Wall Street Says Yes to Blue-Chips, No to Techs

Competing concerns at the dawn of earnings season lead to a bifurcated market.
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Earnings in the actual, theoretical and mystical sense were the dominant focus on Wall Street today, as they likely will be for the next few weeks. On this day, bifurcation was the result.

Blue-chip proxies rallied solidly to new highs in the aftermath of a positive earnings report by

Alcoa

(AA) - Get Report

and expectations for strong profits next week by financials.

Tech measures sagged, however, in the wake of profit warnings, worries about software makers' profits, as well as nervousness over

Yahoo!'s

(YHOO)

earnings.

After the bell, Yahoo! posted first-quarter profits of 11 cents a share vs. the 25-analyst estimate of 8 cents.

The

Dow Jones Industrial Average

rose as high as 10,089.75 and closed up 121.82, or 1.2%, to a record 10,085.31.

Alcoa rose 7.2% after its earnings report bested expectations by 6 cents, but

AT&T

(T) - Get Report

was the index's biggest positive influence, rising 5.9%.

Meanwhile.

Citigroup

(C) - Get Report

,

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were each strong performers as financial names gained overall. The

Philadelphia Stock Exchange/KBW Bank Index

rose 3.6% while the

American Stock Exchange Broker/Dealer Index

climbed 5.2%.

The

S&P 500

, inspired by the aforementioned as well as other financials such as

Donaldson Lufkin & Jenrette

(DLJ)

and

Chase

(CMB)

, rose 9.00, or 0.7%, to a record 1326.89.

Gains by tech heavyweights such as

IBM

(IBM) - Get Report

,

Cisco

(CSCO) - Get Report

and

Intel

(INTC) - Get Report

also helped blue-chip gauges, but the

Nasdaq Composite Index

finished in arrears.

The tech-woebegone index fell as low as 2511.39 and finished down 18.74, or 0.7%, to 2544.43, waylaid by weakness in

MCI WorldCom

(WCOM)

,

Oracle

(ORCL) - Get Report

and

Sun Microsystems

(SUNW) - Get Report

. The

Nasdaq 100

fell 1.2%.

Software makers Oracle,

Compuware

(CPWR)

,

Rational Software

(RATL)

each fell at least 9.8% after

Merrill Lynch

issued some cautious comments.

"The Y2K issue is affecting spending patterns for software purchases," analyst Steve Milunovich wrote in a tech earnings preview.

In the "red flag" category,

Network Associates

(NETA)

fell 27.1%, leading a slew of issues that suffered harshly after respective profit warnings. Other victims included

Engineering Animation

(EAII)

, down 45.9%,

FVC.com

(FVCX)

, off 47.6%; and

Saville Systems

(SAVLY)

, which lost 37.9%.

In Netland, Yahoo! fell 2.9% ahead of its profit report. Additionally,

America Online

(AOL)

fell 6.6%, while

Lycos

(LCOS)

slid 9.7%. Additionally,

Check Point Software Technologies

(CHKP) - Get Report

lost 11% after

ING Baring Furman Selz

cut its recommendation.

With Network Associates weighing heavily on its performance,

TheStreet.com Internet Sector

index fell 20.83, or 2.9%, to 699.83.

TheStreet.com E-Commerce Index

managed to climb 0.11, or 0.1%, to 123.49.

"In light of the fact most tech stocks were down most of the day, the Dow gave a good account of itself," said Ned Collins, executive vice president of U.S. stocks at

Daiwa Securities America

. "There's a great fear about the narrowness of the market and few stocks seemingly participating, but when you look at financials, IBM and

Disney

(DIS) - Get Report

and a couple others that acted super, it gives you heart maybe we have more room to go on the upside."

The

Russell 2000

fell 3.31, or 0.8%, to 397.77 as market internals once again belied the performance of the Dow and S&P 500.

