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Week Ends on a Down Note as Greenspan Calls the Tune

The Fed chairman's words mingled with technical factors to send major indices tumbling into the weekend.
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It may not have been intentional and certainly wasn't Sicilian, but the market's Godfather sent a message today that Wall Street took to heart.

Although many interpretations of

Federal Reserve

Chairman

Alan Greenspan's

speech were proffered (as is often the case), Wall Street was rattled somewhat by the chairman's focus on the relationship between asset prices and Fed policy. Remarks such as "sharp reversals in confidence happen abruptly" and "apparent overestimate of earnings that occurs as a result of the distortion in the accounting for stock options" provided ample fodder for both stocks and bonds to retreat from recent gains.

The price of the 30-year Treasury bond fell 1 1/32 to 102 3/32, its yield rising to 5.97%.

Declines for major stock averages were certainly contained, leaving market players largely unperturbed. But others see disquieting signs in the market's recent action, notwithstanding today being the most sparsely traded session of the year and records set earlier this week by the most public face of equities.

Today, the

Dow Jones Industrial Average

fell 108.28, or 1%, to 11,090.17, pressured most notably by

American Express

(AXP)

,

General Electric

(GE)

and

AT&T

(T)

.

Financials in general weakened in concert with the bond market, leading the

S&P 500

down 13.74, or 1%, to 1348.27. The

Philadelphia Stock Exchange/KBW Bank Index

fell 0.9% while the

American Stock Exchange/Broker Dealer Index

slid 2.6%. Consumer names also weighed on the index as the

Morgan Stanley Consumer Index

and

American Stock Exchange Pharmaceutical Index

each fell over 1.5%.

Bellwether tech names were mixed, but weakness in

Microsoft

(MSFT)

and

Dell

(DELL)

overshadowed strength in names such as

Intel

(INTC)

. The

Nasdaq Composite Index

fell 15.73, or 0.6%, to 2758.89, pressured by Internet favorites -- especially online brokers -- as well as second-tier tech names such as

Qualcomm

(QCOM)

, which fell 3.6%.

The

Nasdaq 100

fell 0.6%, while the

Morgan Stanley High-Tech 35

gained 0.1%, thanks to strength in

New York Stock Exchange

-traded tech stalwarts such as

Hewlett-Packard

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and

Motorola

(MOT)

. The

Philadelphia Stock Exchange Semiconductor Index

gained 0.7%.

TheStreet.com Internet Sector

index fell 2.46, or 0.4%, to 573.99, with notable weakness evinced by

Yahoo!

(YHOO)

and

E*Trade

undefined

. The latter fell 6.5% and

Ameritrade

(AMTD)

lost 6.1% after

Lehman Brothers

downgraded the online brokers. Their peers fell in sympathy, including industry leader

Charles Schwab

(SCH)

down 4.4%, and smaller players such as

Knight/Trimark Group

(NITE)

, off 8.3%.

The

Russell 2000

fell 3.57, or 0.8%, to 432.45, reflecting downward-leaning market internals.

The market's technical outlook is "very mixed at best," according to John Bollinger, president of

EquityTrader.com

in Manhattan Beach, Calif. "We went from a very positive picture early in the year to a very mixed picture at present."

That mixed picture is evident in the rising levels of stocks at new 52-week lows, the "shlumping" advance/decline line and the fact that the

S&P MidCap 400

"failed to participate in this recent rebound off the lows," Bollinger said. The MidCap 400 fell 1.2% today.

"The list of reasons to be bullish is short, the list of reasons to be bearish is increasingly mounting," the technician said, noting the Fed's recent tightening and the fact that a "rotten seasonal period" is forthcoming.

EquityTrader.com's "official" market outlook is "neutral." But Bollinger recommends investors "plan on raising cash in accounts where appropriate."

In NYSE trading, 570.1 million shares were exchanged -- the lightest volume since Dec. 28 -- while declining stocks led advancers 1,760 to 1,107. In

Nasdaq Stock Market

action 810.1 million shares traded while losers led 2,134 to 1,717. New 52-week lows bested new highs 35 to 34 on the Big Board but new highs led 90 to 59 in over-the-counter trading.

No News Is Bad News for Bulls

"Greenspan didn't say anything new," said Lisa Cullen, an equity strategist at

Merrill Lynch

, when asked about the chairman's comments. "He has many of the same concerns we've had. We had an earnings recession for two years and have had some questions as to accounting practices all along,

but asset prices have not slowed down their climb."

While agreeing on the accounting issue, the Fed is "still fighting the last battle, the 1970s and inflation," Cullen contends. "That's not where we are anymore. We think real yields are way too high."

