Didn't those big-cap tech stocks ever go to nursery school?
Apparently not, because no one taught them to share with the other kids. So while the
Dow Jones Industrial Average
lost 9.53 to 9096.21, the
edged up 0.86 to 1165.19, the small-cap
inched up 0.32 to 458.75 and market breadth was negative on both major exchanges, the tech-nitroglycerined
Nasdaq Composite Index
zoomed up 1.1% and the large-cap
blasted up 2.1%.
The Comp rose 22.49 to a record 1965.53, its fourth record in a row, and the NDX rose 29.47 to a record 1420.58. The moves came behind rollicking gains in the
Nasdaq Stock Market's
shot up 4 7/16 to an all-time high of 117 9/16, pushing its market capitalization to nearly $290 billion.
bounded 5 5/16, or 5.3%, to an all-time high of 106 3/16,
charged up 2 5/8 to 82 3/8 and
gained 1 5/16 to 94 1/4.
"I think people are coming around to believing that in terms of the S&P earnings growth, a lot of the names they've relied on may not be there, and technology companies can manufacture growth in a slow-growth environment where a lot of the industries in the S&P cannot," said Mike Molnar, head of Nasdaq trading at
Salomon Smith Barney
. "Does Microsoft need a big economic tailwind to make earnings? No. Same-same with Intel."
Molnar sees the big-cap tech upswing continuing "unless the earnings reports themselves sidetrack it, but I don't think that's going to be the case. Even the disappointments, like today with
, have not been met with huge selloffs, so I think technology is being seen in the best of possible lights." Applied Materials
Friday warned of a third-quarter shortfall. Today it dropped 15/16 to 28 9/16.
"Most of the nasty news is already out," said Grace Messner, head of equity management at
. "The preannouncements have been going on for a month and in many cases the preannouncements only come when you have bad news, so that is behind us."
What's not behind us is the inability of the market's internals to sustain a breakout from their downbeat, moderate-volume trend.
New York Stock Exchange
decliners outpaced advancers by 1,631 to 1,279 on 574.9 million shares, with 113 new highs barely ahead of 108 new lows. On the Nasdaq, 2,320 decliners beat 1,958 advancers on 782.3 million shares. New Nasdaq lows led new highs by 116 to 109.
Those internals will be the unsteady foundation on which a market advance will or won't be built, depending in part on how the second-quarter earnings look. "Year to year, I think you'd probably be talking about flat to up 5%," said Messner. The
forecast for the S&P 500 is 1.5%. "You're down in energy, you're down in a lot of the technology areas; you're still fine in financials and some of the retail areas."
But second-quarter earnings are just one element in the market's course-setting, and probably not even the most important one. Players are looking ahead to the third and fourth quarters, whose rosy projections play a large role in defenses of current valuations. "I'm inclined to think that we'll have sort of flattish earnings, which would actually be pretty disappointing," Messner said. "There's an expectation on the Street that we're having a slowdown now, but we're going to speed up and live happily ever after. I think the third quarter's going to be very pivotal. There's an expectation of some improvement showing up by September, and if it doesn't there'll be some disappointment -- quite a lot -- with the market in general."
Among other equity indices, the
Dow Jones Transportation Average
added 3.31 to 3561.27, the
Dow Jones Utility Average
lost 1.07 to 290.04 and the
American Stock Exchange Composite Index
ticked down 0.19 to 730.47.
The surprise defeat of most
Liberal Democratic Party
candidates in yesterday's upper-house election in Japan initially strengthened the dollar, but views shifted toward optimism about a new prime minister and boosted the yen. As the dollar fell, so did Treasuries: The benchmark 30-year dropped 29/32 to 106 7/32, raising the yield to 5.69%. The dollar came off its worst levels, losing 0.08 to 141.14 yen.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
fell 40.78 to 7348.93 and the
Mexican Stock Exchange IPC Index
ran up 58.50, or 1.3%, to 4625.37.
Monday's Company Report
Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified
Advanced Fibre Communications
hopped 4 1/16, or 20.3%, to 24 1/8 on volume of 11.6 million shares as investors shrugged off their chills from the company's profit warning on June 30. Shares of the telecom supplier lost more than half their value the following day, but have bounced a bit since. Advanced Fibre, which builds equipment for copper phone lines, now trades at 42 times trailing earnings.
Analyst Joe Noel at
Hambrecht & Quist
, who met with company executives late last week, reiterated his buy rating in a bullish research note Monday morning. Noel says that Advanced Fibre's founder Don Green is steering the company with an able hand after the sudden departure of CEO Carl Grivner. Advanced Fibre is competing more aggressively for business with Baby Bells, nursing its revenue in Asia and exploiting its base of existing customers, according to Noel. Hambrecht & Quist has underwritten stock offerings for Advanced Fibre.
