Wall Street Worries as Market Tumbles Through Technical Levels
We are not a technical analyst, nor do we play one on TV. But (in the spirit of
CNBC's
Bob Pisani
) when market players begin expressing concern about the technical outlook for some of the market's biggest names, we are compelled to pay attention.
Building on
yesterday's misery, technology bellwethers of both the traditional and Internet variety led another downturn for stocks today as an early-morning rally attempt faltered badly. Meanwhile, prominent names in the high-tech group were found guilty of violating key technical levels.
The
Nasdaq Composite Index
rose as high as 2466.17 early on, only to stumble precipitously in the afternoon to close down 72.77, or 3%, to 2380.99. The index is now down 10.2% from its
April 26 all-time closing high of 2652.05 and officially in a corrective phase.
Internet stocks also carried on with their wayward (son) ways, sending
TheStreet.com Internet Sector
index down 26.38, or 4.6%, to 550.30. The DOT is down 30.3% from its all-time best of 790.44 and officially in a bear-market mode.
The Comp was led lower by
Cisco
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TheStreet Recommends
,
Sun Microsystems
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and
Intel
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; the
Nasdaq 100
fell 3% while the
Philadelphia Stock Exchange Semiconductor Index
shed 5.5%.
Intel fell 5.5% to 52 7/8, and its fall below 55 is significant -- and troubling, according to those with a technical bent.
"How else can you describe a six-month closing low?" asked Greg Nie, chief technical analyst at
Everen Securities
in Chicago. "It does raise the risk you'll start shaking out holders of the stock. Then it's not all that difficult to push Intel into the upper 40s and some would argue that's being a little generous. If a certain institution located in Boston that has a big holding looks for the exits, this thing will get beat up a little more."
Intel is the "best example," but there are several names among technology, Internet, and financial leaders where "the risk level is fresh because of a breakdown on the charts," Nie said.
Others include
Dell
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, which fell another 4.3% to 34 9/16 after yesterday closing below its 200-day moving average (currently 36 9/16) for the first time in three years.
"If it keeps going marginally lower from here, it could become dead money," Nie said of a stock which has risen more than 61,000 (yes, thousand) percent in the 1990s. "You get discouraged at how much resistance you have to work through on a subsequent rebound. The next layer of support is in the low 30s. But at the same time, what had been support in the upper 30s now becomes resistance."
'I'm not saying I'm happy to see the market down like it's been for the last five or six days, but I still don't think it's the end of the world,' said Daiwa's Ned Collins. 'People were getting too cocky, too complacent, and you need to have these periods.'
Looking at other sacred tech cows, the technician said
America Online
(AOL)
is "close" to exuding the "same kind of risk profile," dubbing 115 a "pivotal area." Today, AOL slid 3.4% to 115 1/2.
"At same time," Nie added, "this still looks like a temporary pullback in a broad-market sense because volume is still light,
which is the strongest piece of evidence it's a temporary pullback."
However, trading volumes increased today and market internals worsened.
In
New York Stock Exchange
trading, 825.8 million shares were traded -- its first plus-800-million-share day since May 12 -- while declining stocks bested advancers 1,909 to 1,083. In
Nasdaq Stock Market
activity, 1.06 billion shares were exchanged while losers led 2,528 to 1,488. New 52-week lows led new highs 64 to 21 in Big Board activity and by 64 to 41 in over-the-counter trading.
Today's Net stock weakness was more troubling because it emerged despite a
Credit Suisse First Boston
upgrade of
Lycos
(LCOS)
, which closed down 0.8% to 96 1/2 after rising as high as 105 3/4, and some generally positive comments from Henry Blodget of
Merrill Lynch
.
There was some success among secondary and new tech names, however.
Brocade Communications Systems
(BRCD:Nasdaq), which develops connectivity technology, soared 138% from its IPO price of $19. Separately,
SpeedUs.com
(SPDE)
leapt 72.9% after announcing a licensing deal with Cisco.
