Strong Advance Belies Intraweek Weakness

Author:
Publish date:

A friendly spin on the May

employment report

and a momentary slackening in earnings worries has sent the major indices rocketing, but a couple of them are struggling to get past unchanged on the week.

Today's rally certainly looks impressive in isolation. Around 12:45 p.m. EDT the

Dow Jones Industrial Average

was up 107 to 8977, the broad

S&P 500

was up 12 to 1107, the tech-smoked

Nasdaq Composite Index

was up 10 to 1780 and the small-cap

Russell 2000

was up 2 to 453. The bond market was providing support, with the bellwether 30-year Treasury up 19/32 to 104 29/32, its yield easing to 5.78%. (See today's midday

Key Numbers for more on the fixed-income side.)

But the market's intraweek weakness (which is kind of fun to say -- try it!) means the move isn't so broadly stellar as it seems. The Dow finished last week at 8899.95, so it's up a healthy 77 since, and the S&P is up 17 from last week's close of 1090.82. But the Nasdaq Comp is up just 1 from 1778.87, and the hobbling Russell is down more than 3 from 456.62.

Plus, the market's internals are again failing to signal a major break from the recent pattern of sluggish volume and narrow breadth.

New York Stock Exchange

advancers were ahead of decliners by 1,718 to 998 on 305 million shares, an improvement from earlier levels but not an overwhelming one. "You have a market up 70 points, you want to have 2-to-1 at least," said Roy Blumberg, chief market strategist at

Josephthal

, earlier in the morning.

Nasdaq Stock Market

breadth was narrower, with 1,981 ups leading 1,731 downs on 367 million shares.

The day's big pieces of news aren't having the effect one might have expected.

Motorola

(MOT)

late

yesterday announced yet another profit shortfall and another restructuring plan, but it was up 1/2 to 52 at midday and was exerting no downward pressure on the overall tech sector.

There's no reason why it should, Blumberg said. "Motorola has been having troubles for a while," he said. "I'm not sure that what is going on in Motorola is a good reflection of what's going on in Asia. I'm not sure you can do an if-then statement. Asia could be booming and Motorola could still do poorly."

The other supposedly earth-shattering element today was meant to be the May jobs report. The report showed a larger-than-expected number of new jobs, 296,000 versus the expected 221,000, and the unemployment rate remained at a 28-year low of 4.3%. But the

Labor Department's

benchmark revisions (explained in a

TSC

market feature yesterday) muted the impact of the big jobs gains, and traders also took heart from a relatively modest increase in average hourly earnings.

"Money is very, very hot," Blumberg said. "There's always fear going into the employment data, and the numbers just weren't too, too bad."

Still, the reasons for worry that have wracked Wall Streeters in recent days haven't gone away, Blumberg said. "I think the prospects for second-quarter earnings are going to be for disappointments," he said. "Now the question is, does it translate to anything, or does the hot money not care? The hot money hasn't cared for a long time; it's only cared about liquidity. If it didn't only care about liquidity, it would be snapping up some of these high-quality small stocks."

And speaking of small stocks, their laggardly behavior also figures high on Blumberg's list of concerns. "The generals go, but the soldiers don't go with them," he said. "The big stocks have been swinging back and forth wildly, and what that's really been disguising is a correction under the surface. The big stocks are two steps forward, two steps back, and the small stocks are one step forward, four steps back."

Friday's Midday Movers

By

Amy Olmstead
Staff Reporter

Struggling Motorola's announcement that it would miss earnings expectations for the second quarter, take a hefty charge and implement a major restructuring plan lifted other chip makers slightly, including

Texas Instruments

(TXN) - Get Report

, up 1 3/16 to 52 1/16,

National Semiconductor

(NSM)

, up 3/8 to 16 1/8, and

Micron Technology

(MU) - Get Report

, up 3/8 to 24 1/8.