In

New York Stock Exchange

trading, 816.4 million shares were exchanged while losers led gainers 1,595 to 1,374. In

Nasdaq Stock Market

activity 1.279 billion shares were exchanged -- the fourth-heaviest session in Nasdaq history -- while declining issues led 2,278 to 1,748. New 52-week lows bested new highs 111 to 66 on the Big Board and by 143 to 111 in over-the-counter trading.

"It's like everything else in life," the trader said of the market's tenor. "It worries a lot of us because it is so narrow but that doesn't mean it can't continue to go up."

A Bridge Over Shark-Infested Waters

The continuing divergence in the performance of big-cap stocks and the average issue has many players fretting about an imminent reversal. Yet major proxies continue to rise to new highs, or suffer only modest setbacks. Unlike many of his peers, Greg Nie, chief technical analyst at

Everen Securities

in Chicago, says the trend can continue.

"I do think we are going to see at least one or two attempts to push the market nicely higher in the second quarter," Nie said. "We could see the first attempt as early as next week as banks report. I'm willing to speculate earnings season will be positive. The door is still open to extend the intermediate bullish trend."

Nie has an upside target of 10,515 for the Dow, based on an 18% appreciation from its 200-day moving average of 8911 heading into today's action. Beyond that, he foresees the Dow potentially hitting 11,200, "if we take care of business and the bulls deliver decidedly positive breadth and volume."

But that's a big if, and the technician concedes being a "nervous bull." The divergences may not be of immediate concern, but they cannot be overcome forever, he said.

Worries such as the advance/decline line, the performance of the transports and utilities, and new highs/new lows are "getting entrenched," Nie said. "That points very heavily to a saw-toothed pattern. All of the excuses for profit-taking are already in place and rallies are likely to get greeted quickly by profit-taking."

The bulls will likely have the opportunity to correct the aforementioned in the second quarter. "But if they're unable to take care of business, it'll be much tougher sledding through the second half of the year," Nie said.

Among other indices, the

Dow Jones Transportation Average

rose 13.75, or 0.4%, to 3338.87; the

Dow Jones Utility Average

lost 1.20, or 0.4%, to 292.37; and the

American Stock Exchange Composite Index

gained 2.09, or 0.3%, to 717.30.

The price of the 30-year Treasury bond rose 4/32 to 96 5/32, its yield dipping to 5.52%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

gained 18.22 to 6786.73 and the

Mexican Stock Exchange IPC Index

fell 23.66 to 5123.13.

Wednesday'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.

)

As mentioned above, Network Associates tanked 5 15/16, or 27.1%, to an annual low of 16 after warning its first-quarter earnings will be 30 cents to 32 cents a share, well below the 21-analyst forecast of 46 cents. The company also announced a $169 million adjustment to acquisition write-downs. Last night, Network Associates posted fourth-quarter operating earnings (excluding amortization charges) of 50 cents a share, beating the year-ago 22 cents. Including charges, the company reported fourth-quarter net earnings of 40 cents vs. a year-ago loss of 47 cents. Analysts at

Bear Stearns

,

NationsBanc Montgomery Securities

,

Goldman Sachs

and

Brown Brothers Harriman

each cut ratings for the stock. (

TheStreet.com

took a closer look at Network's earnings report in a

story last night.)

Check Point Software Technologies tumbled 3 5/16, or 11%, to 26 3/4 after ING Baring Furman Selz lowered the stock to hold from buy on concerns that the company, like Network Associates, will miss earnings targets. The firm dropped its first-quarter earnings estimate for Check Point to 38 cents a share from 44 cents and its 1999 view to $1.79 from $2.05.

AT&T, one of today's most positive influences on the Dow, rung in 4 3/4, or 5.9%, to 84 7/8. Analysts attributed some of that strength to rotation out of MCI WorldCom stock,

Reuters

reported.

Mergers, acquisitions and joint ventures

Boeing

(BA) - Get Report

picked up 1/2 to 34 7/8 after saying it plans to sell its

Boeing Information Services

unit.