Earnings reports and previews
Additional earnings news is compiled in a separate
tumbled 1 3/16, or 26.8%, to 3 1/4 after saying it expects to report a substantial second-quarter loss. First Call did not have estimates for the company. Gull also said it's in potential merger talks with an unnamed company for a deal that would Gull at $3 per share.
skidded 1 1/4, or 18.7%, to an all-time low of 5 7/16 after saying late
Friday that it sees a second-quarter loss because of shortfalls in both its distribution division and its primary business.
dropped 3 5/8, or 14.5%, to 21 9/16 after saying it doesn't expect fourth-quarter earnings to come in as high as third-quarter earnings because of anticipated changes in product mix, higher costs associated with new product instructions and the impact of its recently announced acquisition of
and its acquisition of
. The four-analyst estimate called for fourth-quarter earnings of 38 cents versus the year-ago 10 cents. The company said it expects to report third-quarter earnings between 37 cents and 39 cents per share, above the estimated 35 cents and the year-ago penny.
gave up 1 1/16, or 6.6%, to 15 1/16 after saying that because of a restructuring plan, it expects to report a third-quarter loss between 12 cents and 16 cents per share -- below the 11-analyst forecast for a profit of 5 cents and the year-ago profit of 28 cents. The plan calls for a $5 million to $7 million charge and a 15% workforce reduction.
As noted above, Applied Materials fell 15/16 to 28 9/16 after warning late
Friday that it expects third-quarter operating earnings to come in between 15 cents and 18 cents per share -- below the 22-analyst First Call forecast of 21 cents. Today,
Donaldson Lufkin & Jenrette
lowered its annual earnings estimate for the company to $1.20 from $1.48 per share and downgraded the stock to market perform from buy, calling the second half of 1998 a "dead issue" for Applied.
slashed its annual earnings view to $1.09 from $1.30 and its 1999 forecast to $1.90 from $2.25.
cut its 1998 prediction to $1.10 from $1.35 and its 1999 outlook to 80 cents from $1.75. The firm also cut the stock to long-term attractive from buy.
BT Alex. Brown
reiterated its market perform. The First Call consensus calls for annual earnings of $1.30 and 1999 earnings of $1.45.
Mergers and acquisitions
more than doubled, soaring 3 25/32 to 7, after the Internet advertising agency announced a marketing alliance with
. BroadVision added 7/8 to 24 7/8. Elsewhere in Netland,
continued its run on last week's positive sales report, taking in 4 11/16, or 21.9%, to 26 1/8.
First Virtual Holdings
shot up 1 7/8, or 40.5%, to 6 1/2 after saying it signed a nonbinding letter of intent to acquire
for six million First Virtual shares.
flourished 1 9/16, or 28.1%, to 7 7/8 after announcing an agreement to acquire
for $10.4 million. Harnischfeger added 1/4 to 29 1/4.
swelled 8 1/2, or 27.9%, to an all-time high of 39 1/4 after announcing a technical partnership with
, a data design software provider, to integrate products used to design data warehouses.
grew 2 13/16, or 10.1%, to 30 3/4 after saying late
Friday that it will split into two publicly traded companies: one comprising its
carrier business, the other its
advanced 7/16 to 10 1/16 after
agreed to acquire the company in a stock swap valued at $91 million. Medtronic lost 1 13/16 to 68.
raised its second-quarter earnings estimate on Intel to 70 cents per share from 62 cents a day before the chip maker is scheduled to report results. The firm also upped its target price to 95 from 85 per share. The 32-analyst First Call view calls for 68 cents compared with the year-ago 92 cents. As mentioned above, Intel rose 2 5/8 to 82 3/8.
Sun Healthcare Group
climbed 1 13/16, or 11.6%, to 17 1/2 after
raised it to long-term buy from accumulate.
Global Imaging Systems
popped up 1 3/8, or 10.2%, to 15 1/8 after
initiated coverage with a buy.
shaved off 1 7/16, or 8.9%, to an annual low of 14 13/16 after
Wheat First Union
cut it to hold from buy. Also, a shareholder suit seeking class-action status was filed against the company, alleging that it lied about its operations during the period between March 5 and July 9. On
Friday, the stock dropped on word of larger-than-expected loan loss.
surged 13/16, or 6.7%, to 13 after
started coverage with a buy.
swelled 8 15/16, or 35.1%, to 34 1/2 after saying Japan's
would invest $400 million in the company.
dropped 5 3/8, or 12.6%, to 37 3/8 after saying it received subpoenas from the
U.S. Attorney's Office
in Sacramento, Calif., requesting documents relating to the provision of home oxygen therapy to beneficiaries of certain federally funded health-care programs.
, which makes animated movies, shed 5, or 8.4%, to 54 1/4 after the weaker-than-expected opening of
, an animated film from
. Also, a
story today in
questioned Pixar's valuation, noting that the company will put out only three movies in the next four years and trades at almost 75 times expected fiscal 1999 earnings.
slipped 2 5/16 to 68 7/8 as its labor battle with the
United Auto Workers
intensified. After its top negotiator broke off face-to-face talks, the auto maker said it will step up pressure on the union to settle strikes at two parts plants that have stalled the company's North American operations. GM is expected to release second-quarter earnings tomorrow.
added 2 3/8 to 134 7/8 after the
Food and Drug Administration
approved the 80-milligram version of its anticholesterol drug
took in 3/16 to 7 3/4 after saying it retained Salomon Smith Barney to explore strategic options, including spinoffs, asset sales and a management buyback.