Washingtonian Worries Damp Enthusiasm Over Auto Merger

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Who says there's no reverence for the authority of the central government anymore?

No,

Clinton

hasn't quite ruined everything yet. The warlords of Washington continue to matter -- at least to Wall Street.

So much so that yesterday's meeting with the president,

Fed Chairman Alan Greenspan

and

Treasury Secretary Robert Rubin

and Friday's jobs report are weighing heavier on the market today than the announcement of a potential merger between Germany's

Daimler-Benz

(DAI)

-- a combination that would value the third-largest U.S. car maker at $35 billion. Investors are wringing their cash-holding hands, consumed with interest-rate worries, instead of celebrating the possibility of the largest industrial merger in history.

"This is big news," said Scott Bleier, chief investment strategist at

Prime Charter

. "Certainly the most exciting thing to happen to the auto industry in decades.

"But the market is preoccupied with other things. The market is in the midst of anxiously awaiting the Fed's numbers. We are at historic valuations and there is a high level of uncertainty. And that uncertainty has put a pause in the market. Investors are waiting for a new implied promise of stable rates."

Besides, he said, this is the market of

K-tels

(KTEL)

and

EntreMeds

(ENMD)

-- powered by individual stock and, if you're lucky, industry movements, not marketwide behavior.

Indeed, around 12:45 p.m. EDT -- as Chrysler was rallying up 6 3/8, or 15.4%, to 47 13/16 and Daimler was up 6 13/16, or 6.7%, to 108 7/8 -- the

Dow Jones Industrial Average

was down 43 to 9105, after spending its first half-hour slightly above the flatline.

Leading Dow components on the downside was

Procter & Gamble

(PG) - Get Report

, off 1 5/8 to 82 1/16.

General Motors

(GM) - Get Report

, up 1 to 69 7/16,

Goodyear Tire & Rubber

(GT) - Get Report

, up 1 5/8 to 70 1/4, and

IBM

(IBM) - Get Report

, up 5/8 to 118 3/16, were among the handful of blue chips in the green.

The broad

S&P 500

was down 6 to 1109 and the small-cap

Russell 2000

was down less than 1 to 481. And the

Nasdaq Composite Index

was having some technical difficulty, down 4 to 1861. The benchmark 30-year Treasury was up 4/32 to 102 9/32, its yield easing to 5.96%.

New York Stock Exchange

decliners were outpacing advancers by 16 to 11 on 322 million shares. The Nasdaq losers-to-winners ratio was 10 to 9 on 415 million shares.

Bleier said this kind of market conduct signals the beginning of one of two scenarios.

"Either we're going into an immediate consolidation -- with a long, slow, hot and hard volatile summer with lots of rotation setting the up and low boundaries," he said, adding that he leans toward this one. "Or we'll have a parabolic blowoff to 9500, 9600, then back to the 8600 range. We're not going to have that 5% to 10% correction that everybody's been talking about. It doesn't happen that easily.

"We still have individual investors as a complacent bunch," Bleier continued. "We don't have a change in fundamentals as a backdrop; we have Internet stocks and biotechs. We have whoever's online, the Internet chat guys, contributing to a high level of volatility, especially on the Nasdaq."

Wednesday's Midday Movers

By

John J. Edwards III
Markets Editor

And it's not even on the Internet:

General Magic

(GMGC)

was up 4 11/32, or 46.8%, to 13 5/8 after announcing that it is about to release a voice-activated data-retrieval service called Portico. The service, letting "mobile professionals" access email, voice mail, stock quotes and other information via telephone, will be available July 30.

EntreMed (or BetweenMed, for you non-French-speakers) was down 7 15/16, or 18.4%, to 35 1/4 on the spreading realization that (a) it's very hard to cure cancer and (b) plenty of other companies are trying to do it.

Boston Life Sciences

(BLSI)

was down 1 1/16, or 21.1%, to 3 31/32 and

Agouron Pharmaceuticals

(AGPH)

was off 1/2 to 36 3/8, but

Techniclone

(TCLN)

was up a further 5/16, or 23.8%, to 1 21/32 and

Oxigene

(OXGN)

was up 1 3/8, or 9.6%, to 15 15/16. Techniclone is working on a cancer drug, and Oxigene expects to begin human testing of one within six months.

PolyGram

(PLG) - Get Report

was up 5 1/8, or 11.7%, to 48 15/16 after saying it would explore strategic options to increase shareholder value.

CarMax

(KMX) - Get Report

was down 15/16, or 7.4%, to 11 3/4 after reporting a 9% decline in April comparable-store sales.

Circuit City Stores

(CC) - Get Report

, parent of CarMax, was up 3/4 to 41 9/16 on a 1% rise in comparable-store sales at its Circuit City locations.

Alaska Air

was down 3, or 5.8%, to 48 7/8 after reporting a small year-over-year decline in its April load factor.

Echlin

(ECH) - Get Report

was down 2 3/16 to 48 9/16 after

SPX

(SPW)

withdrew its offer to acquire the company. In other words, no bidding war. Echlin on Tuesday agreed to be acquired by

Dana

(DCN)

, which played the white-knight role in Echlin's battle to avoid SPX. SPX was up 2 to 73 5/8 and Dana was down 2 to 53 5/8.

National Surgery Centers

(NSCI)

was up 1 1/4 to 29 1/8 after

Healthsouth

(HRC) - Get Report

agreed to acquire it for about $590 million in stock. Healthsouth was down 3/16 to 29 13/16.

Cox Communications

(COX)

was up 1 5/8 to 48 1/8 after late yesterday agreeing to acquire 80% of a Las Vegas cable system for $1.3 billion in cash, stock and debt assumption.

Earnings movers

Cisco

(CSCO) - Get Report

was up 1 3/8 to 74 7/8 after late

yesterday reporting better-than-expected third-quarter earnings. Elsewhere in networking,

Ascend

(ASND) - Get Report

was up 1 1/2 to 43 1/2,

Bay Networks

(BAY)

was up 9/16 to 24 3/16,

Fore Systems

(FORE)

was up 3/16 to 23 5/8,

3Com

(COMS)

was down 1/8 to 34 5/16 and

Newbridge Networks

(NN)

was down 1 to 30 11/16.

Sealed Air

(SEE) - Get Report

was down 10 1/16, or 16%, to 52 13/16 after late

yesterday reporting disappointing first-quarter results.

Kent Electronics

(KNT)

was up 2 7/16, or 11.9%, to 22 15/16 after late

yesterday reporting solid fourth-quarter earnings.

Ilex Oncology

(ILXO)

was down 1 11/16, or 10.1%, to 15 1/2 after reporting a first-quarter loss of 57 cents per share. The two-analyst projection called for a loss of 22 cents versus the year-ago loss of 4 cents.

Allied Group

(GRP)

was down 2 1/16, or 7.1%, to 26 7/8 after late yesterday saying it expects its third- and fourth-quarter earnings to be reduced by 1 cent per share because of a change in a pooling agreement between its property-casualty operation and its

Allied Mutual Insurance

unit. The eight-analyst estimate called for third-quarter earnings of 59 cents per share and fourth-quarter earnings of 59 cents.