As for the market's performance today, the strategist chalked it up largely to traders using Greenspan's comments as an "excuse" to sell in a "thinly traded" market.

"There's no real direction here," she said. "Financials continue to be weak, tech is mixed: Microsoft is down but everybody else is up. There's no clear direction in cyclical and growth

stocks. It looks like same market we had the week before the

FOMC

meeting. I think there isn't a lot of news, and not a lot of people sitting at trading desks. We'll maybe see a clear turn in direction in early September when kids go back to school and everybody is back" at work.

Regarding today's reports about the departure of Merrill's chief equity strategist Charles Clough, Cullen expressed personal disappointment but said there's "too much uncertainty" to comment on what the news means for the department.

The strategist took umbrage with reports Merrill brokers were unhappy with Clough's market calls.

"Chuck had a lot of fans," she said. "A lot of people are sad to see him go. Brokers unhappy

with him focused on the asset-allocation/capital-appreciation

model. We have five other portfolios. I think it's hard for brokers -- there's a lot of research thrown at them. Maybe there wasn't enough education done."

Among other indices, the

Dow Jones Transportation Average

fell 42.51, or 1.3%, to 3171.35; the

Dow Jones Utility Average

slid 0.80, or 0.3%, to 320.93; and the

American Stock Exchange Composite Index

lost 1.60, or 0.2%, to 782.52.

For the week, the Dow lost 0.1%, the S&P rose 0.9%, the Nasdaq jumped 4.2%, the Russell slipped 0.4%, the DOT gained 4.5%, the Dow transports rose 0.7%, the Dow utilities added 0.4% and the Amex Composite slid 0.3%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

slid 52.94 to 7106.21 and the

Mexican Stock Exchange IPC Index

fell 97.61, or 1.8%, to 5252.33. For the week, the TSE 300 slipped 0.3% and the IPC surged 3%.

Friday's Company Report

By Tara Murphy
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.

)

Mergers, acquisitions and joint ventures

The

Justice Department

gave

AK Steel Holding

(AKS)

the green light to continue with its estimated $842 million acquisition of

Armco

undefined

. AK Steel said both companies' stockholders are set to render a verdict on the deal during their meetings on Sept. 29. The justice department approval gave way to AK Steel awarding

Wheeling-Nisshin

certain rights connected to a kind of stainless steel strip used in automotive exhaust systems applications. This would permit Wheeling-Nisshin, a joint venture between

WHX's

undefined

Wheeling-Pittsburgh Steel and Japan's

Nisshin Steel

, to continue projects that began through agreements with Armco. AK shares were off 9/16 to 20 3/8, while Armco increased 1/8 to 6 3/4. Shares of WHX advanced 1/16 to 8 7/16.

Calpine

(CPN)

declined 1 1/8 to 86 1/8 after said it forged a deal to acquire 80% of industrial energy producer

Cogeneration

undefined

for an estimated $145 million, or $25 a share.

Northern States Power

(NSP)

subsidiary

NRG Energy

will hold the remaining 20% interest. Earlier this week, Calpine agreed to pay about $41 million for natural gas exploration and production company

Sheridan Energy

undefined

.The deal, which is set to close in January 2000, calls for each Cogeneration stockholder to receive $25 in cash for each share. Cogeneration shares jumped 7 7/16, or 46.4%, to 23 7/16.

In a joint statement,

CompUSA

undefined

and

America Online

(AOL)

announced plans to connect, literally. CompUSA will install a button on its PCs that enables the units to link up with AOL's Internet service. CompUSA shares climbed 1/16 to 7 3/16, while AOL slid 1 5/16 to 99 1/8.

Medtronic

(MDT)

slipped 2 1/8 to 74 9/16 after it said it is buying

Xomed Surgical Products

undefined

for $800 million in stock. Shares of Xomed leaped 6 1/4, or 12.2%, to 57 5/8.

Viatel

undefined

declined 2 13/16, or 6.7%, to 39 1/16 after it announced plans to acquire

Destia Communications

undefined

in a stock swap that values Destia at $18.63 a share. Destia hopped 2 11/16 to 16 5/8.

Earnings/revenue reports and previews

Piedmont Natural Gas

(PNY)

stumbled 5/16 to 33 3/8 after it reported a third-quarter loss of 26 cents a share, larger than both the single-analyst estimate of a 25-cent loss and the year-ago 20-cent loss.

Quanex

(NX)

increased 7/16 to 25 11/16 after it posted third-quarter earnings of 79 cents a share, beating both the seven-analyst estimate of 70 cents and the year-ago 66 cents.

