So it really was that simple. For the past few days, more than a few traders and market watchers said there was "pent-up" demand and used terms like "explosive" and "nuclear" to describe the move stocks would enjoy if, and only if, today's
Consumer Price Index
report were benign.
The CPI report was all that and more, with both the core and overall coming in below expectations. In reaction, stock proxies rumbled higher, notably the
Nasdaq Composite Index
, which established its biggest point gain in history and ninth-largest percentage move. Moreover, volume posted its best showing since the last week of May, proving
theory: "You can't always get what you want, but if you try sometimes, you just might find, you get what you need." The less tuneful adage "It
doesn't pay to bet against this market" could also be heard.
With inflation fears subdued (but not eradicated), growth stocks, led by technology's bellwethers, and financials enjoyed robust gains.
The former helped the Nasdaq Comp soar 103.16, or 4.3%, to 2517.83, eclipsing its 96.05-point rise
Feb. 11. Separately,
TheStreet.com Internet Sector
index took back the bulk of
Monday's thrashing, rising 44.56, or 8.8%, to 548.64.
Traditional bellwethers such as
rallied sharply to send the
up 5.3%. Meanwhile,
roared ahead 31.5% after posting better-than-expected profits
Beyond Intel, chip stocks overall kept up their extraordinary outperformance, with the
Philadelphia Stock Exchange Semiconductor Index
surging 12.37, or 2.7%, to a record 463.48. That's the second consecutive all-time high for the index.
New York Stock Exchange
trading, bellwethers such as
each posted sharp gains as well. The
Morgan Stanley High-Tech 35
With IBM and
, as well as financials
leading the way, the
Dow Jones Industrial Average
rose as high as 10,800.47 before closing up 189.96, or 1.8%, to 10,784.95.
Financials and big-cap tech gainers also fueled the
, which rose 29.25, or 2.3%, to 1330.41. The
Philadelphia Stock Exchange/KBW Bank Index
rose 3% while the
American Stock Exchange Broker/Dealer Index
gained 7.19, or 1.7%, to 441.20.
"It wasn't nuclear, but it was darned close," said Sam Ginzburg, managing director of equity trading at
Monday afternoon predicted a big move if the CPI were tame. "This is terrific. Finally a day where people were dipping in and out, saying a lot of different industries are cheap. The way banks were acting
yesterday into the close had to be a tell-tale sign this was going to be OK."
The trader expressed some disappointment volume wasn't even more robust but said "it was a lot more fun than yesterday and the day before that."
In NYSE trading, 806.9 million shares were traded -- the first plus-800 million share day since May 27 -- while advancers bested declining stocks 1,994 to 1,040. In
Nasdaq Stock Market
activity, 1.03 billion shares were exchanged -- the first billion-share session since May 26 -- while gainers led 2,390 to 1,563. New 52-week highs bested new lows 85 to 78 in Big Board activity and by 88 to 60 in over-the-counter trading.
Assuming a positive bias to Friday's triple-witching and nothing disturbing from
testimony tomorrow before
, Ginzburg expects another rally tomorrow.
"You can tell they want to explode them," he said. "There's still that fear of inflation but
after the CPI what else are people missing? How many more good things before people say 'I am going to buy these stocks and create positions'?"
Elsewhere at Gruntal, technical analyst Peter Green suggested in a report Monday that a close above 2514 by the Nasdaq "on heavy volume" would cause the index to "break above" its bullish "flag."
Reports of Inflation's Demise Exaggerated?
Underlying the stock market's advance was a solid advance by bonds, although some selling emerged after the Federal Reserve's
came in strong and "with increased reports of upward pressure on wages in many parts of the country," according to its
The price of the 30-year Treasury bond rose 20/32 to 88 26/32, its yield dipping to 6.07%.
Despite the hoopla about the CPI, some players weren't convinced inflation's threat has dissipated.
"Anyone that's going to wrap their legs around the CPI numbers and thinks they're teasing the Fed into no action is wrong," said Ronny Kraft, CEO of
Gotham Capital Management
. "Why is the major response to CPI coming in the equity market, which is not supposed to be primary response to economic numbers? If the CPI number is so great then why is the bond
yield still over 6%? Bond traders are generally right, except Jim J. Cramer."
