Wall Street stared into the breach this morning after Brazil's devaluation roiled global markets. But instead of running for the shelter of Treasuries (or even mother's little helper), investors dove smack-dab into the void. The result was one of the most remarkable single-day turnarounds in recent market history, although major proxies all ended with losses.
The U.S. bond market did benefit from the overseas unrest, as did the dollar. The price of the 30-year Treasury bond rose 1 10/32 to 101 22/32, its yield falling to 5.14%.
Nasdaq Composite Index
stumbled as low as 2206.19 in the opening minutes of trading before embarking on a stunning reversal that took it as high as 2353.87. The forward momentum stalled in the latter part of the day, which ended with the index off 3.94, or 0.2%, to 2316.81.
was at the forefront of the Nasdaq's about-face, rising 2.5% after posting strong earnings yesterday; the
Philadelphia Stock Exchange Semiconductor Index
also closed with gains after suffering early declines, although neither was able to sustain intraday highs. The
closed up 0.5%.
Volatility's progeny, Internet stocks, were also featured in this most volatile of sessions.
TheStreet.com Internet Sector
index closed off 35.73, or 6.6%, to 506.34, but well above its intraday low of 457.20.
again embodied the sector's action, tumbling as low as 332, rebounding as high as 406, before closing off 8% at 368.
Dow Jones Industrial Average
hit its nadir of 9213.10 in the initial phase of trading, once all 30 of its components were open. But the blue-chip proxy mounted a smart snapback of its own, climbing as high as 9437.09 before the rally stalled. The index closed off 125.12, or 1.3%, to 9349.56.
closed off 5.11, or 0.4%, to 1234.50 after trading as low as 1205.46. The
closed down 2.50, or 0.6%, to 424.86 but well off its intraday worst of 412.64.
At day's end there was some debate among traders as to which was more significant: The fact major indices rebounded from morning lows or the fact they were unable to sustain afternoon highs.
Randy Billhardt, co-head of block trading at
, said it was clearly the former.
"I don't think it's a big deal people sold into some strength because the rally was so sharp and convincing," Billhardt said, partially attributing the comeback to soothing comments from
and Brazil's finance minister. "It's more encouraging we found a level we were able to bounce off of and the end of the world was not upon us."
The trader was most impressed by the action in technology stocks. "Clearly, the tech stocks continue to rule," he said. "The fact the Nasdaq was down over 115 and rallied back is just a tremendous testament to the strength of this market."
Billhardt noted there were 34 million shares of
priced to trade at 134 before the open "and that was not the low of the day. Clearly there was some panic going in." AOL fell as low as 130, then rose as high as 151 15/16 intraday before closing off 5% at 146.
New York Stock Exchange
trading 934.2 million shares were exchanged while declining stocks swamped advancers 2,091 to 1,021. In
Nasdaq Stock Market
action 1.201 billion shares traded -- the eighth-busiest day in Nasdaq history and a record sixth consecutive session with more than a billion shares exchanged -- while losers led 2,509 to 1,628. New 52-week lows bested new highs 20 to 73 on the Big Board but new highs led 69 to 50 in over-the-counter trading.
Brazil Blinks; Investors Unbowed
Financial stocks overall were waylaid by the developments in Brazil and
was the biggest negative drag on the Dow, followed by
Brazil's central bank removed the so-called mini-band on its currency, the real, essentially devaluing the currency by about 9% vs. the dollar. The
closed down 5.1% after initially falling 10% on the news.
The prospect of Brazilian devaluation has been the great fear of many market players, the proverbial "other shoe" in the market's closet. But as is often the case when something is so widely expected, its impact is muted.
"We knew they were going to devalue and we thought it would be a short-lived problem," said Courtney Smith, chief investment officer at
. "We just didn't know if it would be eight hours or eight days. Once they devalued, the pressure is off."
More than the devaluation, Smith took exception to a recent bank transaction tax enacted in Brazil as part of the
International Monetary Fund's
austerity program. "Raising taxes in a recession is not the right thing to do," he said. "There's no question the balance between
government spending and taxes has to get in line, but you cut spending. That lays off 100,000 people instead of killing 40 million."
As for the U.S. market, Smith described it as "pretty impressive" but said "I'm glad we had today because I could argue the bear case on sentiment."
reported 60% of newsletter writers are bullish this week, up from 58.3% last week and the highest reading since January 1992, according to
Still, Smith does not share the concern of some that today's action will only further cement the 'buy on the dip' mentality in the minds of retail investors.
"At some point this will be the wrong strategy but it's nonsensical to say when," he said. "Once you set a time, you're held accountable."
