Hold the confetti. The much anticipated record close for the
Dow Jones Industrial Average
never materialized. In fact, the well-heeled index never came close to making history as all major proxies sputtered and a late-day rally attempt failed almost as soon as it was born.
For the second consecutive session, technology stocks were mixed and big Internet names suffered some recrimination for their recent excesses. But unlike yesterday, when drug makers and retailers soared, no other groups -- save the transports -- rose to fill the breach created by the sliding techs. Both the
Nasdaq Composite Index
retreated from their respective record highs.
Dow Jones Transportation Average
was the standout in an otherwise dour session. The transports closed up 63.45, or 2.1%, to 3129.84 behind a big move by smaller airlines such as
Alaska Air Group
. Bigger carriers also participated, leaving the
American Stock Exchange Airline Index
Also outperforming blue-chip gauges was the
, which closed up 1.50, or 0.4%, to 411.91.
The Dow industrials spent most of the session in modestly negative territory, falling as low as 9268.46. After poking above break-even with less than an hour left in trading, the index reversed again to finish down 46.34, or 0.5%, to 9274.64, snapping an eight-session win streak.
The S&P 500 surrendered 9.88, or 0.8%, to 1231.93 after rising as high as 1244.93. The Nasdaq Composite shed 14.82, or 0.7%, to 2166.95 after climbing as high as 2196.64 and falling as low as 2160.93.
Weakness in traditional tech bellwethers such as
weighed on both the Nasdaq and S&P 500 but losses for Internet names were far more dramatic (just as the gains had been).
TheStreet.com Internet Sector
index fell 29.72, or 6.8%, to 405.97 following heavy losses for net leaders
, down 4.9%,
, off 9.4%, and
, which fell 8.3%.
The losses were not too troubling to market watchers, even though most agree the Internet bandwagon is getting too overloaded to continue.
"I don't see it as a break," said Gary Kaltbaum, chief technical analyst at
J.W. Genesis Securities
in Boca Raton, Fla. "The stocks went parabolic with no rest whatsoever. They're just in correction mode. It's no big deal whatsoever."
Negative comments about the group by Ralph Bloch, market strategist at
, during an appearance on
may have provided an excuse to sell, although none was really needed, Kaltbaum noted.
"It's a function of a lot of things but at the top of the list there's been so much written about valuation in general, and Internet and tech stocks in particular, maybe the investing public is starting to believe," said Hugh Johnson, chief investment officer at
. "You've seen the word mania appear
often in the financial press, and that's certainly appropriate. Maybe that's cooled everybody."
Also, much of the so-called window dressing by fund managers was concentrated in the highflying Internet and tech names but was largely completed last week, Johnson observed. "Candidly, there's not much going on this week and you can see there's been some give in both tech and Internet stocks in the last couple of days," he said.
As for the broader market's weakness today, "it means absolutely nothing," Kaltbaum said. "The market is paying up for growth stocks left and right. When it stops on one group, it goes to the next. There's a nice rotational correction in different sectors but the trend is up. Where she stops, nobody knows."
Semiconductor and equipment makers were the beneficiaries of the rotation today, the technician noted. With
Advanced Micro Devices
leading the way, the
Philadelphia Stock Exchange Semiconductor Index
New York Stock Exchange
trading, 604.9 million shares were traded while advancers bested declining stocks 1,593 to 1,388. In
Nasdaq Stock Market
activity, 928.7 million shares were traded while gainers led 2,168 to 2,084. New 52-week highs bested new lows 122 to 55 on the Big Board and by 140 to 103 in over-the-counter trading.
Despite today's gains, indicators such as the advance/decline line and the Dow transports are "still not up to snuff," Kaltbaum said. "If divergences continue, eventually they'll be hell to pay."
"But it ain't happening yet," he continued. "When you have stocks like Microsoft,
, Lucent and
busting to new highs
recently, the market is going to be in OK shape regardless of the divergences."
