Sun Shines on Wall Street as Triple-Witching Elicits Few Screams

Stocks put in a solidly positive session despite a news-induced bath at eBay.
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Well golly, Andy. The storm passed. Triple-witching came and went. And stocks ended another negatively biased week on a positive note.

Stocks took their cues from the bond market and the dollar, the latter gaining vs. the yen amid various reports of plans for joint intervention to stem the greenback's recent fall. The dollar was quoted up at 107.13 yen in late New York trading, up from 105.14 yesterday. The price of the 30-year Treasury bond rose 10/32 to 101 1/32, its yield declining to 6.05%.

Bond optimists were further encouraged by a story by John Berry of the

Washington Post

suggesting the

Federal Reserve

will not raise interest rates at its Oct. 5 meeting. Against that backdrop, stocks rose from the opening bell and sustained the momentum in a fairly even-keeled session, save for some late-day erosion by the most public face of equities.

The

Dow Jones Industrial Average

rose 66.17, or 0.6%, to 10,803.63 but slipped from its midafternoon high of 10,860.94. The Dow's biggest boost came from

American Express

(AXP) - Get Report

and

3M

(MMM) - Get Report

.

IBM

(IBM) - Get Report

was the average's biggest drag, falling 3.9% after

Merrill Lynch

cut revenue estimates. Also playing the part of anvil was

Hewlett-Packard

(HWP)

.

But Big Blue and HP weren't representative of big technology on this day. The majority of tech bellwethers were on the rise, helping send the

S&P 500

up 16.94, or 1.3%, to 1335.42 and the

Nasdaq Composite Index

up 62.91, or 2.2%, to 2869.63.

The S&P was also aided by strong cyclical stocks, notably energy plays such as

Exxon

(XON) - Get Report

. The

American Stock Exchange Oil & Gas Index

rose 0.9%.

Gains by bellwethers such

Sun Microsystems

(SUNW) - Get Report

fueled the Comp, while

Adobe Systems

(ADBE) - Get Report

rose 7.3% after

last night posting healthy earnings and setting a 2-for-1 stock split. The

Nasdaq 100

rose 2.8%.

Chip stocks were strong again; the

Philadelphia Stock Exchange Semiconductor Index

rose 2.4%.

Applied Materials

(AMAT) - Get Report

gave the SOX a big boost, rising 4.2%. Additionally,

Motorola

(MOT)

rose 2.1%.

Net stalwarts were mixed but with a positive bent;

TheStreet.com Internet Sector

index rose 12.71, or 2.1%, to 620.56.

Outside the DOT,

eBay

(EBAY) - Get Report

fell 7% on news that a group of companies including Microsoft,

Lycos

(LCOS)

and

Excite@Home

(ATHM) - Get Report

will form a competing online auction network.

The

Russell 2000

gained 4.20, or 1%, to 434.45 as market breadth recanted its recent negativity for one day, at least.

"I think the market acted really well all day," said Jim Volk, co-director of institutional trading at

D.A. Davidson

in Portland. "But it's more of a trading rally and futures- and options-related than anyone saying 10,700 was low enough, let's take 'em back to a new high. There's still enough uncertainty and people who don't believe in the valuations to keep some lid on this market."

Volk questioned how much impact the dollar's rise vs. the yen had on today's advance, noting the buck's still down considerably from its midsummer highs. "I'm not sure a small move in the yen caused the market to jump," he said, suggesting today's triple-witching session was more of a factor.

On that issue, another source noted most stocks close at or near their strike price on triple-witching. For example, the heaviest options activity in IBM today was in the September 125 puts and calls; IBM closed at 125 1/8. Similarly, the biggest action in

Motorola

(MOT)

options was its 90 calls; the stock closed at 89 1/2. This tendency, known as

pinning the strike, had far more influence than any fundamental news, he said.

Applied Materials

(AMAT) - Get Report

, whose most active option was the September 80 calls, was a notable exception, closing at an all-time high of 84 13/16.

In

New York Stock Exchange

trading today, 847.3 million shares were exchanged while advancers led declining stocks 1,687 to 1,216. In

Nasdaq Stock Market

action, 1 billion shares traded while gainers led decliners 2,241 to 1,572. Still, new 52-week lows bested new highs 141 to 38 on the Big Board, while new highs led 94 to 65 in over-the-counter trading.

Rethinking Yesterday

"I'm not wildly bullish, but yesterday's low was very important," said John Bollinger, president of

EquityTrader.com

in Manhattan Beach, Calif. "The reversal that everyone is pooh-poohing because of supposedly hurricane-reduced crowds is very important. They will live to regret ascribing yesterday's price action to Floyd."

Specifically, Bollinger noted that the S&P 500

yesterday traded as low as 1299.95, less than a point above its 200-day moving average. The 200-day moving average (1299 yesterday) is "psychologically important" and a "good base" and a "logical place" for buying to emerge, he said.

The technician noted similar action on

Aug. 10, when the S&P traded as low as 1267.73 -- just below its then 200-day moving average of 1271.69 -- before closing at 1281.43.

Aug. 10 was "not as dramatic as yesterday," which was a "classic picture" of a "big reversal day," Bollinger added. "More importantly, we had a brutal down day midsession and closed up. It's a classic reversal formation. And we're seeing a nice modest follow-through today, which is really all we can expect on triple-witching. There are too many other

things stirring the pot."

The S&P 500 could "retest" its all-time high of 1418.78 in the short term, he said, suggesting a complete change of heart from a recent

interview when Bollinger said (among other things) that "the list of reasons to be bullish is short, the least of reasons to be bearish increasing mounting."

Despite some recent improvement in put/call ratios, sentiment readings and other factors, the market watcher said his short-term optimism does not alter that view.

"I still agree with that assessment, I just think we're due for a rally attempt here," he said. "I fully intend to sell into that rally unless there is substantial proof that my assumptions are wrong."

Among other indices, the

Dow Jones Transportation Average

rose 12.91, or 0.4%, to 2999.79; the

Dow Jones Utility Average

gained 1.76, or 0.6%, to 310.78; and the

American Stock Exchange Composite Index

added 3.64, or 0.5%, to 794.44.

For the week, the Dow lost 2%, the S&P shed 1.2%, the Nasdaq slid 0.6%, the Russell lost 1.5%, the DOT dipped 1%, the Dow transports fell 2.9%, the Dow utilities fell 1.6% and the Amex Composite lost 1.4%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

rose 44.68, or 0.6%, to 7062.33 and the

Mexican Stock Exchange IPC Index

slid 18.56, or 0.4%, to 4951.68. For the week, the TSE 300 shed 1.4% and the IPC slid 0.6%.

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 site 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 fell 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 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 173.4%, 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 only a small change in revenue. Earlier today,

Morgan Stanley Dean Witter

raised its fiscal 200 estimate to $2.05 from $2.00.

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 announced plans to "pursue the sale or other dispositions" of its aviation and entertainment concerns and warned that it expects earnings for the third quarter to 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 165, to 6 5/8 after it said that it expects to report a loss and miss the four-analyst third-quarter 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 low 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

climbed 1 to 43 1/8 after

HSBC

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

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

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

hopped 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 estimates to 31 cents 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

said it has tapped Richard Ward to serve as its CEO.

In a nine-to-two vote, a

FDA

advisory committee said that they questioned the effectiveness of

Liposome's

(LIPO)

breast cancer treatment and 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 issue a 61.85% anti-dumping tax on Micron for selling 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..

Staff reporter Erin Arvedlund contributed to this report.