FTU You, Too
Blue-chips fared better early on, but ultimately succumbed to weakness in techs as well as renewed selling in financials. Still recovering from yesterday's unmerciful
sell call by Michael Mayo of CSFB, the group was rattled by a profit warning from
First Union
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, which lost 8.6%. The
Philadelphia Stock Exchange/KBW Bank Index
shed 3.6% while the
American Stock Exchange Broker/Dealer Index
shed 4.1%.
Elsewhere,
McKesson HBOC
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lost 12.3% after redoubling its profit warning efforts.
The
S&P 500
, once as high as 1317.48 closed down 22.25, or 1.7%, to 1284.40. The
Dow Jones Industrial Average
shed 123.58, or 1.2%, to 10,531.09 vs. its intraday best of 10754.66.
J.P. Morgan
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,
Alcoa
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and
IBM
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led Dow laggards.
The
Russell 2000
dipped 5.94, or 1.4%, to 434.45.
"The market tried its best to fend off some pretty heavy negative news in the last few weeks," said Ned Collins, executive VP of U.S. stocks at
Daiwa Securities America
. "It seemed like yesterday when that recommendation came out to sell major money-center banks, it had a negative effect. Today, it's pretty much across the board -- banks and brokers got creamed, semis and Internets are down big."
Like most, Collins believes the bull market remains intact and said it's "probably a healthy thing" for the major averages to correct.
"I'm not saying I'm happy to see the market down like it's been for the last five or six days, but I still don't think it's the end of the world," he said. "People were getting too cocky, too complacent, and you need to have these periods" of weakness.
The trader observed bonds "are not acting all that bad" and there's still merger and acquisition activity, although
Georgia-Pacific
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stumbled 10.8% on word it is acquiring
Unisource Worldwide
(UWW)
, which gained 9.3%.
One concern is hearing others say, "'Give me a 10% correction and I've got money to put to work,'" Collins said. "I'd love to see this thing correct a good 10, 12 percent, then sit there and lick wounds for while. But if we try to rally 'em here, I think it could be dangerous."
Utilities again stood out on the upside. The
Dow Jones Utility Average
rose 1.05, or 0.3%, to an all-time high 328.48.
Among other indices, the
Dow Jones Transportation Average
fell 20.47, or 0.6%, to 3453.33 and the
American Stock Exchange Composite Index
shed 6.57, or 0.8%, to 778.84.
The price of the 30-year Treasury bond rose 2/32 to 92 27/32, its yield dipping to 5.76%.
Elsewhere in North American equities, the
Toronto Stock Exchange 300
fell 166.46, or 2.4%, to 6799.51 and the
Mexican Stock Exchange IPC Index
slid 57.73, or 1.1%, to 5441.06.
Tuesday'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.
)
barnesandnoble.com
(BNBN:Nasdaq) closed up 4 15/16, or 27.4%, to 22 15/16 following an earlier high of 26 1/2 after
Goldman Sachs
late yesterday priced its 25 million-share IPO top-range at $18 a share. The online bookseller is owned by
Barnes & Noble
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and
Bertelsmann
and is a rival of
Amazon.com
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, which slid 5 15/16, or 5.1%, to 111 9/16.
First Union sank 4 5/16, or 8.6%, to 45 5/8 after warning it sees second-quarter and full-year 1999 earnings falling short of estimates. For the quarter, the company expects to earn 80 cents to 83 cents a share, which would miss the 22-analyst view of 97 cents. And for the year, the bank expects to earn $3.40 to $3.50 a share, which would miss the 25-analyst forecast of $3.98.
J.P. Morgan
lowered the stock to market performer from buy.
Everen Capital
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, which First Union agreed to buy earlier this year, sank 2 3/16, or 8.2%, to 24 1/2.
As noted above, Internets tried to generate a forward charge, but to no avail.
