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Uncertainty Wafts Through the Air as Cyclicals Top Techs

The market's rotation is continuing, and some on Wall Street are getting a little skittish about the implications.

You know the drill: Cyclicals ruled the roost again today while tech stocks, especially those of the Internet variety, played Chicken Little.

The

Dow Jones Industrial Average

fell from its apex of 10,928.21 but continues to remind its upstart counterparts it is the biggest, baddest index of all. The

Shaft

-esque Dow closed up 32.93, or 0.3%, to 10,878.38, its third consecutive record and 13th in the month of April.

The Dow was restrained largely by

General Electric

(GE) - Get General Electric Company Report

and by

Wal-Mart

(WMT) - Get Walmart Inc. Report

, which fell 4.7% following a

Prudential Securities

downgrade.

In addition to cyclicals such as

TheStreet Recommends

Exxon

(XON) - Get Intrexon Corporation Report

and

Alcoa

(AA) - Get Alcoa Corporation Report

, the Dow got a boost from financials

American Express

(AXP) - Get American Express Company Report

and

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. Report

.

Financials in general recovered from

yesterday's weakness; the

Philadelphia Stock Exchange/KBW Bank Index

rose 0.7% while the

American Stock Exchange Broker/Dealer Index

climbed 1.1%. Gains were fostered partially by strength in bonds, up after the

Employment Cost Index

proved much weaker than anticipated. The price of the 30-year Treasury bond rose 25/32 to 95 29/32, its yield falling to 5.53%.

Meanwhile, the

Morgan Stanley Cyclical Index

rose 1.6% to an all-time high of 604.91. Led by Exxon and

Mobil

(MOB)

, the

American Stock Exchange Oil & Gas Index

gained 2% to a record 519.67, while the

Philadelphia Stock Exchange Oil Service Index

climbed 2.2%. The

Philadelphia Stock Exchange Gold & Silver Index

gained 2.9%. Still, basic-industry stocks cooled somewhat from their recently pace.

Frigid better describes investors' view toward technology, though there was some sign of thawing in the late afternoon.

The

Nasdaq Composite Index

tumbled for the third straight session but closed well off its intraday low of 2500.75. The tech-beleaguered index closed down 21.93, or 0.9%, to 2528.44.

TheStreet.com Internet Sector

index shed 10.49, or 1.6%, to 647.41.

With tech still on the outs and cyclicals less enthusiastic, the

S&P 500

fell 8.08, or 0.6%, to 1342.83. The

Russell 2000

shed 0.68, or 0.2%, to 432.85.

Disappointment over

Amazon.com's

(AMZN) - Get Amazon.com, Inc. Report

forecast of widening future losses was the dominant factor in technology selling today.

Last night, the online retailer reported a narrower-than-expected first-quarter loss but warned its quarterly shortfalls will expand as spending on acquisitions and internal expansion continues. Amazon.com fell 13.2%.

Meanwhile,

MCI WorldCom

(WCOM)

tumbled 4.3% despite posting first-quarter earnings of 36 cents a share, excluding one-time items, vs. the 26-analyst estimate of 34 cents. Company officials were optimistic about the future but did not encourage analysts to raise estimates.

Weakness prevailed among other tech bellwethers, notably

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

and

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

. The

Nasdaq 100

fell 1.4%.

Chip equipment makers such

Teradyne

(TER) - Get Teradyne, Inc. Report

and

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

suffered after

Kulicke & Soffa

(KLIC) - Get Kulicke & Soffa Industries, Inc. Report

posted a second-quarter loss of 32 cents a share vs. a gain of 63 cents a year ago and the seven-analyst estimate for a 23-cent loss. Kulicke & Soffa shed 15.9%.

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

also fell sharply; the

Philadelphia Stock Exchange Semiconductor Index

lost 1.6%.

