Wall Street was in a wary mood Monday as investors weighed reports of increased US factory production and consumer spending against the prospect of slower growth this year. A weak opening gave way to a brief afternoon rally, only to see share prices once again sag as traders lost heart and opted to play it safe.
Tech and Internet shares largely managed to hold firm as the stock splits kept on coming. Telecom firms, meanwhile, reeled from news of a high-stakes tie-up between AT&T and Time Warner.
The Dow Jones Industrial Average fell 13.13 points to close at 9345.70. The Nasdaq Composite Index rose 4.34 to a record 2510.23, but the S&P 500 was down 6.64 at 1273.
AT&T (T) advanced US$2.75 to $93.50 after striking a deal to provide local phone service over Time Warner cable systems in 33 states. With its acquisition of Tele-Communications Inc. almost complete, the telco said it will soon be able to offer a full array of network options to almost half of all US households -- and at prices as much as 20 percent below current rates.
"AT&T has been the most aggressive in moving competition ahead for the benefit of consumers," said Brian Adamik, an analyst with the Yankee Group. "Everything AT&T has been saying is that this is about bringing choice to the market."
It's also about doing an end run around local phone companies that have been doing their damnedest to keep the long-distance carriers from horning in on their action. Not least among the considerations here is a shifting of Internet access from clogged phone lines to high-speed cable systems. "There's no doubt about it," Adamik said. "That's where this is headed."
He added that federal regulators will be taking a close look at how AT&T's lock on both TCI's and Time Warner's cable resources will impact competitors. If the deal ultimately is green-lighted, expect further such consolidation as the good old information superhighway veers away from the office and straight into the living room.
Time Warner (TWX) was up 13 cents at $62.38, while Baby Bells like Bell Atlantic (BEL) and SBC Communications (SBC) were both lower. At Home (ATHM), the cable-based Net-access provider with close links to AT&T, fell $5 to $120.
Consolidation remained the watchword among Internet companies as well, although investors gave a lukewarm response to the idea of one bloated stock being used to purchase another. Theglobe.com (TGLO) lost $5.94 to $60.13 after saying it will purchase online department store Azazz.com for about $25 million in stock. Meanwhile, Internet America (GEEK) was 50 cents higher at $36.13 as it acquired the assets of ISP CompuNet for about $2 million.
Lycos (LCOS) dropped $9.56 to $127.44 after grabbing lots of headlines with the unveiling of what it claims is the world's largest database of MP3 audio files -- around 500,000 song titles. Record companies fret that the MP3 format is an open invitation to piracy, although Lycos insisted that it's only posting links to the tunes, not doing the actual hosting. Lycos is now in the process of acquiring the parent company of Wired News.
Online brokers were a hot pick following news that the average number of daily electronic trades jumped 34 percent in the most recent quarter. ETrade Group (EGRP) surged 13 percent to $62.44 after announcing a two-for-one stock split, and Ameritrade (AMTD) was up 32 percent at $105.63 as the eligibility deadline for its own two-for-one split approaches.
Charles Schwab (SCH) slipped 38 cents to $69.94. But that's to be expected when, instead of a stock split, the biggest news is simply that your Web site logged more than 1 billion hits last month.
Software maker Inso (INSO) plunged 62 percent to $9.41 after saying it will restate its revenue for the first three quarters of 1998, essentially erasing about $7 million in reported revenue. Oops. The company said the funny figures were discovered during a routine review of its annual performance, and that, in light of the changes, it is now looking at quarterly and full-year losses.
Until someone devises an olfactory plug-in for browsers, it doesn't look like fragrances are going to be the Next Big Thing for e-commerce. Perfumania (PRFM), a new site for designer scents, saw its own stock tumble 39 percent to $6.75 as investors decided that online perfume sales are a smelly proposition.
In tech, Hewlett-Packard (HWP) rose $3.38 to $81.75 after Merrill Lynch raised its near-term rating for the company's stock to "accumulate" from "neutral." Analyst Steven Milunovich said H-P's earnings could increase by 16 percent this year.
Compaq Computer (CPQ) wasn't as fortunate, shedding 69 cents to $46.94 as SoundView Financial Group downgraded the firm's shares to "buy" from "strong buy." Bad timing. Compaq simultaneously announced the more upbeat news that it's now selling $1 million worth of personal computers every day via the Net and telephone.
Advanced Micro Devices (AMD) climbed $1.94 to $24.88 on word that it's in talks with Gateway 2000 about having its chips used in Gateway PCs for the first time. AMD looks determined to steal away the low end of the chip market from industry leader Intel (INTC), which was down $3.06 at $137.88.
Cisco Systems (CSCO), on the other hand, rose $3.44 to $115 ahead of reporting its quarterly results on Tuesday. The network-systems pacesetter is expected to come through with profit of at least 35 cents a share, and don't be surprised if it announces a stock split to boot.
There's speculation that Dell Computer (DELL) will do the same. Its stock vaulted $8.06 to $108.06. Oracle (ORCL), for its part, was $3.75 higher at $59.13 as it announced its own three-for-two split.
Lastly, Coca-Cola (KO) fizzled $1.25 to $64.06 after launching a new marketing ploy in which book excerpts are being included with 12- and 24-packs of Diet Coke. Shoppers can now find cool authors like Elmore Leonard bundled in with their sugar water.
Literature isn't dying. It's just got fewer calories.
