Wall Street Greets Dow's Latest Millennial Mark With Some Concern

A seven-week jump of 1000 Dow points finds some market mavens increasingly worried about the health of equities.
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Cyclical stocks acted like a combination of

Jaromir Jagr

,

Allen Iverson

and the

New York Yankees

again today: Opponents could not stop them, and could barely contain their ascendancy.

Investors' unfettered appetite for the once-bemoaned cyclicals sent the

Dow Jones Industrial Average

soaring 225.65, or 2.1%, to a record 11,014.69. The close above 11,000 comes just over a month after the index first surpassed 10,000 on a closing basis,

March 29 -- its fastest millennial ascent in history (although each millennial appreciation represents less and less of a percentage move).

The Dow industrials fell as low as 10,756.11 this morning as all equity proxies experienced sluggishness in the early going. Then a weaker-than-expected

National Association of Purchasing Management

survey was released at 10 a.m. EDT, spurring buyers. But while the Dow and the

S&P 500

built on the NAPM-inspired enthusiasm, tech proxies soon reversed and closed with modest losses.

The Dow was paced by

General Motors

(GM) - Get Report

and cyclical giants

3M

(MMM) - Get Report

,

United Technologies

(UTX) - Get Report

,

Goodyear

(GT) - Get Report

and

Exxon

(XON) - Get Report

.

Overall, it was a fine day for basic materials: The

Morgan Stanley Cyclical Index

gained 2.7%, the

S&P Chemical Index

climbed 2.8%, the

American Stock Exchange Oil & Gas Index

rose 2.1%, the

Philadelphia Stock Exchange Forest & Paper Products Index

climbed 4.2% and the

Philadelphia Stock Exchange Gold & Silver Index

rose 3.3%.

Meanwhile, the

Dow Jones Transportation Average

rose 49.30, or 1.4%, to a record 3696.59, eclipsing its previous best of 3686.02, set April 16, 1998. According to the basic premise of

Dow theory, the "confirming" new highs of the Dow industrials and transports is extremely bullish. However, Richard Russell, editor and publisher of

Dow Theory Letters

, told

TheStreet.com

on

Friday the transports hitting a new high so long after their previous record is more likely a signal of a market top.

Meanwhile, technology found itself the cool side of the markets' McDLT. The

Nasdaq Composite Index

shed 7.27, or 0.3%, to 2535.58, although well off its session low of 2512.37.

TheStreet.com Internet Sector

index surrendered 23.29, or 3.6%, to 632.97.

Among Nasdaq-traded tech bellwethers,

Microsoft

(MSFT) - Get Report

and

Oracle

(ORCL) - Get Report

led the retreat.

Similarly, Internet giants suffered losses once again, led by

Amazon.com

(AMZN) - Get Report

, off 12.3%.

'Rotation in one sense is healthy,' Cantor Fitzgerald's Bill Meehan said. 'But the manner it's taking place is unhealthy. Is it justified by economics and fundamentals that some cyclicals should move 50% to 70% in a week or two? I'm not sure.'

In perhaps the most telling sign of the lack of momentum in Netland,

RealNetworks

(RNWK) - Get Report

fell 9.7% despite launching an online digital music platform in tandem with

AT&T

(T) - Get Report

. Previously, such an announcement likely would have sent RealNetworks

up

by a similar amount.

But

Intel

(INTC) - Get Report

gained 3.2%, and

VLSI Technology

(VLSI)

rose 10.3% after accepting an increased takeover offer from

Philips Electronics

(PHG) - Get Report

, which rose 3.7%. The

Philadelphia Stock Exchange Semiconductor Index

rose 2.8%.

Restrained by the techs, the S&P 500 lagged the Dow but closed up 19.45, or 1.5%, to 1354.63. In addition to burgeoning cyclicals and transports, the index was aided by strength in drugmakers, financials and retailers.

In

New York Stock Exchange

trading, 811.5 million shares were exchanged while gainers bested losers 1,997 to 993. In

Nasdaq Stock Market

activity, 871.4 million shares were exchanged while gainers led 2,090 to 1,895. New 52-week highs led new lows 73 to 20 on the Big Board and by 78 to 43 in over-the-counter trading.