"The market shot up early on the

ECI number but the Nasdaq couldn't hold it," said Doug Myers, vice president of equity trading at

Interstate/Johnson Lane

in Atlanta. "But at one point the Internet index was down pretty big and it rallied almost all the way back. That, I think, bodes well. For the last three weeks there's these cross-currents where the Dow and Nasdaq have disengaged. The Nasdaq had been outrunning the Dow. Now it's drifting back down, regressing toward the mean. Long-term they'll recouple, hopefully on the upside."

Citing Laszlo Birinyi, president of

Birinyi Associates

, Myers said: "I don't think there's a rotation out of tech and into cyclicals. I think the cyclicals are just playing catch-up" and eventually the two groups will reach "equilibrium."

In

New York Stock Exchange

trading, 970.3 million shares were exchanged while advancers led losers 1,649 to 1,304. In

Nasdaq Stock Market

activity, more than 1 billion shares were exchanged for the 18th-straight session while losers led 2,072 to 1,944. New 52-week highs led new lows 75 to 23 on the Big Board and by 67 to 32 in over-the-counter trading.

Leery, but Not Panicked

Despite the Dow's latest record, "I'm getting a little leery," said Charles Payne, president and chief analyst at

Wall Street Strategies

. "I'm not concerned about fundamentals, but when we give up big

intraday gains like this it's to me, if nothing else, a yellow caution flag. Also, the reception to some earnings of Internet stocks -- even though they were built up on a lot of hype -- I felt like there was an air of uncertainty, but not panic."

Payne remained mainly on the sidelines today and believes a lot of other investors took a similar tack.

"There's not a sense of panic, but everyone wants to see the market sell off so they can buy 'em on weakness," he said. "But no one is really selling, and no one is really buying. It's sort of a consolidation phase. After all, the market has surpassed almost everyone's expectations. At the beginning of the year, the most optimistic forecast was for

Dow 10,400."

Strength in Baby Bells such as

Ameritech

(AIT) - Get Applied Industrial Technologies, Inc. Report

, up 2.4%, is "usually a sign people are being pretty cautious," he said. "They want to participate and view that as a safe haven."

Moreover, the strategist noted that there were more downgrades than usual today and many upgrades "initially didn't help."

Still, separate brokerage upgrades inspired big gains for

SCI Systems

(SCI) - Get Service Corporation International Report

,

Verisign

(VRSN) - Get VeriSign, Inc. Report

and

Asarco

(AR) - Get Antero Resources Corporation Report

, among others.

Among other indices, the

Dow Jones Transportation Average

rose 11.03, or 0.3%, to 3642.75; the

Dow Jones Utility Average

gained 3.36, or 1.1%, to 311.31; and the

American Stock Exchange Composite Index

added to its recent string of records, up 1.31, or 0.2%, to 779.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

fell 7.74, or 0.1%, to 7093.33 and the

Mexican Stock Exchange IPC Index

gained 59.15, or 1.1%, to 5517.31.

Thursday's Company Report

By Heather Moore
Staff Reporter

(

Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.

)

Like

America Online

(AOL)

before it, Amazon.com lost some steam after posting better-than-expected first-quarter results, falling 25 9/16, or 13.2%, to 168 1/4.

Late yesterday, the Internet retailer reported a quarterly loss of 23 cents a share, 6 cents narrower than the 21-analyst view but deeper than the year-ago loss of 7 cents. Revenue soared to $294 million from $87 million a year earlier. Today,

Credit Suisse First Boston

reiterated its buy rating on Amazon.com, but

BT Alex. Brown

lowered the stock to buy from strong buy. As

TheStreet.com

reported in a

piece last night, concerns continue to mount about Amazon's aggressive spending and distant profitability.

Mergers, acquisitions and joint ventures

CMP Media

(CMPX)

swelled 4 11/16, or 13.9%, to an all-time high of 38 7/16 on news Britain's

United News & Media

(UNEWY)

is buying the company for $920 million in cash. United News & Media picked up 1 1/4, or 5.7%, to 23 3/4.

