(

Updated from 2:49 p.m.

)

With slim action and little interest keeping major indices close to unchanged throughout the session, the market's eyes stayed fixed on

Emulex

(EMLX)

, the victim of a hoax that cost the stock 57% of its value before it was halted at 65. Trading later resumed on the stock, and it recovered most of the value lost. (

TheStreet.com

covered the Emulex downs and ups in a separate

story.)

A phony press release that said the company was going to restate earnings and was facing a probe by the

Securities and Exchange Commission

roiled the stock from the open, but volume and selling pressure picked up after 10 a.m. Before the halt, 3.7 million shares had traded.

Whoever planned the hoax took advantage of the fact that the company is based in California -- as company officials weren't immediately available to rebut the claims. Trading on the stock was halted at 10:28 a.m. EDT, according to wire reports, but the damage was already done. The stock reopened at 1:30 p.m. and ended down 7 5/16, or 6.5%, to 105 3/4.

Individual stocks trade on rumors all the time, but this rumor, probably because of the extent to which it was planned, bamboozled many more than the typical fly-by-night chatter about some stock that's going to miss estimates.

"Obviously, it's scary when a rumor can get floated like that very effectively," said Tony Cecin, manager of Nasdaq trading at

U.S. Bancorp Piper Jaffray

. "The reality is, the market trades on rumors 24/7, and structurally, you're not going to be able to get rid of that."

The stock gained 30% in value in its last five sessions before investors were run amuck today. "The stock had a tremendous run-up about a month ago that really propelled it," said Charles Payne, president of independent research firm

Wall Street Strategies

. "The momentum guys were back -- even yesterday, it was up 15 points."

Bad Trade?
Emulex plunges on hoax press release, then bounces back

Source: BigCharts

The release also hurt

QLogic

(QLGC)

, which was spun off from Emulex in 1992. Yesterday, QLogic stock fell from 109 11/16 to 74 before rebounding to 104 5/8.

Brocade

(BRCD)

, a switch-maker, as is Emulex, dropped to 206 from 218 5/16 in sympathy, but also recovered, ending down 5 13/16, or 5.3%, to 103 7/8.

The action shook up a sparsely traded, quiet market. Now that the stock has reopened, and the stock has resumed trading, overall trading is subdued again. After a quiet, slow grind past 11,000 on the

Dow Jones Industrial Average and up to 4000 on the

Nasdaq Composite Index, the market was nearly unchanged today.

The Dow gained 9.89 to 11,192.63, while the Nasdaq slipped 10.60 to 4042.68. The Comp is just 26.63 short of breaking even for the year, having enjoyed a solid couple of weeks.

The

S&P 500 inched down 1.85 to 1506.46. The small-cap

Russell 2000 improved 1.81 to 525.11.

TheStreet.com Internet Sector

index, the

DOT, edged up 1.40 to 803.61.

Save for the scary ride in Emulex, it was a typical summer Friday. Tepid volume and scarce market news had traders counting the hours until the closing bell.

"The market is leveling off at the high end of the trading range," said Jon Olesky, head of block trading at

Morgan Stanley Dean Witter

.

Most of the news was stock-specific, such as

Coke

(KO) - Get Report

moving lower after comments from

Salomon Smith Barney

. The firm cut Coke's second-half volume growth view to 4.5% from previous estimates of 5% to 5.5%, and its fiscal 2001 view to 5% from 5.5%.

Coke, down 1 15/16 to 56, shaved 11.35 points off the Dow.

Elsewhere, the biggest percentage gainer on the Nasdaq was

Calypte Biomedical

(CALY)

, soaring 2 7/8, or 191.6%, to 4 3/8 on news that its urine test for HIV was approved for use in China.

Data No Big Surprise; SOX Declines

This morning, preliminary second-quarter

gross domestic product

(

definition |

chart |

source

) data were in line with expectations at 5.3%.

July

existing home sales

(

definition |

chart |

source

) came in at 4.79 million, below the expected 5.12 million.

Existing home sales statistics show the selling rate of pre-owned houses, while GDP data measures the pace of growth in the overall economy.

The Nasdaq yesterday closed above that psychologically important 4000 level, the first time it had finished above that mark since July 25. Strength in semiconductors helped fuel the upticks yesterday. Today, however, the

Philadelphia Stock Exchange Semiconductor Index

, known as the SOX, fell 1.7%.

It was the big cyclical names such as auto giant

General Motors

(GM) - Get Report

that led the blue-chip average higher yesterday. In lower-interest-rate environments, the cyclicals -- which have businesses related to the economic cycle -- tend to give stronger performance. This is because consumers are able to borrow at a lower rate to purchase their products. With an August

federal funds rate hike no longer a worry, these issues are being bought again. GM dropped 1 7/16, or 2%, to 71 7/16.

Auto-parts supply makers were seeing some profit-taking, after

Merrill Lynch

cut quarterly and fiscal 2000 earnings per share estimates for

ArvinMeritor

(ARM)

and

Dana

(DCN)

, citing weakness in the euro and Ford production cuts stemming from the

Firestone

recall. The firm also downgraded

Visteon's

(VC) - Get Report

third-quarter and year estimates.