Did Goldman Cook the Golden Goose?

"This is all

Goldman

Sachs

," one market player claimed. "They've been throwing buy programs all day, ramping up the Dow" to ensure a positive backdrop for their IPO.

After the close of trading, underwriters priced 69 million shares of the venerable brokerage firm at $53 a share. At $3.7 billion, the IPO is the second largest in U.S. history, trailing only

Conoco's

(COC)

deal last October.

"I always thought the Goldman IPO would mark the top of the market, but I didn't think they'd spend all the money from the offering to make it happen," said the source, who requested anonymity.

Given the anticipation surrounding the IPO, Bill Meehan, chief market analyst at

Cantor Fitzgerald

, doubted Goldman was up to anything nefarious, or needed to be.

"I've heard a lot of mumbling about Goldman doing this, Goldman doing that, but from what I can gather, there's no paucity of demand," Meehan said. "It's a very strange market. Today you had a steady slide in the Nasdaq and

Nasdaq 100

futures, but the only spike is this 3 o'clock action where we have a tendency to spike," regardless of what's happening in the IPO market.

Like most, Meehan attributed the bulk of today's advance to the benign NAPM data. At 52.8 the survey showed an expanding manufacturing sector for the third consecutive month but came in below 54.3 in March and expectations for a reading of 54.5.

Crude futures getting above $19 a barrel today contributed to the gains, Meehan said, "but I don't think we would have seen this much progress in the Dow and cyclicals had we gotten a bad report on NAPM."

The strategist, who has been urging an increasingly cautious stance in recent months, expressed pleasure at the broadening of interest into cyclicals and small-caps but is unnerved by the ferocity of the move.

"Rotation in one sense is healthy," he said. "But the manner it's taking place is unhealthy. Is it justified by economics and fundamentals that some cyclicals should move 50% to 70% in a week or two? I'm not sure. It seems like momentum is driving a lot of it and that's not something that makes me feel very comfortable."

Noting rising commodity prices are fueling interest in cyclicals, Meehan said: "With the economy we've got and with prospects for global growth looking better, I'm not sure what it means for the

Fed

. They won't move at this point, but they'll probably announce a bias toward tightening. We're not only seeing asset inflation on Wall Street, we're seeing an appreciable pickup in many markets."

Meanwhile, the strategist was a bit "surprised" the bond market didn't "snap back better" on the heels of the NAPM report, particularly after Friday's big losses.

The price of the 30-year Treasury bond rose 2/32 to 94 5/32, its yield dipping to 5.66%.

Among other indices, the

Russell 2000

rose 0.47, or 0.1%, to 433.28; the

Dow Jones Utility Average

gained 4.79, or 1.5%, to 316.34; and the

American Stock Exchange Composite Index

climbed 9.70, or 1.3%, to a record 786.67.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

gained 67.27, or 1%, to 7081.97 and the

Mexican Stock Exchange IPC Index

jumped 164.69, or 3%, to 5579.14.

Monday'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.

)

America Online

(AOL)

pulled out of a rumored alliance with

Comcast

(CMCSA) - Get Report

to make a joint bid for

MediaOne

(UMG)

, according to

CNBC

. Earlier today, MediaOne accepted AT&T's $54 billion unsolicited offer and gave Comcast until Thursday to make a counteroffer. An alliance with AOL and/or Microsoft was expected to sweeten Comcast's offer for MediaOne. AOL dropped 9 5/8, or 6.7%, to 133 1/8; Comcast rose 3 1/8, or 5%, to 65 15/16; MediaOne gave up 1 15/16 to 79 11/16; and Telephone picked up 9/16 to 51 1/16.

Mergers, acquisitions and joint ventures

ABR Information Services

(ABRX)

climbed 7 1/2, or 42.9%, to 25 after

Ceridian

(CEN) - Get Report

said it's buying the company for $25.50 a share in cash, or about $750 million. Ceridian lost 1/2 to 36 1/8.