Without specifying, the bullish investment chief doesn't think the strategy will prove wrong anytime soon, "unless we get into a deflationary depression a la the 1930s -- a total liquidity trap -- with the Japan model in the U.S. and Europe. Excluding that, the current inflationary situation is almost ideal for financial assets."
Today, Smith sold long positions in Citigroup,
, and Microsoft, while adding positions in
, Sun Microsystems, Intel and
American Home Products
. The hedge fund entered the session with short positions against
Among other indices, the
Dow Jones Transportation Average
slid 37.27, or 1.2%, to 3169.42; the
Dow Jones Utility Average
dipped 0.51, or 0.2%, to 308.07; and the
American Stock Exchange Composite Index
lost 0.26, or 0.04%, to 699.39.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
dropped 68.78, or 1%, to 6632.05 and the
Mexican Stock Exchange IPC Index
plunged 159.22, or 4.6%, to 3300.42.
Wednesday's Company Report
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.
Intel took in 3 3/8 to 139 after
last night posting fourth-quarter earnings of $1.19 a share, 12 cents higher than the 31-analyst consensus and above the year-ago 98 cents. The company said it sees its first-quarter gross margin falling slightly below the fourth quarter's 58% because of seasonal factors.
upped the chip maker to buy from market perform and
Credit Suisse First Boston
lifted the stock's price target to 180 a share. Elsewhere in tech,
hopped 2 11/16, or 6.9%, to an annual high of 41 5/8 after it reported last night second-quarter earnings of 42 cents a share, well in excess of the 11-analyst forecast of 26 cents and the year-ago loss of 8 cents.
After traveling all over the place today, as noted above, Yahoo! settled down 32 1/2, or 8.1%, to 368. Late yesterday, the Internet portal reported fourth-quarter earnings of 21 cents a share, topping the 24-analyst forecast of 16 cents and the year-ago 2 cents. The company also announced a 2-for-1 stock split.
BT Alex. Brown
cut it to buy from strong buy, and
Donaldson Lufkin & Jenrette
upped its six-to-12-month price target to 500 a share (presumably on a pre-split basis). Elsewhere in Netland,
gave up 53 3/4, or 24.2%, to 170 and
tumbled 5 15/16, or 15.3%, to 33 1/4.
, meanwhile, climbed 3/8, or 8.5%, to 4 15/16 on plans to introduce its next Internet service Feb. 8.
For the most part, Brazilian ADRs (understandably) failed to soften losses as large-cap U.S. tech stocks did.
fell 5 11/16, or 9.1%, to 56 5/8;
fell 1/2, or 5.9%, to 8;
fell 2 9/16, or 19.6%, to an all-time low of 10 1/2;
fell 1 7/16, or 8.2%, to 16 1/8; and
fell 1 1/16, or 8.6%, to 11 1/4.
Telefonica del Peru
sliced off 1 7/16, or 11.5%, to 11 1/16 and Argentina's
Banco Rio de la Plata
sliced off 1 11/16, or 16.5%, to 8 9/16.
Also unable to recover from Brazilian economic worries were big banks and brokerage house: Citigroup dropped 3 9/16, or 6.4%, to 52 3/16; J.P. Morgan dropped 5 1/4 to 106 9/16; and
dropped 2 1/4 to 71 5/8.
let go of 3 9/16 to 69 7/16 after
Brown Brothers Harriman
slashed it to short-term neutral from buy.
Mergers, acquisitions and joint ventures
jumped 5 7/16, or 7.3%, to an all-time high of 80 5/16 after agreeing to a $20 billion stock buyout offer from
. Lucent lost 3 5/8 to 104 1/4.
Morgan Stanley Dean Witter
upped its rating on Lucent to strong buy from outperform.
wrote this week about what a Lucent-Ascend get-together might mean for
. Cisco slipped 2 1/4 to 95 7/8.
rose 2 1/2, or 17.9%, to a post-offering high of 16 1/2 after
Castle Creek Partners
launched a $17-a-share cash tender offer for 16% of the company.
popped 2 3/4, or 18.8%, to 17 3/8 on takeover rumors, and SunMicrosystems grew 3 7/16 to an all-time high of 96 13/16 on talk of a link-up with
. Big Blue picked up 7/16 to 185 1/2.
shot up 4 1/16, or 73%, to 9 3/4 after announcing it will market its computer training products through America Online. Separately, AOL and
announced a deal to offer high-speed Internet access over Bell phone lines. Bell rung up 1 3/16 to 54 15/16.
