nternets sizzle
Blue-chips flat; small shares shine
By Kevin N. Marder, CBS MarketWatch
Last Update: 5:20 PM ET Oct 26, 1998
Bond Report
NEW YORK (CBS.MW) -- Blue-chip shares took a well-deserved day off
Monday, but small- and medium-sized issues continued last week's stellar
showing by blasting higher, led by concerted buying of Internet names.
The day's activity was interrupted by a one-hour trading stoppage on the
floor of the New York Stock Exchange.
The Dow Jones Industrial Average declined 21.37 points, or 0.3 percent, to
8,430.92. The benchmark was up as much as 68.75 points at 2:31 p.m. ET.
Trading was halted at 1:16 p.m. ET on the New York Stock Exchange due to
equipment troubles. Activity resumed at 2:15 p.m. ET. Nasdaq trading
continued without interruption. See full story.
"I think it's an oversimplification to say we're in a new bull market or that
we're going to go in a crisis mode," said Liam Dalton, president of Axiom
Capital Management Inc. "Some of the valuations got so compressed that it
can be pure liquidity that drives the market up.
"We're back to a modicum of confidence," he said. "I think that's leading
money back into some of the prior leaders, like the big tech stocks. Money
managers have got the liquidity and they've got to put it to work.
"You just have to use some rational analysis and figure out where it's going
to go."
There wasn't much in the way of fundamental news to account for Monday's
action in stocks. The economic calendar was thin, while the number of
earnings releases waned dramatically from last week's surfeit of reports.
Tuesday will see the resumption of another wave of profits readings. Most
Wall Streeters have been relieved that few companies have sprung big
negative surprises with their reports. This due to many corporations guiding
analysts to slim their earnings estimates in the past several weeks.
"The earnings have not been bad," said Harry Laubscher, market analyst at
Tucker Anthony. "They're probably a little better than expected, in some
cases."
With about two-thirds of the third-quarter earnings reporting season over,
investors' focus is gradually shifting back to the outlook for the economy and
interest rates. On that score, most expect the Federal Reserve to cut
short-term interest rates further before the year is out.
A prime beneficiary of lower interest rates, the small-cap sector,
outperformed blue-chip issues for the sixth time in seven sessions.
"It makes sense that the small-caps would have a bit of a catch-up rally
because they were underperforming pretty dramatically even prior to the
July-October selloff," said Dalton.
"We're expecting a couple of days of sloppy action, with the Dow weakening
to the 8,200-to-8,300 area," Laubscher said. "But then the market's tendency
to rally at the end of the month should lift prices later in the week."
Laubscher notes that the market rises about 70 percent to 75 percent of the
time between the last day or two of one trading month and the first several
days of the following trading month. "This month it would start on Thursday
and would conclude Friday of next week," he said.
The technology sector realized the session's biggest gains, with bargain
hunters continuing to peck away at many beaten-down issues. Market
research firm Dataquest reported personal computer shipments grew 18
percent in the third quarter. Another researcher, International Data Corp.
estimated PC shipment growth at 14 percent.
In particular, investors targeted the Internet group for upward revaluation.
"eBay is the reason the Internets are acting well today," said Arnie Owen,
managing director of equities at Cruttenden Roth, adding that "a number of
these stocks are up multiple points in the last week."
eBay (EBAY) bolted 23 1/4, or 46 percent, to 73 3/8 after Donaldson Lufkin
& Jenrette started coverage with a "buy" rating. The broker set a six-to-12
month price objective of $100. eBay, an online auctioneer, reports
third-quarter earnings Tuesday. It went public Sept. 24 at $18. See full story
and related story.
Energy shares were the day's other leaders, as investors anticipated a slew of
earnings reports due later in the week. Halliburton, Falcon Drilling,
Anadarko Petroleum, Pennzoil, Kerr-McGee, and Lyondell are among those
slated to unveil results in the next few days.
The Standard & Poor's 500 Index rose 0.2 percent.
New York Stock Exchange winners dominated losers by 18 to 13.
On the Big Board floor, volume slowed 5 percent to 604 million shares.
