Traders Wonder About Greenspan Hangover Amid Selloff

It seems like investors have been on the sidelines longer than

Don Shula

. And a third straight session of broad consolidation doesn't seem to be dislodging many from their

Fed

watch posts today.

In very light trading, all the proxies were underwater at midday, led by the

Nasdaq Composite Index

, off 37 to 2722. The

S&P 500

was down 15 to 1333, while the

Dow Jones Industrial Average

was off 98 to 10,992. The Dow was struggling under the weight of loss-leading financials

Citigroup

(C)

,

American Express

(AXP)

and

J.P. Morgan

(JPM)

, down 5%, 2.9% and 2.7%, respectively.

TheStreet.com Internet Sector

index was 18 lower to 556, paced by

Amazon.com

(AMZN)

, off 6 11/16, or 5.2%, to 121 13/16. The small-cap

Russell 2000

was off 5 to 428.

Market players were searching for new reasons for the consolidation.

"I think we're just seeing some leftover selling after Greenspan's remarks on Friday, said Bruce Bittles, market strategist at

J.C. Bradford

in Nashville, Tenn. Bittles was referring to

Alan Greenspan's

speech Friday at the

Kansas City Fed

symposium in Jackson Hole, Wyo., in which the Fed chief said that stock prices are one factor among many that all central banks must consider when they frame monetary policy. "People aren't spooked to the point of being aggressive sellers," Bittles qualified. "But we're seeing some carryover selling."

"It seems to be unnerving people," concurred Rao Chalasani, chief investment strategist at

Everen Securities

in Chicago.

Others downplayed the Jackson Hole theory. "If people were spooked by it, you would have seen a bigger reaction Friday," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "Why is the Dow down 30 points? Who knows?"

Whatever its cause, this morning's selling was happening on extremely light volume, with 335 million shares trading on the

New York Stock Exchange

and 456 million shares changing hands on the

Nasdaq Stock Market

. The action should pick up a bit -- just a bit -- as the week's economic data unfold. Tuesday and Wednesday will bring the

Chicago Purchasing Managers' Index

and the

National Association of Purchasing Management

index, respectively. Friday's

employment report

caps off the week.

As important as the week's coming data are, their effect on the market may prove muted with so few players on Wall Street right now, according to Basel. "This week isn't going to be much," he said. "But the employment data on Friday is going to determine where we go next."

Bittles, who describes himself as "cautious on the market," thinks this week is more crucial than that. He sees the market rallying into Labor Day, provided the data come out friendly. "It's important that it does rally," he said. "If it didn't, that would be a reason to raise some more cash, which we're inclined to do. The market's technically on unsafe ground -- the monetary situation

relating to Greenspan's comments Friday is a second strike now."

Elaborating on that "unsafe ground" was Tim Hayes, senior equity strategist at

Ned Davis Research

. He noted that the S&P 500 was still in mired in the right shoulder of a

head-and-shoulders pattern -- a precarious position with significant downside potential: "The Dow already broke that

pattern to the upside, but we didn't get any follow through." Hayes is watching to see whether the S&P 500 can break through the 1380 area; if it fails, he said, neckline support stands all the way down at 1280.

Chalasani said he doesn't care much for technical analysis, and that the market "seems to be in good shape with respect to the economy and corporate earnings." But he did say that the market may be due for a consolidation after its most recent run-up.

Stocks were losing ground nearly across the board. Inveterate interest rate worries had financial stocks especially on the run at midday. The

Philadelphia Stock Exchange/KBW Bank Index

was down about 3.3%, and the American Stock Exchange Broker/Dealer Index was off 3.4%.

Oil stocks were holding up better than the broader market, while drug stocks were downright solid. The

American Stock Exchange Oil & Gas Index

was up 0.3%, while the American Stock Exchange Pharmaceutical Index was about 1% higher.

Breadth was lousy. Decliners were beating advancers 1,949 to 827 on the NYSE, where there were 21 new 52-week highs against 60 new lows. In Nasdaq action, decliners were beating advancers 2,217 to 1,323, with 63 new highs and 49 new lows.

Monday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified

.)

AT&T

(T)

was off 3/8 to 47 1/8 after it announced two new calling plans, AT&T One Rate 7 Cents and AT&T Family Plan. The first plan allows consumers to make interstate long-distance calls from home anytime for 7 cents a minute with a monthly fee of $4.95 if the company also handles their residential local calls. If not, the monthly fee is $5.95. AT&T Family Plan is a wireless plan. Earlier today, the company said it is on track to reach its 1999 financial goals but consumer long-distances revenues could fall 4% to 5% due to price competition. AT&T anticipates revenue growth of 5% to 7%, with business revenue up 6% to 7%.

Mergers, acquisitions and joint ventures

The

European Commission

has decided to open an in-depth investigation into

AlliedSignal's

(ALD)

acquisition of

Honeywell

(HON)

. The commission said its initial investigation "has shown that the merger may lead to the creation or strengthening of a dominant position in one or more markets for avionics products, but this has to be subject to further investigation." Shares of AlliedSignal were off 1 1/4 to 63, while Honeywell was falling 3 1/2 to 115 7/8.

Telephone carrier

McLeodUSA

(MCLD)

was up 2 3/4, or 8.7%, to 34 3/8 after it said

Forstmann Little

, a private investment concern, is investing $1 billion for a 12% stake in the company.

Phelps Dodge

(PD)

on Friday announced plans to launch a $2.5 billion hostile bid for

Cyprus Amax Minerals

(CYM)

and

Asarco

(AR)

. Cyprus and Asarco are planning their own merger. Shares of Phelps were up 1/16 to 56 11/16, while Asarco was down 3/8 to 22 5/16. Cyprus shares were off 1/16 to 17 1/2.