The CPI "doesn't change anything," Kraft said, suggesting "a lot of" today's move was options related. "Keep in mind stocks are bouncing out of oversold conditions. There was a significant amount of put buying," he said. "CPI was the excuse, but if not CPI then Oracle. They would have rallied it anyway."
Another trader agreed: "A lot of people were short S&P stocks and the puts were pretty much worthless," he said. "So they're going in and doing some buying. I'm seeing some good
S&P 100 buying."
The trader, who requested anonymity, said it's still "touch and go" in the bond market ahead of Greenspan's testimony, although he thinks "bonds should be bought."
Kraft, meanwhile, said Greenspan's testimony is "not the kind of innocuous speech he made on Monday. He's going to talk about the economy. He's going to be asked about the CPI."
The hedge fund manager, who's been bracing for the onset of inflation in recent months, admitted being "a little surprised" by the economic report today. But he claimed he was "not short" heading into the session, suggesting it was folly to "take action in front of a CPI number."
Those who gambled and went long yesterday might argue otherwise.
Among other indices, the
Dow Jones Transportation Average
rose 59.76, or 1.8%, to 3411.28; the
Dow Jones Utility Average
gained 1.35, or 0.4%, to a record 333.45; and the
American Stock Exchange Composite Index
climbed 1, or 0.1%, to 764.92.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
gained 59.49, or 0.9%, to 6925.31 and the
Mexican Stock Exchange IPC Index
soared 328.60, or 6.2%, to 5628.53.
Long-Term Strikes Back
In reaction to allegations made by the
Gold Antitrust Action Committee (GATA) , Eric Rosenfeld, a principal of
Long-Term Capital Management
filed an affidavit in Connecticut court today denying the hedge fund was involved in any manipulation of the gold market.
"None of Long-Term Capital Management,
Long-Term Capital Portfolio
nor their affiliates has ever entered into any transaction involving the purchase or sale of gold, including without limitation spot, forwards, options, futures, loans, borrowings, repurchases, coin or bullion, long or short, physical or derivative or in any other form whatsoever," the affidavit states.
The ill-fated hedge fund did trade in six gold mining stocks involved in mergers as part of its arbitrage strategy, but "such equity positions never exceed $25 million in value on a gross basis long and short at any one time, and actual net positions were significantly less," the statement says.
Neither Bill Murphy, chairman of GATA, nor attorneys at
Berger & Montague
, the firm hired by GATA to investigate alleged manipulation of the gold market, could be reached for comment.
Wednesday's Company Report
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 mentioned above, Oracle blossomed up 7 7/8, or 31.5%, to 32 15/16 after last night reporting fourth-quarter earnings of 36 cents a share, topping the 30-analyst prediction of 32 cents and moving ahead of the year-ago 27 cents. The healthy report caused an avalanche of analyst upgrades.
Credit Suisse First Boston
raised Oracle from buy to strong buy and hiked the stock's 12-month price target to 34 from 32.
Warburg Dillon Read
lifted the stock to buy from hold, upping its price target to 39 from 33.
pushed up the stock to near-term buy from accumulate, while maintaining a long-term buy.
upgraded the stock to strong buy from neutral.
upped the stock to accumulate from neutral.
added the stock to its recommended list, lifting it from market outperform.
Hambrecht & Quist
granted the stock a buy rating, up from market perform.
Deutsche Banc Alex. Brown
raised its 1999 earnings estimate for the company to 92 cents from 86 cents.
Mergers, acquisitions and joint ventures
shot up 6 3/16, or 28.1%, to an annual high of 28 3/16 after
said it would buy the company for $115 million, or $30 a share, in cash. Tyco added 2 3/8 to 91 5/16.
