Wall Street Stays Cool Despite Harsh Selloff

The tech sector is taking a big backward step, but market watchers aren't sweating too hard just yet.
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Little follow-through on gains earned from what amounted to a nonevent isn't something that seems to be worrying people much. At least not yet.

After the

Fed's

widely expected

decision yesterday to leave short-term interest rates alone, today's selloff is instead largely being viewed as further equity consolidation.

"The things that stand out to me are, we're not seeing a follow-through

but we're not looking at a large list of stocks for sale today," said Jon Olesky, head of block trading at

Morgan Stanley Dean Witter

.

The brawny

Nasdaq Composite Index

was down 43 to 2450. Although the tech-stuffed index was up for the day yesterday, a smattering of Internet strength disguised losses from bigwigs like

Microsoft

(MSFT) - Get Report

and

Intel

(INTC) - Get Report

. Lately, Microsoft was off 2% and Intel was off 3.8%. Today, with the notable exception of a group of small online brokers, Internet stocks weren't so lucky.

TheStreet.com Internet Sector

index, which doesn't include any online brokers among its components, was down 1 to 548.

Paul Rabbitt, president of

Rabbitt Analytics

in Los Angeles, said he wasn't concerned about the recent tech selling. "Tech will continue to be the leaders," the strategist said, "because they're the ones who will making positive revisions over the next four quarters. We've seen some weakness over the past few trading days? I would ignore that."

He said he's particularly bullish on semiconductor, software and Internet-service stocks, adding "although Internets are obviously wild I still find them attractive ... there's plenty of room to go. There's a lot of risk there and that's why you have diversified portfolios, to buy only one or two is too much risk."

Despite a mild pop at the open, the

Dow Jones Industrial Average

lately was down 35 to 9332, off its session low of 9274.89. Like one of those swirled half chocolate, half vanilla soft ice cream cones, the components of the blue-chip index looked half up, half down at a glance of a computer screen. Just so happens, however, that the downs (vanilla) were down by more. Hurting the most among the gilded 30 were

General Electric

(GE) - Get Report

,

Hewlett-Packard

(HWP)

,

IBM

(IBM) - Get Report

,

J.P. Morgan

(JPM) - Get Report

and

AT&T

(T) - Get Report

.

The broader

S&P 500

was down 13 to 1259, and the small-cap

Russell 2000

was down 4 to 420.

"I think we're just overextended," Rabbitt said. "We've had a run-up the past 11, 12 trading days that pushed stocks into extended territory. We've gotten some strong earnings numbers, some strong economic numbers and they've deprived investors of the carrot of an interest-rate cut. We've discounted most of the good news at this point. And that leaves us vulnerable."

Adding to that apparently ignored good news today was a string of robust January sales reports and a rumored merger between

General Motors

(GM) - Get Report

and Germany's

BMW

, talk of which has lifted most European bourses.

Beyond tech, Rabbitt also sees buying opportunities in housing-related and traditional brokerage/investment bank names, which he said are due to stage a comeback. Industries where he sees continued frailty include "anything economic-related," such as cyclical and manufacturing stocks. And he expects internationally exposed companies -- soft drinks, packaged foods, cosmetics, specialty foods -- to experience earnings pressure throughout the year.

Market breadth continued to perform poorly. On the

New York Stock Exchange

, decliners were leading advancers 1,785 to 1,006 on 489 million shares. The downs had the ups 2,215 to 1,521 on 646 million shares in

Nasdaq Stock Market

activity.

Over in the bond market, a drop in

initial jobless claims

and talk that the January

employment report

will be strong were keeping traders busy. The 30-year Treasury was down 26/32 to 99 4/32, lifting its yield to 5.31%, around the highest it's been in nearly three months. (For more on the fixed-income market, see today's early

Bond Focus.)

As for

Greenspan

& Co., Rabbitt said he doesn't expect to learn the Fed moved to a tightening bias yesterday. "There's still plenty of international uncertainty, and they're still looking for the effects of the easing this fall. It takes nine months or so for this stuff to filter into the economy. But I'll tell you one thing: I don't expect to see any further cuts this year -- that environment is over. I think they want to leave a cushion to cut rates at the new year for the

year 2000 issues, to restore confidence in that environment."

Thursday's Midday Movers

By Aaron L. Task
Senior Writer

Advanced Micro Devices

(AMD) - Get Report

was down 2 3/8, or nearly 12%, 18 9/16 after

Merrill Lynch

semiconductor analyst Thomas Kurlak downgraded the chipmaker to neutral from accumulate. The downgrade came a day after AMD backed out of an appearance at the

NationsBanc Montgomery Securities Technology Week Conference

last night.

Kurlak also took his rusty old ax to longtime nemesis Intel, cutting his earnings estimates for Intel for the first quarter and the full year. Intel was lately down 5 1/8, or 3.8%, to 133 3/8.

E*Trade Group

(EGRP)

was suffering a second day of service outages, but its stock was down just 1/8 to 55 1/8. Other online brokers were soaring, however.

National Discount Brokers Group

(NDB)

was lately up 3 11/16, or 9%, to 41;

J.B. Oxford

(JBOH)

was higher by 6 13/16, or 56.5%, to 18 11/16;

M.H. Meyerson

(MHMY)

was lately higher by 7, or 94.9%, to 14 3/8; and

Siebert Financial

(SIEB) - Get Report

was up 9 3/4, or 19.7%, to 59 1/4. Conversely,

Ameritrade

(AMTD) - Get Report

was lately off 6 3/8, or 5%, to 122 7/8.