Earnings/revenue reports and previews
Fourth-quarter net income dropped dramatically for offshore driller
, pushing the stock down 1/2 to 10 7/16. The first of the offshore drilling group to report, Rowan fell short of the estimate, posting net income of $4.8 million, or 6 cents a share, on revenue of $134.7 million. That's 3 cents shy of the 22-analyst consensus and well below the net income of $47.8 million, or 53 cents a share, it generated in the year-ago quarter on revenue of $190.2 million.
For the year, Rowan reported net income of $124.5 million, or $1.43 a share, on revenue of $706.4 million. In 1997, Rowan's net income was $146.7 million, or $1.65 a share, on revenue of $695.3 million.
Reflecting the severity of the downturn in the shallow water drilling market, Rowan's utilization for its jackup rig fleet, one of the largest in the Gulf of Mexico, was 59%, down from 100% in the year-ago quarter.
Continued earnings estimate cuts can't seem to keep up with the pace of falling revenue in the sector. One of the latest estimate cuts came from
Salomon Smith Barney
just this week. Analyst Mark Urness cut his 1999 estimate for Rowan to 65 cents from $1. But without a marked improvement in the industry next year, Rowan stands a good chance to earn only 24 cents in 1999, less than half of Urness' latest estimate and far below the current consensus estimate of 78 cents.
shed 1 13/16, or 14.7%, to 10 1/2 after posting first-quarter earnings of 16 cents a share, a penny ahead of the five-analyst call for a repeat of the year-ago 15 cents.
skidded 1 3/4, or 14.4%, to 10 3/8 after warning it sees a fourth-quarter loss of 21 cents a share after establishing a $1 million reserve to cover past-due bills. The five-analyst estimate called for a loss of 14 cents.
gave up 1 1/4, or 13.5%, to 8 after warning its fourth-quarter earnings would be 8 cents to 10 cents a share. The nine-analyst view was for profits of 13 cents.
plunged 6 1/4, or 17%, to 30 9/16 after it announced a fourth-quarter loss of 53 cents a share, wider than the five-analyst forecast of a loss of 47 cents and the year-ago loss of 11 cents.
vaulted 12 3/16, or 13.9%, to an all-time high of 99 13/16 after it reported second-quarter earnings of 59 cents a share, 2 cents above the 17-analyst outlook and above the year-ago 55 cents. The company also set a 2-for-1 stock split. In sympathy,
Maxim Integrated Products
lifted 6 7/8, or 15.4%, to an all-time high of 51 1/2.
gained 8 7/8, or 6.2%, to an all-time high of 151 1/4 after its CEO made bullish comments about the company's third-quarter earnings potential. The six-analyst forecast calls for 35 cents a share, after a proposed 2-for-1 stock split, vs. the year-ago 43 cents.
brought in 1 3/4, or 6.2%, to 29 7/8 after last night reporting second-quarter earnings of 81 cents a share, 11 cents higher than the two-analyst view and above the year-ago 59 cents.
Offerings and stock actions
expanded 3 3/16, or 5.9%, to 57 11/16 after setting a 2-for-1 stock split.
American Xtal Technology
surged 4 1/16, or 33.5%, to 16 3/8 after
raised it to strong buy from accumulate and set a 12-month price target of 20 a share.
accepted 6, or 6%, to 105 3/4 after Prudential pushed it up to strong buy from buy.
slid 2 1/16, or 5%, to 39 7/16 after DLJ downgraded it to market perform from buy.
lowered 6 1/8, or 7.3%, to 78 3/8 after DLJ cut it to market perform from buy.
brought in 3 9/16, or 21.8%, to 20 after
Wheat First Union
lifted it to outperform from hold based on strong Christmas sales.
excelled 5 3/8, or 8.6%, to 68 1/8 after
upped it to strong buy from buy.
shot up 1 5/8, or 81.3%, to 3 11/16 after the healthcare information concern said it will focus on electronic commerce between physicians and hospitals and change its name to
rose 4 3/16, or 5.5%, to 80 11/16 after saying a federal court limited the number of issues in a patent lawsuit between it and
antidepressant. Barr tumbled 4 5/16, or 9.3%, to 42 1/4.
shaved off 1/16 to 70 after saying last night it was not consulted when
LVMH Moet-Hennessy Louis Vuitton
9.5% stake in Gucci. Louis Vuitton slid 1 7/8 to 45 3/8.
advanced 3 1/16, or 23.7%, to an annual high of 16 1/16 after a
Food and Drug Administration
panel recommended approval for the company to sell its nearsightedness product,
picked up 1 3/16, or 5.4%, to 23 3/16 thanks to a bullish Heard on the Street article in
The Wall Street Journal