Ironically, Lucent and Cisco are two of the stocks Johnson mentioned when he talked about the quandary many fund managers find themselves in these days. Johnson said he was prepared to sell
and buy Lucent and Cisco but "my associates talked me out of it because of worries about valuation."
The quandary is that Johnson wants to "continue to buy the best companies because the trends are still positive, but in order to buy the very best you're going to have to look the other way on valuation. You're damned if you do and damned if you don't."
As 1998 comes to a close, the environment is "scary" and "baffling," the fund manager concedes. "My disciplines and
John Kenneth Galbraith
tell me sell but my instincts tell me not to -- and maybe that's just an instinct for self-preservation," he says. "It takes one immense act of courage to sell your stocks and raise cash despite the fact it is glaringly obvious the market is overvalued."
Johnson does believe this will all end badly but could not say when and admits he's unlikely to avoid the downdraft. "I'm no different than any other sucker," he says. "You won't see the signs until it's over and there's nothing but debris on the deck. It's not encouraging, but I'm afraid that's the truth. Enjoy the euphoria while it lasts."
Among other indices, the
Dow Jones Utility Average
lost 1.65, or 0.5%, to 310.92; and the
American Stock Exchange Composite Index
climbed 1.32, or 0.2%, to 672.07.
The price of the 30-year Treasury bond rose 6/32 to 102 15/32, sending its yield down to 5.09%.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
fell 42.11, or 0.7%, to 6430.05 and the
Mexican Stock Exchange IPC Index
hopped 43.98, or 1.1%, 3960.78.
Wednesday's Company Report
If to every session there is a
was today's. The direct merchandiser finished with a gain of 2 3/4, or 38.9%, to 9 7/8 after trading as high as 17 on news it has signed a deal with
to bring 20 Genesis Direct brands to Excite's flagship portal sites. Excite, however, shed 3 15/16, or 8.1%, to 44 11/16, declining along with most other big Internet names.
In the "we have a Web site so you must buy our stock" category,
D.G. Jewellery of Canada
flew 7/8, or 21.9%, to 5 on news it plans to market its jewelry online. Separately,
galloped 1/2, or 6.4%, to 8 5/16 after issuing a press release (no, seriously) confirming it has an online site and will soon centralize the Web offerings of its operating companies.
bounded 4, or 108.4%, to an all-time high of 7 11/16 after announcing that it will offer online trading services along with broker/dealer
. It traded as high as 11 5/8.
On the clammy side of the Internet mania pillow, some of this week's biggest gainers tumbled hard, including
, down 12 5/8, or 31.1%, to 27 3/4;
, off 3 7/8, or 44.6%, to 4 13/16;
Active Apparel Group
, down 7 5/16, or 38.4%, to 12 1/2; and
, lower by 10 3/8, or 23%, to 35.
Additionally, online brokers skidded after a big run-up in recent trading and some cautious comments in a Heard on the Street column in
The Wall Street Journal
. Notably lower were
National Discount Brokers
, down 7 5/8, or 24.2%, to 23 7/8, and
, lower by 9 3/8, or 15.6%, to 50 13/16.
gained 13/16 to 65 1/4 on reports that the networker is sealing deals to divest certain extra operations of
, which it acquired in October. The shares climbed as high as 69 5/8 intraday.
Next week Ascend is expected to announce plans to unload two Stratus divisions, one through a leveraged buyout and the other through a straight sale, according to analyst Chris Stix with SG Cowen. Stix, who reiterated a strong buy rating on Ascend, expects the company to announce plans to unload a third unit by the end of January. He did not name any buyers for the previously announced deals. Cowen has not banked any deals for Ascend.
Ascend's $822 million stock purchase of Stratus, greeted with skepticism when it was first announced Aug. 3, is now seen as a positive step in Ascend's strategy of helping telephone carriers ease voice traffic onto computer networks. Ascend bought Stratus for its specialized voice-signaling technology, and is discarding operations it doesn't need.
An Ascend official declined to comment on Cowen's report. Stix's colleague Vijay Rajamani was not immediately available for comment.