Offerings and stock actions

Lockheed Martin

(LMT)

declined 5/8 to 37 5/8 after it said it would extend its $2.2 billion offer to buy

Comsat

undefined

shares to Sept. 18 from Aug. 31. Lockheed said it was awaiting regulatory approval, which includes antitrust clearance,

Federal Communications Commission

approval and

Congress

revamping existing legislation that bars a private-sector company from owning more than 10% of Comsat. To seal the deal, Lockheed has to purchase up to 49% of Comsat for $45.50 a share in cash by Sept. 18. Comsat shares slid 1/16 to 35 7/16.

Rex Stores

undefined

tumbled 2 5/8, or 6.1%, to 39 3/4 after it filed a 2.4 million common share offering with the

Securities and Exchange Commission

. According to the filing, 1.5 million of the shares are being offered by the company, while 900,000 are stockholders shares. The deal is being lead by underwriters

Salomon Smith Barney

,

Credit Suisse First Boston

and

Gerard Klauer Mattison

. Earlier today, Rex Stores posted strong second-quarter earnings of 48 cents a share, beating both the four-analyst estimate of 31 cents and the year-ago 20 cents.

Analyst actions

Advanced Fibre Communications

undefined

was unchanged at 16 15/16 after

U.S. Bancorp Piper Jaffray

upped its price target to 20 to 21, citing progression in the quarter. Advanced Fibre's interest in

Cerent

, the whole of which

Cisco

plans to buy for $6.9 billion, is worth $5.25 a share before taxes.

Apple

(AAPL)

popped 2 1/2 to 64 3/4 after

Warburg Dillon Read

upped its price target to 75 from 65, maintaining its buy rating.

Ameritrade declined 1 3/8, or 6%, to 21 5/16 after Lehman Brothers downgraded to the stock to outperform from buy.

BP Amoco

undefined

was unchanged at 110 3/8, while

Shell Transport & Trading

(SC)

was unchanged at 48 5/16 after

SG Securities

raised its oil price forecast for this year and next and repeated its buy recommendation on BP Amoco.

Champion Enterprises

(CHB)

fell 1/16 to 8 7/8 after Warburg Dillon Read cut its 1999 EPS estimates to $1.60 from $1.93.

Convergent Communications

undefined

was up 3/4, or 6%, to 13 1/4 after Warburg Dillon Read stared coverage of its shares with a buy rating and a 12-month price target of 21.

Dave & Buster's

(DAB)

plumetted 11 1/8, or 44.7%, to 13 3/4 after U.S. Bancorp Piper Jaffray cut its rating on the stock to buy from strong buy. Yesterday, the company said that it expects earnings to be 40% below analysts' estimates, citing weaker West Coast store sales.

Superior Industries

(SUP)

climbed 1/2 to 28 7/16 after

CIBC World Markets

boosted its rating to strong buy from hold.

E*Trade slid 1 13/16, or 6.5%, to 25 15/16 after Lehman downgraded its shares to outperform from buy.

Gilat Satellite

undefined

jumped 3 11/16, or 8.7%, to 46 after

Banc of America Securities

upped its rating on the stock to strong buy from buy.

Hollywood Park

(HPK)

was up 3/4 to 17 after Credit Suisse First Boston initiated coverage with a buy rating and a price target of 25.

Intel

(INTC)

hopped 1 15/16 to 83 after Morgan Stanley Dean Witter increased its price target on the stock to 95 from 80.

Intuit

(INTU)

leaped 8 5/16, or 10%, to 91 1/16 after Credit Suisse First Boston upgraded it to strong buy from buy. The company late yesterday reported a fourth-quarter loss of 26 cents a share, better than the 11-analyst estimate of a 33-cent loss, but swinging from the year-ago profit of 3 cents.

Linens 'N Things

(LIN)

and

Bed Bath & Beyond

(BBBY)

after Credit Suisse First Boston rolled out coverage of the stocks with strong buy and buy ratings, respectively. Despite its rating Linens was off 13/16 to 32 1/2, while Bed Bath shares were up 1/8 to 26 7/8.

NextLink

undefined

advanced 4 1/8 to 101 7/8 after

J.P. Morgan

initiated coverage with a buy rating.

Northwest Airlines

undefined

slipped 2 7/16, or 7.6%, to 29 1/2 after

Donaldson Lufkin & Jenrette

hammered down the shares rating to a market perform from a buy.

Powertel

(PTEL)

stumbled 1 11/16 to 37 7/8 after Morgan Stanley downgraded to its shares to outperform from strong buy.

Shire Pharmaceuticals

(SHPGY)

was up 3/16 to 25 5/8 after DLJ rolled out coverage of the British company with a buy rating.

Sapient

(SAPE)

declined 3 3/8 to 69 7/8 after

PaineWebber

downgraded it to attractive from buy.