Internet service provider

FlashNet Communications

(FLAS)

reeled in 2 1/4, or 5.5%, to 43 1/2 on word of a co-branding alliance with Lycos, granting FlashNet customers the ability to create customized online start pages using templates. Lycos sloughed off 10 9/16, or 9.7%, to 98 1/8.

General Cable

(GCN)

vaulted 2 13/16, or 29.6%, to 12 5/16 after announcing it will acquire the energy and cable business of U.K.-based

BICC

for $440 million. General Cable later announced its board has approved the repurchase of up to $50 million of its outstanding shares.

Hewlett-Packard

(HWP)

gave up 1/4 to 69 3/4 after setting an alliance with

BEA Systems

(BEAS)

designed to provide customers with a framework for e-commerce applications. Under the pact, Hewlett-Packard will commit $100 million to BEA Systems, which rose 1/8 to 16 3/8, over three years.

Revlon

(REV) - Get Report

flourished 3 9/16, or 17.8%, to 23 9/16 after saying it is considering the sale of one of more of its businesses. Goldman Sachs and

Lazard Freres

have been hired as advisers.

Seagram

(VO) - Get Report

expanded 4 1/16, or 7.4%, to an all-time high of 59 after its

Universal Music

unit and

BMG

, a unit of

Bertelsmann

, unveiled a joint Internet venture, creating an online music store called

getmusic.com

. Also, Seagram said it will sell some

Polygram

assets to

USA Networks

(USAI) - Get Report

, which lifted 1/2 to 36 9/16.

Spyglass

(SPYG) - Get Report

rocketed up 4 5/8, or 51.8%, to 13 5/8 after announcing a development deal with Microsoft that could generate as much as $20 million in revenue over three years.

TCI Music

(TUNE)

soared 17 1/16, or 57.7%, to an all-time high of 46 3/4 following yesterday's announcement it will assume the Internet and interactive TV assets of

Liberty Media

(LMGA)

. Liberty, a unit of AT&T, tacked on 3 1/4, or 5.5%, to an all-time high of 62 1/4.

Earnings/revenue reports and previews

Acclaim Entertainment

(AKLM)

slouched 1 3/8, or 15.4%, to 7 5/8 despite reporting second-quarter earnings of 21 cents a share, in line with the six-analyst view and ahead of the year-ago loss of 2 cents.

Alcoa advanced 2 15/16, or 7.2%, to 44 after reporting first-quarter earnings of 60 cents a share, 6 cents ahead of the 16-analyst forecast but below the year-ago cents 62 cents.

Centura Banks

(CBC)

fell 2 5/16 to 56 1/16 after announcing first-quarter earnings of 94 cents a share, 1 cent shy of the 10-analyst expectation but above the year-ago 85 cents.

Data Dimensions

(DDIM)

skidded 3/4, or 18.2%, to an annual low of 3 13/32 after saying it expects to record first-quarter earnings of 9 cents to 12 cents a share vs. the three-analyst prediction for 21 cents. The company earned 7 cents a year ago.

Engineering Animation sank 18 5/16, or 45.9%, to an annual low of 21 11/16 after warning it expects first-quarter revenue to fall 15% below analysts' expectations and first-quarter earnings to come in below the six-analyst consensus of 26 cents a share.

FVC.com stumbled 6 3/16, or 47.6%, to an all-time low of 6 15/16 after warning of a first-quarter loss of 20 cents to 22 cents a share. The five-analyst forecast called for earnings of 3 cents vs. the year-ago loss of 4 cents. Bear Stearns cut its recommendation to attractive from buy.

Hyperion Solutions

(HYSL)

sloughed off 1 1/16, or 8.3%, to an all-time low of 11 13/16 after saying its third-quarter earnings will fall short of the 12-analyst forecast of 22 cents a share. A year ago, the company earned 21 cents. Goldman Sachs cut its recommendation to market performer from market outperformer.

