough. What's troubling is the advance comes on scant (but not scantily clad) volume and there's still the matter of the
meeting next week, plus concern about subsequent meetings (and rate hikes therein).
"Equity markets trade off perception over the short term and reality over the long term," said Tony Dwyer, chief market strategist at
. "The perception is there's going to be multiple rate hikes. Near-term, it's going to continue to pressure stocks and bonds."
The pressure has been released thus far today, however. With the price of the 30-year Treasury bond up 8/32 to 87 28/32, its yield declining to 6.14%, all major stock proxies were solidly higher as lunchtime beckoned on Wall Street. (For more on the fixed-income market, see today's early
Dow Jones Industrial Average
was up 67 to 10,602, with
was higher by 6 to 1322 and the
was up a fraction to 443.
With most tech bellwethers higher, albeit not dramatically so, the
Nasdaq Composite Index
was up 7 to 2561.
TheStreet.com Internet Sector
index had come off its earlier strength and was down 7 to 569.
Market players who are at work today are largely looking ahead to next week's
gathering. The conventional thinking is the Fed will tighten by 25 basis points and a "relief" rally will emerge.
Dwyer agrees but does not see eye-to-eye with market players who expect the relief to be followed by strong second-quarter earnings and a concurrent rally.
"I think earnings are going to be great, strong as expected," he said. "But everybody is expecting it, so it's already discounted. We're going to get interim bounces but the general direction of the market is down for the next month, maybe two, until you have some kind of climactic situation. We haven't had that yet."
The strategist sees the Dow falling below 10,000 -- perhaps as low as 9500 -- and the S&P 500 declining by a corresponding percentage.
"Two things drive a bull market: multiple expansion and earnings growth. This bull has enjoyed both," he said. "Now there's inflation fears. The fact we're at historically high valuations takes that positive out."
But Dwyer is far from bearish. He's expecting just two rate hikes from the Fed and believes stocks and bonds will rally when that perception sinks in.
"As we get more economic data and reality sets in there's no inflationary pressure, and therefore no multiple rate hikes," markets will rally, he said. "You'll get a bounce on a good
economic number but that doesn't mean it'll be a sustained low. Not until you get a couple of months of it."
New York Stock Exchange
trading, advancers were leading declining stocks 1,529 to 1,246 on 355 million shares. In
Nasdaq Stock Market
activity, gainers were leading 1,850 to 1,616 on 448 million shares. New 52-week lows were crushing new highs 99 to 29 on the Big Board, but new highs were topping new lows 71 to 26 on the Nasdaq.
Good Help is Hard to Find
Speculation emerged yesterday
is negotiating either the purchase of PC maker
or some sort of marketing agreement under which the two would produce "AOL-branded" PCs.
first reported the story.
Internet analyst Henry Blodget published a report sent to clients that stated the deal as fact.
"AOL announced an agreement with Microworks
sic, an OEM, to produce an AOL branded internet access device that will be given away or made available at a nominal cost, thus enabling AOL to benefit from access revenues," the report said.
That the name of the company reportedly involved in the deal was misspelled in the Merrill report should have been an indication something was amiss (at the Circle K).
"We haven't announced anything," said Tom Ziemba, an AOL spokesman, while declining to comment further on the possibility of any AOL-Microworkz.com combination.
Blodget could not be reached for comment. But an assistant in his office said rumors about talks between America Online and Microworkz were mentioned during Merrill's morning call and the person who wrote the report mistakenly indicated a deal had been announced.
Luanne Brown, director of public relations at Microworkz.com, confirmed the company is in talks with AOL but said it was not a done deal.
So perhaps this was just a case of an overzealous employee getting it wrong; more proof full employment has its drawbacks.
Or maybe Blodget and his staff accidentally reported on something they were tipped off about by AOL but were supposed to keep under wraps.
"We recently spoke with management regarding free European Internet access, the bundling phenomenon that's occurring in the U.S. and the advent of free access services in the U.S.," the report says. "After speaking with management, we expect strategic moves to be made in response to these changes in the competitive landscape in both England and the U.S."
In the conclusion of the report, Blodget (or some unreasonable facsimile thereof) writes: "The implications of this alternate business model will be driven by higher volume in exchange for lower profit per user. Management indicated that they are comfortable with the economics of such a model."
Blodget's office denied it was tipped off by AOL.
Meanwhile, a source close to the situation confirmed the companies are engaged in "initial talks, but not about an acquisition."
The source, who requested anonymity, said the firms have "talked about an OEM marketing deal like AOL's done with a dozen other PC makers, where AOL software is loaded on the machine."
Staff Reporter David Shabelman contributed to this story
Friday's Midday Movers
was rocketing 63 7/8, or 187.8%, to 97 15/16 after
priced its 4.8 million-share IPO above-range at $34. On Wednesday, the Internet infrastructure firm raised the price range for the offering to $28 to $30 from $21 to $23.
Elsewhere in new issues,
was climbing 4 3/16, or 38.1%, to 15 1/4 after
BancBoston Robertson Stephens
priced its 3 million-share IPO top-range at $11. The company offers server software products used for high-volume e-commerce transactions.
Finally, not doing as well as its IPO peers,
was tumbling 1, or 11.1%, to 8 1/32 after
priced its 6 million-share offering low-range at $9. The company's Web site and toll-free phone number offer public-record information about individuals.
also was disappointing in its debut, down 3/8 to 13 5/8.
U.S. Bancorp Piper Jaffray
priced its 3.4 million-share IPO above-range at $14. The company is a network of Web sites, email newsletters and online discussion forums.
In other news:
American Electric Power
was down 2 9/16, or 6.2%, to 39 1/16 after its board approved a $574 million plan to restart the company's idle Cook Nuclear plant in Bridgman, Mich. The company shut down both units of the facility in September 1997 because of questions raised during a design inspection by the
Nuclear Regulatory Commission
was up 2 1/16, or 14.7%, to 16 1/8 after last night private investment firm
agreed to buy 95.6% of the company for $18.10 a share, or $643.8 million including assumed and refinanced debt.
was up 3 11/16, or 17.1%, to 25 1/4 on confirmation of yesterday's rumors that its planned merger with
is kaput. Parexel was down 4 7/8, or 28.8%, to 12 1/8.
was up 1 5/16 to 36 1/2 after
The Wall Street Journal
said the company seeks to get rid of at least $1 billion worth of assets as part of an overhaul aimed at restoring sagging profits and investor confidence.
A bout of on-the-news selling was striking
, lately down 1 13/16, or 16.9%, to 8 15/16. The stock climbed 14.7% yesterday on rumors of a merger with
. Last night, the companies confirmed a $1.3 billion deal, saying Tuboscope will exchange 0.65 of a share for each Newpark share. Tuboscope was off 3/8 to 13 7/8.
was up 1 3/4, or 5.3%, to 34 3/4 after
Inside Wall Street column quoted Bear Stearns analyst James Kissane saying that, in light of Pegasus' strong revenue growth and prospects for margin expansion, the company could grow much faster than the average computer-service company over the next several years.
-- still in a quiet period following the online brokerage and investment bank's June 4 initial offering -- was up 3 3/8, or 21.5%, to 18 27/32, reportedly on talk about upcoming IPO deals.
was up 3 7/16, or 10.5%, to 36 1/4 after last night saying it sees fourth-quarter earnings coming in around $1.20 to $1.25 a share thanks to record operating income in the cement and concrete business. The six-analyst
prediction called for earnings of 87 cents vs. the year-ago $1.60.