Lycos closed down 3/4 to 96 1/2, off an earlier high of 105 3/4, after Credit Suisse First Boston Internet analyst Lise Buyer upgraded the stock to buy from hold. In a research note, Buyer wrote Lycos has "significant unrealized potential." She also noted that this is the third time in the past eight months that Internet stocks have seen a downturn and that each case has been "a catalyst for significant M&A activity in the group." Lycos will join the Nasdaq 100 Friday.
Elsewhere on the Net, SpeedUs.com soared 2 11/16, or 72.9%, to 6 5/8, which is below an earlier high of 9 1/4, after the wireless Internet service provider announced a deal with Cisco giving it new video capabilities. And
Gemstar
(GMST)
lowered 1/4 to 59 1/2 after an earlier high of 64 after America Online signed a long-term licensing pact to use the company's technology to develop electronic programming guides. AOL plans to launch
AOL TV
next year.
Finally,
Macromedia
(MACR)
tanked 4 1/4, or 9.3%, to 42 even after forming an alliance with
@Home
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to provide personalized Web content and develop new online ads. @Home skidded 2 9/16 to 112 13/16.
Mergers, acquisitions and joint ventures
Belden
(BWC)
vaulted 3 1/8, or 15.4%, to 23 7/16 after last night agreeing to acquire privately held
Cable Systems Holding
for $180 million in cash. Today,
ING Baring Furman Selz
upgraded the stock to strong buy from hold.
Federated Department Stores
undefined
gave up 1 3/4 to 53 13/16 after agreeing to create an in-store and online bridal registry with
WeddingChannel.com
.
Synetic
(SNTC)
sliced off 11 1/2, or 11.5%, to 88 1/2 after announcing it will buy
Associates First Capital's
(AFS)
Med-Link
unit for $14 million. Associates picked up 1/16 to 39 1/4.
TNP Enterprises
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, the parent company of
Texas-New Mexico Power
, jumped 3 3/8, or 9.7%, to 38 5/16 after an investor group led by William Catacosinos, former CEO of
Long Island Lighting Co.
, agreed to acquire the company for about $1 billion, including assumed debt.
Earnings/revenue reports and previews
Albertson's
(ABS)
added 11/16 to 54 7/16 after posting first-quarter earnings of 57 cents a share, in line with the 18-analyst estimate and up from the year-ago 45 cents.
Cole National
(CNJ)
declined 1 7/8, or 15.4%, to an annual low of 10 5/16 after reporting first-quarter earnings of 20 cents a share, 7 cents below the four-analyst estimate and behind the year-ago 40 cents.
As mentioned above, Georgia-Pacific dwindled 10 3/8, or 10.8%, to 86 despite saying it expects its acquisition of Unisource Worldwide to boost earnings by more than $1 a share in fiscal 2000. Unisource rose 1, or 9.3%, to 11 3/4.
J. Baker
(JBAK)
lost 11/16, or 8.7%, to 7 1/4 despite reporting first-quarter earnings of 7 cents a share, 2 cents higher than the three-analyst view and above the year-ago 4 cents.
JLG Industries
(JLG)
climbed 3/4 to 18 3/4 after posting third-quarter earnings of 39 cents a share, 3 cents above the seven-analyst estimate and ahead of the year-ago 32 cents.
Just For Feet
undefined
shed 1 3/4, or 16.7%, to an annual low of 8 13/16 after posting first-quarter earnings of 15 cents a share, missing the seven-analyst estimate by 2 cents and falling below the year-ago 19 cents. Blaming lower gross margins, the company said it sees a second-quarter loss.
BT Alex. Brown
lowered the stock to market perform from buy.
Merrill Lynch
cut it to near-term neutral from buy and long-term accumulate from buy.
McKesson HBOC, which last month saw a sharp drop in its stock after revising downward estimates for its fourth quarter, fell 4 11/16, or 12.3%, to 33 1/2 after saying "further downward revision will be required of those fiscal year's results as well as quarterly results during the fiscal year." The company said auditors have found additional improper recognition of software sales, which was the culprit for the last warning.