New York Attorney General

Eliot Spitzer

announced an inquiry into the online brokerage industry in response to customer complaints about trading delays and technology problems. He is sending letters to several online firms, asking them to provide information about their services. He said in a press release that he is seeking voluntary cooperation from the industry to resolve the problems and develop safety precautions. Friday, a questionnaire for online investors with be posted on the attorney general's

Web site .

Earnings movers

Boron LePore

(BLPG)

was tumbling 12 11/16, or 44.1%, to 16 1/16 after posting fourth-quarter earnings of 24 cents a share, a penny shy of the four-analyst estimate but up from 16 cents a year earlier.

Cerner

(CERN) - Get Report

was down 7 5/16, or 30.5%, to 16 11/16 despite posting fourth-quarter earnings of 24 cents a share

last night, a penny ahead of the 24-analyst estimate and up from 16 cents a year ago. Something the company said must not have sat well with analysts; today,

Bear Stearns

,

BT Alex. Brown

,

Merrill Lynch

,

Goldman Sachs

and

ING Baring Furman Selz

separately cut recommendations.

Fort James

(FJ)

was lately down 4 1/4, or 12.1%, to 31 although its fourth-quarter earnings of 63 cents a share were a penny ahead of the 11-analyst consensus and up from 48 cents a year ago.

W.R. Grace

(GRA) - Get Report

was up 13/16, or 5.8%, to 14 13/16 after posting fourth-quarter earnings of 33 cents a share, excluding one-time charges, three cents better than the four-analyst estimate. A year ago, the company earned 90 cents a share.

JetForm

(FORMF)

was down 5 3/16, or 46.1%, to 6 1/32 after warning it expects to report a third-quarter loss of around 36 cents a share vs. a profit of 36 cents a year ago. The six-analyst consensus was for earnings of 13 cents a share.

IXC Communications

(IIXC)

was up 10 9/16, or 32.1%, to 43 1/2 after reporting a fourth-quarter loss of $1.17 a share, wider than the 99-cent loss of a year ago but better than the $1.59 shortfall of the 11-analyst consensus. The company said it has hired

Morgan Stanley Dean Witter

to help it explore strategic alternatives.

Lincoln Electric

(LECO) - Get Report

was down 1 1/8, or 5%, to 21 1/4 after posting fourth-quarter earnings of 44 cents a share, up from 41 cents a year ago but a penny shy of the four-analyst consensus.

Maytag

(MYG)

was down 4 1/2, or 7%, to 58 3/8 despite posting fourth-quarter earnings of 75 cents a share, up from the year-ago 54 cents, both excluding items. Maytag beat the seven-analyst view of 71 cents.

Orbital Sciences

(ORB)

was down 5 3/8, or 13.9%, to 33 3/8 after warning it sees fourth-quarter earnings falling below the eight-analyst view of 23 cents a share. A year ago, the company earned 18 cents.

OSI Systems

(OSIS) - Get Report

was lately down 1 3/4, or 17.7%, to 8 1/8 after posting second-quarter earnings of 20 cents a share, 2 cents shy of the three-analyst view and down from 24 cents a year ago.

Timberland

(TBL)

was up 7 15/16, or 15.5%, to 59 1/4 after posting fourth-quarter earnings of $1.80 a share, up from $1.48 a year ago and 14 cents better than the two-analyst average. BT Alex. Brown upped its recommendation to buy from market performer.

World Color Press

(WRC)

was up 1 7/8, or 7.7%, to 26 3/16 after posting fourth-quarter profits of 63 cents per share, a penny better than the eight-analyst consensus and up from 62 cents a year ago. The company said it expects to double its acquisition activities in 1999.

In other news:

A host of names in assisted living were getting shellacked this morning after

BancBoston Robertson Stephens

suspended ratings on four companies, citing uncertainty surrounding an expected government report on the industry.

Alternative Living Services

(ALI)

was lately down 3 9/16, or 13.8%, to 22 5/16;

Balanced Care

(BAL) - Get Report

was off 1 1/2, or 22.2%, to 5 1/4;

CareMatrix

(CMD) - Get Report

was lower by 4 1/4, or 17.7%, to 19 3/4; and

Sunrise Assisted Living

(SNRZ)

was lately down 4 1/4, or 10.3%, to 37 1/4.

Asarco

(AR) - Get Report

was up 1 3/16, or 8.8%, to 14 3/4 after Morgan Stanley Dean Witter upped its rating on the copper producer to outperform from neutral. Morgan also raised recommendations on

Cyprus Amax Minerals

(CYM)

, lately up 1 3/8, or 14.1%, to 11 1/8, and

Phelps Dodge

(PD) - Get Report

, recently higher by 4 3/16, or 9.7%, to 47 3/16.

J. Ray McDermott

(JRM)

was up 2 1/4, or 9.4%, to 26 1/4 after tendering to buy its $250 million of outstanding senior subordinated notes, due 2006.

Mony Group

(MNY)

was down 2 1/8, or 7.6%, to 25 7/8 after

The Wall Street Journal

reported the

Securites and Exchange Commission

is investigating the accounting practices of the firm's

Mutual Life Insurance Co. of New York

unit.

Perot Systems

(PER) - Get Report

was enjoying a third day of robust gains since coming public; lately, the technology services firm was up 14 1/8, or 22.8%, to 76 1/2.

Trimeris

(TRMS)

was lately up 3 1/2, or 16.8%, to 24 7/8 after saying it received fast-track status from the

Food and Drug Administration

for its

HIV T-20

, the first of a new class of HIV drugs.

Staff reporter Amy Olmstead contributed to this story

.