Bank of America

(BAC) - Get Report

was losing fractionally this morning after announcing the redesign of 22 Atlanta branches in order to integrate more investment services, marking the start of a major renovation of all its 4,500 offices. The project also includes building 20 new branches.

The financials continued to lose after recent surges on the view that interest rates have stabilized and on the fact that there are more active IPO calendars. Lately, the

American Stock Exchange Broker/Dealer Index

, which had lifted 10.6% since July 28, slid 0.8%, while the

Philadelphia Stock Exchange/KBW Bank Index

, which had shot up 11.3%, shed 1%.

Razorfish, Sycamore Tumble

Razorfish

(RAZF)

was bleeding after

Deutsche Banc Alex. Brown

downgraded its shares to buy from strong buy. The Web consulting firm's president Mike Pehl resigned from his post yesterday. Razorfish tumbled 7/8, or 6% to 13 11/16, but that was well off its intraday all-time low of 11.

In the market's give and take,

Sycamore Networks

(SCMR)

has been taking a bit more than its share -- at least, that's what investors were saying this morning. Wall Street's cheerleading for the optical networking gear-maker was not fully rewarded by the company's fiscal fourth-quarter earnings, causing shares to fall 7 3/16, or 4.6%, to 150 13/16.

Despite Sycamore's announcement yesterday that it beat consensus profit estimates by 2 cents per share, last night's earnings conference call didn't assure investors that their bullishness would pay off. Doubts lingered about the company's future sales. And as

TheStreet.com

reported last night after the earnings call, deferred revenues actually slipped, giving the impression that the pipeline of new sales was not as full as expected.

Sycamore also didn't say if its largest customer,

Williams Communications

(WCG) - Get Report

, had in fact chosen rival

Ciena's

(CIEN) - Get Report

optical-switching products over its own, as

TheStreet.com

reported recently.

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Market Internals

Breadth was mixed on last-one-out-turn-off-the-lights volume.

New York Stock Exchange: 1,420 advancers, 1,330 decliners, 676.8 million shares. 69 new 52-week highs, 30 new lows.

Nasdaq Stock Market: 2,136 advancers, 1,756 decliners, 1.26 billion shares. 88 new highs, 54 new lows.

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Most Active Stocks

NYSE Most Actives

  • Lucent (LU) : 14.1 million shares.
  • America Online (AOL) : 8.4 million shares.
  • AT&T (T) - Get Report: 8 million shares.

Nasdaq Most Actives

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Sector Watch

Oil stocks were on the upside today, with the

American Stock Exchange Oil & Gas Index

climbing 0.6%. Despite higher crude prices, the group had slipped yesterday after facing downgrades from several brokerage firms that felt the stocks had struck their target highs.

Meanwhile, the

Philadelphia Stock Exchange Oil Service Index

slipped 0.1%, with losses from

Smith International

(SII)

and

Schlumberger

(SLB) - Get Report

.

The aerospace sector was still on course with investors, after marking up big gains yesterday.

Boeing

(BA) - Get Report

, which hit a new intraday trading high of 54 5/16 in the first minutes of trading, advanced 1.2%, while

Northrop Grumman

(NOC) - Get Report

, headed up 2.5%.

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Bonds/Economy

Treasury securities were virtually unchanged, rebounding after earlier giving back some of the gains that had pushed the benchmark 10-year note's yield to its lowest in more than a year. Strategists thought the market was a bit expensive after watching the market's strong rally this week. Volume was light, as much of the market was headed out on its wheels instead of trading during this seasonally quiet period.

Second-quarter GDP was revised slightly upward, to 5.3% from 5.2%, in line with expectations as reported by

Reuters

. The implicit price deflator, this report's inflation indicator, was revised to 2.6% from 2.5%.

The 10-year note was unchanged at 100 7/32, with a yield of 5.720%.

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International

European

markets gave back some gains at the close. The

CAC 40

in Paris ended up 133.18, or 2%, to 6595.11, the German

Xetra Dax

gained 88.53, or 1.2%, to 7318 and the

FTSE

in London ended up 6.7, or 0.1%, to 6563.70.

The euro was lately trading at 0.9030.

In

Asian markets, high hopes for chip-makers' fiscal first-half profits had investors buying these stocks, pushing key indices higher today.

The key

Nikkei 225

index climbed 240.51, or 1.4%, to close at 16,911.33. Most experts expect that fiscal first-half profits for key tech firms, released starting in October, will show robust growth. With fund managers also back in the game, the Nikkei 225 index is expected to hover around key psychological resistance of 17,000 for the coming week.

Sony

(SNE) - Get Report

gained 300, or 2.8%, to 11,100, while

Softbank

jumped 1990, or 16.6%, to 13,990.

The dollar recently fetched 106.98 yen.

Hong Kong's

Hang Seng

index fell 202.96, or 1.2%, to close at 17,236.74. Traders attributed the drop to investors adjusting positions ahead of Wednesday's expirations of Hang Seng August futures, traders said.

Hutchison Whampoa

, which released first-half earnings after the market closed Thursday, fell HK$1.50, or 1.4%, to 109.00 ($13.97). Although the conglomerate scored with a 326% jump in first-half profits, investors were a bit irked when chairman Li Ka-shing failed to state the firm's European wireless strategy.

Elsewhere in Asia, Korea's

Kospi

index rose 10.94, or 1.5%, to close at 729.80.

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