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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


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



General Electric






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


American Stock Exchange Pharmaceutical Index

each fell over 1.5%.

Bellwether tech names were mixed, but weakness in






overshadowed strength in names such as



. 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



, which fell 3.6%.


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






. The

Philadelphia Stock Exchange Semiconductor Index

gained 0.7%. Internet Sector

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






. The latter fell 6.5% and



lost 6.1% after

Lehman Brothers

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

Charles Schwab


down 4.4%, and smaller players such as

Knight/Trimark Group


, off 8.3%.


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

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.'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


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


Justice Department


AK Steel Holding


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



. 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


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



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.



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



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

Northern States Power



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


.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,




America Online


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.



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

Xomed Surgical Products


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



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

Destia Communications


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


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.



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


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



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

Federal Communications Commission

approval and


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


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


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


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


, the whole of which


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



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


was unchanged at 110 3/8, while

Shell Transport & Trading


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


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

Convergent Communications


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


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


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


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


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



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



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



Bed Bath & Beyond


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.



advanced 4 1/8 to 101 7/8 after

J.P. Morgan

initiated coverage with a buy rating.

Northwest Airlines


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.



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

Shire Pharmaceuticals


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



declined 3 3/8 to 69 7/8 after


downgraded it to attractive from buy.

Union Carbide


hopped 1 3/16 to 59 15/16 after

Brown Brothers Harriman

lowered its short-term rating to neutral from buy.



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



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

American Home Products


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


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



should buy

Occidental Petroleum


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.



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


, 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



CIBA Vision


General Motors


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



ICO Global Communications


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


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


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

Glenayre Technologies



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


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


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



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,



Middlesex Water


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


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