Maxim

(MXG)

declined 1 1/4, or 11.9%, to 9 1/4 after reporting a fourth-quarter loss of 37 cents a share, excluding one-time gains, vs. the five-analyst estimate of a 10 cent shortfall and year-ago profits of 19 cents.

PictureTel

(PCTL)

shed 1 11/16, or 26%, to 4 3/4, matching an annual low, after saying it expects to lose 68 cents a share in the first quarter vs. the four-analyst estimate of a 9-cent shortfall.

Saville Systems slid 3 13/16, or 37.9%, to an annual low of 6 1/4 after warning it expects to post a first-quarter loss of up to 9 cents a share. The 14-analyst estimate was for a profit of 24 cents a share vs. 23 cents a year ago.

BT Alex. Brown

cut its recommendation to buy from strong buy.

Supervalu

(SVU)

added 3/16 to 20 9/16 after posting fourth-quarter earnings of 45 cents a share, a penny above the six-analyst view and ahead of the year-ago 42 cents.

Symix Systems

(SYMX)

skidded 3, or 30.2%, to an annual low of 7 after saying it sees third-quarter earnings of 9 cents to 11 cents a share vs. the seven-analyst outlook for earnings of 13 cents. The company lost 60 cents a share a year ago.

Valley National Bancorp

(VLY) - Get Report

rose 7/16 to 25 3/16 after recording first-quarter earnings of 46 cents a share, topping the five-analyst prediction by 4 cents and moving ahead of the year-ago 43 cents.

Offerings and stock actions

Asia Pulp & Paper

(PAP)

lost 1 1/16, or 12.4%, to 7 1/2 after the company filed with the

Securities & Exchange Commission

to offer an additional 40.3 million American depositary shares.

InfoSpace.com

(INSP) - Get Report

swelled 22, or 24.6%, to an all-time high of 111 1/2 after announcing a 2-for-1 stock split.

Lucent Technologies

(LU)

rose as high as 67 after closing down 5/8 to 64 following news that Argentine cellular phone operator

CTI Movil

invested $35 million in digital technology provided by Lucent.

Analyst actions

Aavid Thermal Technologies

(AATT)

tacked on 1 3/4, or 14.9%, to 13 5/8 after

Prudential Securities

upgraded it to strong buy from accumulate.

AMR

(AMR)

excelled 13/16 to 66 1/2 after BT Alex. Brown raised it to strong buy from market perform.

Hertz

(HRZ)

dwindled 2 3/4 to 57 1/16 after Merrill Lynch lowered it to near-term neutral from accumulate while keeping its long-term buy.

Orbital Sciences

(ORB)

surged 1 13/16, or 7%, to 27 7/8 after Prudential upped it to accumulate from hold.

Miscellany

PairGain Technologies

(PAIR)

jumped as high as 11 1/8 and closed up 11/16, or 8%, to 9 3/8 on a bogus story saying the company was being bought by Israel's

ECI Telecom

(ECILF)

in a deal valued at $1.35 billion. A link from a Yahoo! message board to a Web site pretending to be

Bloomberg's

reported the false news.

Peapod

(PPOD)

lowered 15/16, or 7.7%, to 11 5/16 on word COO John Walden resigned to become president of the Internet commerce division of

Best Buy

(BBY) - Get Report

, which shed 1 5/16 to 53 1/8.

Watson Pharmaceuticals

(WPI)

grew 3 13/16, or 9%, to 46 on news it will replace

Aeroquip-Vickers

(ANV)

in the S&P 500 after the closing bell Friday. Aeroquip-Vickers is being acquired by S&P 500 component

Eaton

(ETN) - Get Report

.

Univision Communications

(UVN)

climbed 4 9/16, or 9%, to an all-time high of 55 1/2 on the simultaneous announcement it will replace Watson in the

S&P MidCap 400

index.