Delphi Financial Group

(DFG)

jumped 8 7/8, or 28.5%, to 40 after announcing it sold its troubled Unicover Managers unit to former shareholders. Delphi Financial said it expects to breakeven on its purchase and subsequent sale of Unicover Managers.

Mercantile Bancorp

(MTL) - Get Report

lifted 3 11/16, or 6.5%, to an annual high of 60 11/16 after

Firstar

(FSR)

agreed to buy the company in a $10.6 billion stock swap late Friday. Firstar picked up 5/16 to 30 3/8.

Telecom Italia

(TI)

added 13/16 to 107 and

Deutsche Telekom

(DT) - Get Report

added 1 7/16 to 40 3/16 after

The Wall Street Journal

reported the companies are in talks with a third communications company about joining in on their proposed merger. Among possible U.S. partners are

BellSouth

(BLS)

, which rose 1 1/4 to 45 3/4, and

SBC Communications

(SBC)

, which fell 1 to 54 3/4.

Separately, SBC Communications and

Telmex

(TMX)

agreed to buy

Cellular Communications of Puerto Rico

(CLRP)

. According to the terms of the deal, SBC and Telmex, through a joint venture, will pay $464 million in cash and assume $350 million in long-term debt. Telmex hopped up 4 1/4, or 5.6%, to an all-time high of 80; Cellular Communications of Puerto Rico hopped up 4 5/16, or 18.2%, to 28.

VLSI Technology surged 1 15/16, or 10.3%, to 20 3/4 after reaching a friendly pact to be acquired by Philips Electronics in a deal valued at about $1 billion, bringing Philips' nearly two-month hostile takeover attempt to an end. Philips will pay $21 a share for VLSI vs. its original hostile bid for the chipmaker of $17 per. Philips tacked on 3 1/8 to 88 1/4.

Earnings/revenue reports and previews

Atlantic Richfield

(ARC) - Get Report

expanded 1 1/4 to 85 3/16 after announcing first-quarter earnings of 53 cents a share, blowing away the 29-analyst forecast for 29 cents but falling behind the year-ago 65 cents.

Baker Hughes

(BHI)

excelled 2 1/16, or 6.9%, to 31 15/16 after posting first-quarter earnings of 13 cents a share, beating the 22-analyst estimate of 11 cents but falling below the year-ago 35 cents.

Cable Design Technologies

(CDT)

sliced off 1 3/4, or 11.8%, to 13 1/8 after late Friday warning its third-quarter earnings would fall 5 cents to 7 cents a share below the six-analyst forecast of 35 cents. The company blamed the news on "an extremely slow February" and delayed programming. The company earned 34 cents in the year-ago period.

Circus Circus

(CIR) - Get Report

vaulted 4 7/8, or 23.2%, to an annual high of 25 15/16 after predicting it will record first-quarter earnings of 40 cents to 42 cents a share thanks to strong occupancy rates and room-rate increases at its Las Vegas resorts. The 20-analyst consensus called for 25 cents vs. the year-ago 23 cents. Circus Circus also set a repurchase plan to buyback 15% of its outstanding shares.

GP Strategies

(GPX) - Get Report

tanked 6 1/8, or 39.8%, to 9 1/4 after warning it sees a second-quarter shortfall in its training unit. The company also posted first-quarter earnings of 21 cents a share, in line with the four-analyst view and ahead of the year-ago 15 cents.

Limited

(LTD)

advanced 7/8 to 44 5/8 after saying it sees second-quarter earnings beating estimates, unveiling plans to spin-off

Limited Too

to shareholders and announcing a repurchase plan for up to 15 million shares of its outstanding stock. The clothing retailer also said it plans to sell its majority stake in

Galyan's Trading Co.

Limited, which expects its April same-store sales to rise by 5%, sees first-quarter earnings of 14 cents a share, 4 cents higher than current estimates and a nickel above the year-earlier figure.

Pillowtex

(PTX) - Get Report

sank 3 3/8, or 20.5%, to 13 1/16 after posting first-quarter earnings of 31 cents a share, 9 cents behind the seven-analyst outlook and below the year-ago 33 cents.