The Nasdaq Composite advanced 1.8 percent. Advancing issues led decliners
by 23 to 17 in the Nasdaq Stock Market. Volume totaled 809 million shares.
The Russell 2000 Index of small-capitalization stocks gained 1.8 percent. It's
sprinted about 22 percent just since the Oct. 8 market lows.
In the bond market, short- and intermediate-term maturities gave ground,
while long-dated paper climbed.
The 30-year Treasury rose 1 2/32, to yield 5.108 percent. See Bond Report.
On the earnings board, AT&T (T) advanced 7/16 to 64 1/4. Ma Bell
reported third-quarter operating net of $1.00 a share, a nickel richer than
most analysts had forecast. Operating profits in the year-ago period amounted
to 60 cents a share.
American Express (AXP) picked up 1/2 to 88 1/8. It netted $1.25 a share in
the third quarter, a penny above what most analysts had predicted, and 14
percent above the tally of a year ago. See full story.
Dow component Union Carbide (UK) sank 5/8 to 39 3/16. The chemicals
producer said market weakness, especially in Asia, cramped its third-quarter
results. It netted 55 cents a share vs. the $1.18 of the year-ago period. Wall
Street had looked for 53 cents. Sales declined 19 percent. Due to cost-cutting
programs, Union expects the fourth quarter to be "at or near the bottom in
terms of financial performance." See full story.
Diversified packaging company Ball Corp. (BLL) rose 1 15/16 to 41 15/16
after it reported a third-quarter operating income of 75 cents a share, 2 cents
ahead of the consensus estimate.
In other issues, XTRA Corp. (XTR) lost 3 3/8 to 40 after holding out the
possibility that it may not be able to conclude its merger with MergeCo. The
company cited a change in financing terms as a potential stumbling block in
the deal's completion. XTRA leases transportation equipment such as marine
containers and intermodal trailers.
Kulicke & Soffa (KLIC) rose 1 5/16 to 16 7/16. Josephthal improved its
opinion of the semiconductor equipment maker to "buy" from "hold."
Property and casualty insurer Chubb (CB) backpedaled 4 to 60 on a Merrill
Lynch downgrade to near-term "neutral" from "buy."
America Online (AOL) put on 4 11/16 to 119 5/8. It reports earnings
Tuesday. SG Cowen and CIBC Oppenheimer made positive comments on the
stock.
Other Internet issues stepped forward with multipoint efforts. Yahoo!
tacked on 5 5/8 to 127 3/4, Excite 3 7/8 to 37, Amazon.com 5 5/16 to 121
7/16, MindSpring Enterprises 2 3/4 to 40, Lycos 1 13/16 to 36 15/16,
Infoseek 2 13/16 to 28 1/2, CNET 5 1/4 to 44 1/4, and Onsale 3 1/4 to 18 1/2.
Elsewhere in technology, top-tier issues echoed the moves in 'Net shares,
albeit on a smaller scale. Intel grew 1 11/16 to 88 15/16, Dell Computer 4 1/4
to 62 1/2, Gateway 4 1/8 to 55 3/4, Lucent Technologies 2 3/16 to 79 15/16,
3Com 1 13/16 to 34 5/8, Cisco Systems 2 11/16 to 61 3/8, and International
Business Machines 1 1/2 to 143 1/16.
Over in the oil patch, Transocean Offshore was ahead 3 7/8 to 39 3/8,
Diamond Offshore 2 11/16 to 32 15/16, Baker Hughes 1 11/16 to 22 5/16,
Halliburton 1 5/16 to 36 7/16, Nabors Industries 1 5/8 to 18 3/8, Atwood
Oceanics 2 3/8 to 28 7/8, and Schlumberger 1 1/8 to 52 3/8.
COMMODITIES
New York light sweet crude for December delivery advanced 18 cents to
$14.23.
December gold fell 60 cents to $293.60.
CURRENCIES
The dollar traded higher vs. the yen and d-mark.
Dollar/yen was quoted at 119.20 from Friday's 118.28.
Dollar/mark was at 1.6618 from 1.6440. See latest currency rates. |