Covance

(CVD)

tanked 5 3/16, or 18.9%, to 22 5/16 after agreeing to buy

Parexel International

(PRXL)

in a stock swap valued at $800 million. Under terms of the deal, Parexel shareholders will receive 1.184 Covance shares for each Parexel share. The new company will be called

Covance Parexel

. Parexel leapt 3 15/16, or 20.4%, to 23 1/4.

Morgan Stanley Dean Witter

cut Covance to neutral from outperform.

Earnings/revenue reports and previews

Actel

(ACTL)

plunged 5 7/8, or 30.8%, to 13 5/16 after last night missing first-quarter earnings estimates by a penny with a profit of 19 cents a share.

Geon

(GON)

rose 3 3/8, or 12%, to an annual high of 31 1/2 after last night posting first-quarter earnings of 50 cents a share, blowing away estimates for 38 cents.

IHOP

(IHOP)

climbed 2 5/8, or 6%, to 47 after setting a 2-for-1 stock split and posting first-quarter earnings of 65 cents a share, blasting the single-analyst forecast of 53 cents. The company earned 47 cents a year ago.

Scientific-Atlanta

(SFA)

expanded 3, or 10.5%, to 31 1/2 after last night posting third-quarter earnings of 25 cents a share, 6 cents above expectations.

SCI Systems advanced 5, or 14.3%, to 40 after last night topping third-quarter earnings by 3 cents with a profit of 48 cents a share. Today, Credit Suisse First Boston lifted the stock to buy from hold, Morgan Stanley Dean Witter started coverage with an outperform and a price target of 45 a share,

Merrill Lynch

upped it to near-term accumulate from neutral, and

Lehman Brothers

pushed it up to buy from outperform.

Tenneco

(TEN) - Get Tenneco Inc. Class A Report

slipped 11/16 to 27 9/16 after reporting first-quarter earnings of 27 cents a share, 2 cents ahead of the two-analyst estimate but down from the year-ago 44 cents. The company also said it will spin off its specialty-packaging business to shareholders.

Unilever

(UN) - Get Unilever NV Report

dropped 3 3/16 to 66 9/16 after saying its first-quarter pretax profit fell 4% to $1.1 billion from the year-ago $1.15 billion. Per-share figures weren't available.

In other earnings news:

Offerings and stock actions

Lexmark

(LXK)

gave up 4 to 120 7/8 despite setting a 2-for-1 stock split.

MPath Interactive

(MPTH)

shot up 32 3/4, or 181.9%, to 50 5/8 after

BancBoston Robertson Stephens

priced its 3.9 million-share IPO at $18 a share last night. The company develops Web software. Elsewhere in new issues,

Informatica

(INFA)

, a software maker, soared 13 3/8, or 83.6%, to 29 3/8 after Credit Suisse First Boston priced its 2.75 million-share IPO at $16 a share last night.

Analyst actions

PaineWebber

downgraded both

Conoco

(COC)

, which added 5/16 to 26 11/16, and

Texaco

(TX) - Get Ternium SA Report

, which added 1/4 to 63 3/4, to neutral from attractive. The firm also cut

Unocal

(UCL)

, which lost 7/16 to 43 13/16, to attractive from buy.

Pioneer Natural Resources

(PXD) - Get Pioneer Natural Resources Company Report

hopped up 1 1/8, or 11.1%, to 11 1/4 after

J.P. Morgan

raised it to buy from long-term buy.

Proxim

(PROX)

lifted 2 7/8, or 9%, to 35 1/8 after

US Bancorp Piper Jaffray

upped it to strong buy from buy.

Miscellany

Disney

(DIS) - Get Walt Disney Company Report

sliced off 2 1/8, or 6.5%, to 30 3/8 after

The Wall Street Journal

said some money managers and analysts think the company's string of poor quarterly earnings could drag on well into next year.

TheStreet.com

is taking a look at Disney in a series of stories that began

yesterday.