Mergers, acquisitions and joint ventures
slumped 3 1/4, or 5.6%, to 54 3/4 and
dropped 6 3/4, or 7.5%, to 83 3/16 despite the merger partners' receiving
Federal Trade Commission
approval for their $55 billion combo. The selloff came because once the merger goes through, the combined, British-based company will exit the all-American S&P 500.
dimmed 1/8 to 31 7/8 after agreeing to sell its
Eye on People
cable channel to
for undisclosed terms.
leapt 1 1/8, or 8.7%, to an all-time high of 14 1/4 after agreeing to acquire
Amazing Smart Card Technologies
for undisclosed terms.
Earnings/revenue reports and previews
improved 3/4, or 10.3%, to 8 1/16 despite reporting third-quarter earnings of 2 cents a share, matching the 13-analyst forecast but down from the year-ago 14 cents. The company said it expects the adverse retail conditions that hurt its third-quarter results to damage its fourth-quarter performance as well. The estimate calls for fourth-quarter earnings of 18 cents vs. the year-earlier 37 cents.
bounced 1, or 9.3%, to 11 3/4 after reporting fourth-quarter earnings of 4 cents a share, up from 1 cent a year ago as revenues rose 12%. No earnings estimates were available.
, which fell 19% yesterday after saying it will have to restate earnings for 1996, 1997 and 1998, clattered down a further 1 15/16, or 8.9%, to 19 15/16.
Hambrecht & Quist
lowered its recommendation to hold from buy.
Advanced Micro Devices
was up 1 1/2, or 5.5%, to 29 after
made some positive comments about the chip maker's shipments this quarter. Other chip names were higher in concert, including
, up 3 1/2 to 87 1/2 and
, up 1/2 to 13 5/16.
blasted up 3 11/16, or 79.7%, to a 52-week high of 8 3/8 following an upgrade to buy from neutral at
fell 2 9/16, or 5.8%, to 41 7/16 after
Wheat First Union
downgraded it to hold from outperform.
ascended 3/4, or 7.8%, to 10 3/8 after
Salomon Smith Barney
upgraded it to buy from outperform.
Electronic Data Systems
brightened 7/8 to 49 15/16 thanks to an upgrade from
to near-term accumulate from neutral.
fell 1/2, or 5.3%, to 9 after
trimmed it to accumulate from buy. The firm cut its price target to 13 from 18.
climbed 3/4 to 16 11/16 after
Credit Suisse First Boston
said it expects the company to meet the 17-analyst third-quarter estimate of 10 cents a share. Fore made 10 cents in the year-earlier quarter.
rose 1 5/8 to 70 1/2 after Credit Suisse First Boston initiated coverage at buy with a price target of 80.
Offerings and stock actions
jumped 13/16, or 18.1%, to 5 5/16 after saying it will buy back up to 1.5 million shares.
grew 9/16, or 8.3%, to 7 3/8 after announcing a buyback of up to $5 million of its shares.
gained 3/16 to 16 3/4 after setting a buyback of up to 5% of its common shares.
plummeted 3/4, or 68.6%, to an all-time low of 3/8 after saying last night it will have to weigh strategic alternatives, including the sale of some or all assets and a shutdown of operations, because majority shareholder
will not increase its existing credit capacity. Lockheed Martin was up 5/16 to 83 5/16.
slipped 2 1/16 to 45 3/8 after
LVMH Moet Hennessy Louis Vuitton
Chairman Bernard Arnault said he would resign from Diageo's board tomorrow. That led to speculation that LVMH will reduce its 11% stake in Diageo. LVMH improved 2, or 5.3%, to 39 7/8.
exploded up 1 9/16, or 86.2%, to 3 1/2 after signing a deal with
, which will use the company's real-time operating system in its new digital television set-top box.
was down 3/8 to 186 3/4.
, the subject of many a
story, jumped 2 5/16, or 15.2%, to 17 9/16 after signing an agreement allowing it to remain an
customer for the next 25 years. Tel-Save.com can also purchase an unlimited amount of broadband fiber capacity over the next 12 months. AT&T lost 2 3/16 to 76 13/16.