Earnings/revenue reports and previews

Oil and gas producer

Cross Timbers Oil

(XTO)

was up 1/2 to 12 1/4 after it announced that recent purchases could boost total cash flow for the third quarter to more than 80 cents a share and $1 a share for the fourth quarter. The company also said that it anticipates established reserves to add up to more than two trillion cubic feet of natural gas equivalent, with higher reserves helping to slate it among the 10 largest independent oil companies. Chairman and CEO Bob R. Simpson said the company expects equity to grow from asset sales gains, net income and a possible equity offering. Simpson said that the equity would not be offered to shareholders until its stock price was "substantially higher."

Progressive

(PGR)

was plummeting 17 1/2, or 14.8%, to 101 1/2 after late Friday warning of a third-quarter earnings shortfall. J.P. Morgan cut the stock's rating to long-term buy from buy, along with its 1999 estimate to $3.90 a share from $4.95 and its year 2000 estimate to $4.10 a share from $5.50.

Offerings and stock actions

Alternative electric service provider

Plug Power

has filed with the

Securities and Exchange Commission

to raise $117.3 million in an IPO.

Goldman Sachs

,

Hambrecht & Quist

,

Merrill Lynch

and

FAC/Equities

will serve as underwriters for the deal.

Analyst actions

Allstate

(ALL)

was down 1 15/16, or 5.4%, to 33 9/16 after Merrill Lynch lowered its rating to near-term neutral from buy.

Fairchild Semiconductor

undefined

was sliding 3/4 to 26 despite

Credit Suisse First Boston

starting coverage of its shares with an initial strong buy rating and a price target of $32.

Fair Isaac

undefined

was sinking 3 3/16, or 10.6%, to 26 11/16 after

U.S. Bancorp Piper Jaffray

lowered its rating to neutral, reducing both its 1999 and 2000 estimates along with its price target.

1-800-Flowers.com

(FLWS)

was off 5/8 to 20 despite Goldman Sachs rolling out coverage of the shares with a recommended rating.

Interactive Pictures

(IPIX)

was up 13/16 to 20 7/8 after

J.P. Morgan

analyst Susan Walker White rolled out coverage of the stock with a buy rating and a price target of 37.

Internet Capital Group

(ICGE)

was soaring 7 9/16, or 14.1%, to 61 1/4 after Merrill Lynch initiated coverage of its shares with a near-term accumulate rating, a long-term buy rating and a two-year price target of 125. Merrill was lead underwriter on the company's IPO.

Deutsche Banc Alex. Brown

also started coverage with a buy rating.

Quotesmith.com

(QUOT)

was down 1 1/2, or 12%, to 11 1/4 despite

PaineWebber

initiating coverage of the stock with a buy rating. PaineWebber was an underwriter on Quotesmith's IPO.

PepsiCo

(PEP)

was off 1 1/8 to 34 3/16 after

Donaldson Lufkin & Jenrette

cut its full-year 1999 earnings estimate to $1.20 a share from $1.22, and its 2000 estimate to $1.37 from $1.38.

Pinnacle West

(PNW)

was declining 1 to 38 7/8 after

Morgan Stanley Dean Witter

cut its rating to neutral from outperform.

Pivotal

(PVTL)

was slipping 1 3/8, or 7.7%, to 16 1/2 after Merrill Lynch initiated coverage of the stock with a near-term accumulate and a long-term buy rating. Merrill was the lead underwriter on Pivotal's IPO.

Scient

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was jumping 11 1/8, or 21.3%, to 63 1/2 after Morgan Stanley upped its rating on the stock to outperform from neutral.

Miscellany

Avado Brands

undefined

was up 1/2, or 7.8%, to 6 7/8 after it said it signed on financial advisor

BancBoston Robertson Stephens

to devise strategic alternatives to boost shareholder value. Avado operates restaurants including

Don Pablo's Mexican Kitchens

and

Canyon Cafe Restaurant Grills

.

Leaders of

Boeing's

(BA)

largest union urged rank and file members to accept a new three-year contract offer from Boeing. Members of the union will vote on the proposed contract Wednesday. Shares of Boeing were up 1 to 45.

TheStreet.com's

Holly Hegeman

recently wrote a

piece on the subject.

Centocor

(CNTO)

was up 7/16 to 59 15/16 after it said its duo drug treatment, which includes anti-platelet

ReoPro

and

Retavase

, returned blood flow in obstructed coronary arteries in heart attack patients more effectively than Retavase alone. According to the study, 61% of patients who received Repro and 60 units per kiliogram of heparin, reached optimal coronary artery blood flow within 60 to 90 minutes compared to 47% who were given Retavase alone. In July, Centocor said it would be bought by

Johnson & Johnson

in a $4.9 billion stock swap. The merger is expected to be completed in the fourth quarter.

G.D.Searle

announced that its "very celebrated" arthritis drug

Celebrex

will receive priority review by the

Food and Drug Administration

as a remedy for growths in the colon which could develop into cancer. Searle, which is a subsidiary of

Monsanto

(MTC)

and

Pfizer

(PFE)

, serves as co-marketer for the osteoarthritis and adult rheumatoid arthritis treatment. According to the companies, the FDA awarded the priority review status to Celebrex to stop colorectal adenomatous polyps in patients with familial adenomatus polyposis, or FAP. According to the companies, there are no current treatments for FAP approved by the FDA. Shares of Pfizer were up 5/8 to 39 1/4, while Monsanto was off 5/8 to 42 3/8.

Shorewood Packaging

undefined

was up slightly to 14 after it said it would close its Stanley, N.C., packaging plant by the end of November. The company expects the move to save $3 million.