R&B Falcon

(FLC) - Get Report

grew 1 1/8, or 11.3%, to 11 1/8 after reporting first-quarter earnings of 2 cents a share, a penny ahead of the 20-analyst view but behind the year-ago 37 cents.

SPX

(SPW)

picked up 2 7/16 to 67 3/4 after increasing its 1999 earnings guidance to $5 from $4.90 a share thanks to top-line growth and first-quarter operating performance. The five-analyst outlook called for SPX to earn $4.96 in 1999.

theglobe.com

(TGLO)

rose 1 3/8 to 61 1/2 after recording a first-quarter loss of 47 cents a share, narrower than the year-ago 76 cents. The company said its number of users increased to 10.2 million during the quarter from 1 million a year ago, excluding the audience of recently acquired

Attitude Network

.

Watson Pharmaceuticals

(WPI)

lifted 2 3/4, or 6.8%, to 43 1/4 after reporting first-quarter earnings of 41 cents a share, meeting the eight-analyst estimate and topping the year-ago 33 cents.

Offerings and stock actions

Marimba

(MRBA)

, an Internet-based software management company, rallied 5 1/4, or 8.6%, to 66 7/16 in its second day of trading.

RSL Communications

(RSLC)

shaved off 2 15/16, or 8.9%, to 30 5/8 after announcing plans for an IPO of its wholly owned Internet telephony subsidiary,

Delta Three

.

Analyst actions

Apache

(APA) - Get Report

flew up 2 1/16, or 6.7%, to 32 3/4 after

Merrill Lynch

raised it to near-term buy from accumulate while maintaining a long-term buy.

Carnival

(CCL) - Get Report

tacked on 3 5/16, or 7.9%, to 45 3/16 after

Donaldson Lufkin & Jenrette

upgraded the stock to buy from market perform.

CDI

(CDI)

jumped 2 7/16, or 9.2%, to 29 after

Credit Suisse First Boston

raised it to buy from hold and set a one-year price target of 38 a share.

Computer Sciences

(CSC)

leapt 3 7/16, or 5.8%, to 63 after

SoundView Technology Group

upgraded the stock to strong buy from buy ahead of tonight's expected earnings report from the company.

Pharmacopeia

(PCOP)

shot up 3 3/16, or 44%, to 10 1/2 after BT Alex. Brown pushed it up to strong buy from buy and set a 12-month price target of 14 a share.

PLX Technology

(PLXT)

slid 2 1/8, or 11%, to 17 after Merrill Lynch initiated coverage with an accumulate.

Precision Castparts

(PCP)

declined 2 11/16, or 6.3%, to 40 1/16 after Morgan Stanley Dean Witter lowered it to neutral from outperform.

Skywest Airlines

(SKYW) - Get Report

climbed up 3 1/16, or 11.8%, to 29 after Morgan Stanley Dean Witter upped it to strong buy from outperform.

Xircom

(XIRC)

grew 3, or 13.3%, to 25 11/16 after

CIBC Oppenheimer

started coverage with a strong buy and a 12-month price target of 40 a share.

Miscellany

American Management Systems

(AMSY)

skidded 3 3/8, or 9.8%, to 31 1/8 after late Friday the

Mississippi State Tax Commission

canceled the company's work on the state tax automated revenue system. The state filed suit, alleging that American Management failed to deliver software conforming to the contract and seeking compensatory damages of $235 million and punitive damages of $750 million.

E*Trade

(EGRP)

gave up 4 to 111 1/2 despite saying

ClearStation

, its recently acquired financial media Web site, surpassed 100,000 registered members.

IBM

(IBM) - Get Report

rose 3 1/16 to 212 1/4 following word it's expected to release its new generation of mainframe computers -- G6 mainframes -- and ship them a month ahead of schedule.

After rallying last week in anticipation of today's unveiling of

RealJukebox

-- which allows consumers to record CD collections to PC hard drives and to find and download music from the Internet -- RealNetworks lost 21 1/2, or 9.7%, to 200 1/16.

TheStreet.com

wrote about the software in a story

this morning.