Union Carbide

(UK)

hopped 1 3/16 to 59 15/16 after

Brown Brothers Harriman

lowered its short-term rating to neutral from buy.

Miscellany

ABC's

entertainment division president, Jamie Tarses, has resigned. ABC is owned by

Disney

(DIS)

, which slipped 3/8 to 29 1/8.

American Home Products

(AHP)

dove 3 7/8, or 8.4%, to 42 1/8 after a federal judge said former fen-phen users in 44 states could begin legal proceedings against the drugmaker for health monitoring expenses. AHP said the court's decision "conditionally certified a class action lawsuit against the company.

Bank of New York

(BK)

fell 5/16 to 35 1/2 after it axed a vice president for her alleged role in a money laundering scheme by Russian mobsters through the U.S. bank. Prior to her termination, Lucy Edwards was placed on leave from the bank's London office, along with her boss Natasha Gurfinkel Kagalovsky, while U.S. investigators looked into the laundering of more than $10 billion through accounts. Edwards was fired for alleged gross misconduct, internal policy violations, record falsification and failure to cooperate. Kagalovsky has not been fired and maintains her innocence.

The term money laundering refers to accepting large cash deposits from individuals or business when there is reason to believe that the cash was obtained illegally or used for criminal purposes. Under the

Bank Secrecy Act

, U.S. banks must report cash deposits of $10,000 or more.

An expanding number of analysts think

Chevron

(CHV)

should buy

Occidental Petroleum

(OXY)

as a way of resolving a legal battle between the two companies, the Heard on the Street column in

The Wall Street Journal

reports. A few years ago Chevron lost a nearly $1 billion legal battle with Occidental and is now running out of appeals on the matter, the column said. Chevron shares increased 1/16 to 92 3/4, while Occidental climbed 1/2 to 20 13/16.

Coherent

(COHR)

was up 1 1/16, or 6%, to 19 after it said that the

U.S. Food and Drug Administration

issued a priority review status to

Visudyne

, a laser and drug therapy for vision illness age-related macular degeneration. The duo treatment uses Coherent's new OPAL photoactivator laser with the drug verteporferin to remedy the wet form of AMD, which is the No.1 cause of blindness in people over 50 in the West Hemisphere. Coherent said priority status is issued to products that will be reviewed for approval within six months. If approved, the treatment will be marketed worldwide by

Novartis

subsidiary

CIBA Vision

.

General Motors

(GM)

was down 1 1/8 to 65 15/16 despite a California judge hacking a product-liability judgment against the auto titan to $1.2 billion from $4.9 billion.

Hughes Electronics

undefined

said

ICO Global Communications

undefined

has filed for Chapter 11 bankruptcy court protection. Hughes holds an interest in the financially troubled company. Hughes shares hopped 1 3/16 to 52 5/8, while ICO Global was halted at 3 5/8.

Philip Morris

(MO)

stumbled 13/16 to 37 9/16 after lawyers said a federal judge permitted the family of the "Marlboro Man" cigarette ads actor David McLean to continue legal proceedings against the tobacco giant. The family has filed a wrongful death suit over the actor's lung cancer death. The court denied a motion to dismiss the proceedings on Aug. 13. Lawyers said the trial could begin in early 2000.

Research in Motion

(RIMM)

advanced 7/8 to 30 after it said that it can adaquatey defend itself against a patent lawsuit filed by

Glenayre Technologies

(GEMS)

.

TheStreet.com

reported on Dell CEO Michael Dell's interest in possibly putting his brand on RIM's pagers in an

Aug. 16 story.

Toys R Us

undefined

fell 1 1/16 to 14 15/16 after CEO Robert Nakasone resigned over "differing views regarding the direction of the company." The toy company said its chairman and ex-CEO, Michael Goldstein, will act as CEO temporarily, until its board can find a permanent replacement.

The Inside Wall Street column in

Business Week

, penned by Gene Marcial, says some investors are excited over

Concord Camera's

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prospects. The column says the company is poised to make a digital camera to be developed with

Hewlett-Packard

undefined

and that Concord will also introduce a product that can transmit pictures to a cell phone, a product that's being developed by a major European wireless-phone company. Hewlett-Packard was up 2 to 104 5/8 after Merrill Lynch was out with positive comments on its new CEO,

CNBC

said.

Middlesex Water

(MSEX)

rocketed 5 1/2, or 18.5%, to 39 1/2 after Charles LaLoggia, editor of

LaLoggia's Special Situation Investor

newsletter, said he is convinced it will attract one of the major water utilities to take it over, the column says.

In a final item, the column says some money managers believe

New Century Financial

(NCEN)

is a takeover candidate. New Century shares were up 1/16 to 16 15/16.