Intel

(INTC) - Get Report

was up 1 5/16 to 69 1/2 after

The Wall Street Journal

reported that the that the Federal Trade Commission could vote as early as Monday to go ahead with a narrow antitrust complaint against the chip maker.

Novell

(NOVL)

rose 1/2 to 11 1/16 on the announcement that its board approved a buyback of up to 10% of its common stock.

Warner-Lambert

(WLA)

was down 1 1/8 to 62 7/8 after announcing that the

National Institutes of Health

had dropped its drug

Rezulin

from an ongoing, major diabetic prevention study, for safety reasons. The drug was being tested to prevent or delay type 2 diabetes in patients with impaired glucose tolerance, a possible precursor to the disease. The decision was taken after a person in the study suffered liver failure and died. Warner-Lambert says the decision does not affect the drug's results when taken for treatment of type 2 diabetes.

Merck

(MRK) - Get Report

was up 3 5/16 to 119 after announcing it was in talks to restructure its U.S. joint venture with Swedish pharmaceutical company

Astra

(A) - Get Report

rose 3 3/8 to 112 15/16 after Morgan Stanley raised its rating to strong buy from outperform. Separately,

Excite

(XCIT)

was up 2 1/16 to 58 1/16 after announcing Thursday it signed a deal to use content from Disney on its web site.

Qwest Communications

(QWST)

was up 3/8 to 31 15/16 after it announced it would continue to offer long distance service to customers in

U S West Communications Group's

(USW)

14-state territory, despite a

preliminary injunction issued by a federal court Thursday against the marketing alliance. U S West was off 3/16 to 50 5/8.

Gap

(GPS) - Get Report

was up 2 1/2 to 58 3/4 after announcing Thursday that its same-store sales for May rose 24% to $609 million from $413 million.

Tandy

(TAN) - Get Report

was down 5/8 to 43 5/16 after announcing Thursday that sales at

Radio Shack

stores open more than a year rose 4%, slightly below expectations, and that

Computer City

same-store sales fell 2%.

Browning-Ferris Industries

(BFI)

was up 1 7/8 to 36 1/8 after

The Wall Street Journal

reported that

Allied Waste Industries

(AWIN)

approached it about a merger. Allied was down 1/8 to 26 5/8.

Telco Systems

(TELC)

was up, way up, 4 7/16 to 14 1/8 after announcing Thursday that it would be acquired in a $187 million stock deal by

World Access

(WAXS)

, which was down 2 to 27 1/2.

Insurer

Allied Group

(GRP)

was off 3/16 to 46 3/8, despite its agreement to be acquired by

Nationwide Mutual Insurance

for a sweetened offer of $48.25 a share, or about $1.49 billion.

MCI Communications

(MCIC)

was down 1 9/16 to 50 3/4 and

WorldCom

(WCOM)

was off 1/2 to 44 5/8 after the

European Union

said MCI's plan to sell its Internet backbone might not be enough to quell its concerns about their merger.

JDA Software

(JDAS)

was down 4 3/8 to 41 after announcing it would buy

Comshare's

(CSRE)

Arthur Retail

unit for $44 million in cash, taking a $39 million charge in the second quarter. Comshare was up 3/16 to 9.

Earnings movers

Tommy Hilfiger

(TOM)

was down 1 15/16 to 34 3/8 after reporting fourth-quarter earnings of 73 cents per share, 5 cents ahead of consensus estimates.

Witco

(WIT) - Get Report

was down 1 7/8 to 34 3/8 after announcing Thursday that its second-quarter earnings would fall below consensus views. Today, Schroder cut its rating to perform in line from outperform and cut 1998 earnings estimates to $1.35 per share from $1.65 and 1999 earnings estimates to $2.15 from $2.35.

DII Group

(DIIG)

was down 2 5/8 to 15 3/16 after announcing it expects to fall below consensus estimates for the second and third quarters.

As originally posted, this story contained an error. Please see

Corrections and Clarifications.