-- the consumer services company, not today's economic hero -- rocketed 6 13/16, or 24.5%, to an all-time high of 34 5/8 after agreeing to be bought for $37 a share in cash to entities controlled by an affiliate of its management and privately held
American Securities Capital Partners
New Era of Networks
tumbled 4 1/4, or 9.9%, to 38 7/8 after it agreed to buy tiny
, a maker of application integration software, for $34 million cash and stock.
climbed 5 7/8, or 23%, to an all-time high of 31 3/8 after
sweetened its offer to buy the company to $37.50 a share after Oneida rejected its original bid of $30 a share. Libbey slipped 3/4 to 32 15/16.
scored 4 1/8, or 11.7%, to 39 1/4 after receiving a $45 million equity infusion from Amazon.com, with which the 255-year-old company will set up a joint online auction service. Amazon grew 15 5/16, or 15.9%, to 111 11/16.
swelled 6 11/16, or 29.8%, to an all-time high of 29 1/4 after
Pharmacia & Upjohn
said it will buy the biotechnology company for about $728 million in Pharmacia stock, or about $31 a share. Pharmacia gave up 1/8 to 54 9/16.
Earnings/revenue reports and previews
jumped 8 3/8, or 10.2%, to an all-time high of 90 3/8 after saying it was pulling out of the unprofitable
Digital Video Express
partnership marketing the Divx home-video system, a business that helped the company post a first-quarter loss of 89 cents a share. Excluding the discontinued
operations, Circuit City reported first-quarter earnings of 41 cents a share, easily surpassing the 15-analyst estimate of 25 cents and moving up from the year-ago 21 cents. Circuit City, which also announced a 2-for-1 stock spit, was raised to strong buy from buy by Credit Suisse First Boston.
unit posted first-quarter earnings of 3 cents a share, in line with the four-analyst estimate and above the year-ago loss of 3 cents. The stock lowered 1/8 to 6 1/16.
vaulted 13 13/16, or 33.3%, to an all-time high of 55 1/4 on news the Cincinnati-based
Fifth Third Bancorp
is buying the Indiana bank in a $2.1 billion stock transaction. Fifth Third Bancorp fell 2 3/4 to 64 27/32.
rose 15/16 to 27 1/4 after reporting third-quarter earnings of 76 cents a share, topping both the four-analyst view of 60 cents and the year-ago 75 cents.
slid 1/16 to 23 1/16 after posting second-quarter earnings of 61 cents a share, beating the four-analyst estimate by 2 cents and the year-ago figure by a dime.
Railroad products maker
sank 4 3/16, or 20.9%, to an annual low of 16 after warning its second-quarter earnings would come in around 10 cents a share, well below the 37-cent three-analyst view and down from last year's 43 cents.
picked up 5/16 to 7 3/16 after reporting third-quarter earnings of 24 cents a share, in line with the four-analyst view but below the year-ago 35 cents.
slipped 1 1/2 to 47 1/2 after the circuit board maker last night said its fourth-quarter earnings would be hurt by design delays on new products.
covered the news in last night's
added 5/16 to 30 1/4 after announcing second-quarter earnings of 28 cents a share, 3 cents higher than the 10-analyst forecast and above the year-ago 22 cents.
skidded 2 11/16, or 9.7%, to 25 1/8 even after reporting second-quarter earnings of 40 cents a share, 2 cents ahead of the five-analyst prediction and higher than the year-ago 24 cents.
tacked on 1/16 to 17 13/16 after recording fourth-quarter earnings of 53 cents a share, matching the seven-analyst estimate and moving above the year-ago 46 cents.
expanded 3/8 to 24 1/2 after reporting third-quarter earnings of 37 cents a share, besting the four-analyst outlook for 35 cents but falling below the year-ago 63 cents.
Dell flew 1 3/16 to 35 13/16 even after
CIBC World Markets
lowered its 2001 earnings estimate to 95 cents a share from $1, saying the box maker faces growing pressure to sell lower-priced PCs.
deflated 4 1/8, or 15.7%, to 22 1/4 after Deutsche Banc Alex. Brown slashed it to market perform from buy. Yesterday, Credit Suisse First Boston started coverage of the company with a hold.
surged 1 3/8 to 29 1/2 after
Donaldson Lufkin & Jenrette
initiated coverage with a market perform.
declined 2 7/8, or 5.8%, to 47 1/8 after Merrill Lynch cut the stock to near-term neutral from accumulate while maintaining its long-term accumulate.
lost 4 1/4, or 11%, to 34 3/8 on rumors an unnamed analyst may slice revenue expectations for the company's second quarter and that the company's expenses were rising due to a high rate of turnover at its branch offices.