Polo Ralph Lauren
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shaved off 2 1/2, or 10.5%, to 21 3/8 after posting fourth-quarter earnings of 27 cents a share, in line with the 13-analyst estimate but down from the year-ago 29 cents.
Promus Hotel
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collapsed 5 3/8, or 17.6%, to 25 1/8 after slashing earnings targets for 1999, blaming softening market conditions, repositioning actions of the
Doubletree
brand and deteriorating performance of
Red Lion
-related hotels. The company sees annual earnings-per-share growth in the mid-single digits, down from previous expectations in the mid-teens. In sympathy,
Starwood Hotels
(HOT)
gave up 1 3/16 to 34.
Spartech
(SEH)
hopped up 2, or 9%, to 24 5/16 after recording second-quarter earnings of 38 cents a share, 2 cents ahead of the five-analyst forecast and above the year-ago 31 cents.
Offerings and stock actions
Brocade Communications Systems shot up 26 1/4, or 138.1%, to 45 1/4 after
Morgan Stanley Dean Witter
priced its 3.25 million-share IPO above-range at $19 a share. The company is a supplier of switches computers use to save information.
TC PipeLines
(TCLPZ:Nasdaq) added 1/16 to 20 9/16 after Goldman Sachs priced its 11.5 million-share IPO low-range at $20.50 a share late yesterday. Calgary-based TC PipeLines was recently formed to acquire, own and participate in the management of U.S.-based pipeline assets.
Analyst actions
Avis
(AVI)
dropped 1 1/8 to 26 7/8 following a downgrade by J.P. Morgan to market perform from buy. Yesterday, the company agreed to buy
Cendant's
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auto leasing and fleet management business for $1.8 billion.
Chase
(CMB)
lowered 2 1/16 to 73 13/16 and
Citigroup
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lowered 2 3/8 to 62 3/4 despite an upgrade to buy from hold from
Banc of America
. The upgrade comes a day after Credit Suisse First Boston analyst Mike Mayo cut four blue-chips banks, including Chase and Citi.
CMGI
(CMGI)
tumbled 19 9/16, or 9.3%, to 191 1/2 even after
Prudential Securities
initiated coverage with a strong buy. The firm also set a 12-month price target of 280 a share and a two-year target of 400. Prudential said the Internet venture-capital firm "represents a unique and nonreplicable investment vehicle that has proven success, a strong pipeline, vision and operating experience that warrants a premium valuation."
Micron Technology
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slipped 1 11/16 to 34 1/2 after ING Baring Furman Selz lowered it to sell from hold based, in part, on possibly lower-than-expected anti-dumping duties imposed by the
Commerce Department
on Taiwanese DRAM memory chips.
MPath Interactive
(MPTH)
plunged 3 7/16, or 13.1%, to an all-time low of 22 7/8 even after
Warburg Dillon Read
initiated coverage with a buy, saying: "We believe the demand for live communities could grow substantially and believe MPath is well positioned to take advantage of this growing demand."
Providian Financial
(PVN)
sliced off 3 11/16 to 96 even after
CIBC World Markets
started coverage with a strong buy.
Miscellany
Compaq
(CPQ)
gave up 1 1/4 to 23 13/16 after cutting prices on a wide range of its
Deskpro
desktop PCs. The PC maker said prices on selected models of its Deskpro EP and EN Series were reduced up to 14%.
Fuisz Technologies
(FUSE)
stumbled 2 3/8, or 36.9%, to an all-time low of 4 after CEO Kenneth W. McVey resigned. Chairman Richard C. Fuisz will serve as acting chief executive. The company also said it sees a loss for the second quarter. The three-analyst estimate called for a quarter profit of 1 cent a share vs. the year-ago loss of 26 cents.
Harnischfeger Industries
(HPH)
sloughed off 1/8 to 8 11/16 after naming John Nils Hanson CEO and Robert B. Hoffman nonexecutive chairman.
