Wall Street succumbed once again Tuesday to jitters about high valuations and a possible hike in interest rates. After starting strong, the market gave way in the late afternoon to a modest sell-off as investors snatched whatever profits they could find.
Tech stocks took it on the chin amid concerns that hardware makers will see sales slow over coming months. Traders were looking forward to observing how Dell Computer and Hewlett-Packard fared in reporting their latest earnings after the closing bell.
The Dow Jones Industrial Average gained 22.14 points to 9297.03, while the Nasdaq Composite Index was down 7.95 at 2313.94. The S&P 500 rose 11.73 to 1241.86. US financial market were closed Monday for Presidents Day.
"These are the kind of gyrations we're going to have to get used to this year," said Arthur Hogan, chief market analyst with Jefferies & Co. "But the fundamentals of a lot of big companies haven't changed."
Dell (DELL) is a good case in point. The computer maker's stock dropped 12 percent on Friday after BancBoston Robertson Stephens and Salomon Smith Barney both warned that Dell is facing stiffer competition from rivals like Compaq Computer. Many investors took this as a red flag for Dell's future sales.
"Wrong reaction," Hogan said. "The message wasn't that Dell's business is slowing. The message was that Compaq is doing better."
But traders weren't so sure. Dell slid US$1.13 to $88.75 prior to posting its fourth-quarter results. Analysts were expecting profit of 31 cents a share. For its part, Hewlett-Packard (HWP) was $3.19 lower at $73.25 amid anticipation that quarterly income would decline to 83 cents a share from 86 cents a year ago.
The market remained disenchanted with Lycos' pending marriage to USA Networks. Lycos (LCOS), soon-to-be parent of Wired News, shed another $7.50 to $92 as speculation mounted that the deal may collapse unless the portal's shareholders see a higher premium for their stakes. USA (USAI) was 13 cents higher at $38.13.
Lycos shareholders seem determined not to accept USA's insistence that it isn't actually acquiring Lycos, but is instead establishing a new company -- USA/Lycos Interactive Networks -- that combines the portal's resources with USA's electronic shopping assets. They also appear reluctant to hold stock in a media company with measurable performance and a here-and-now market valuation.
"I don't think the deal as it stands will go through," Hogan said. "Lycos is eager for the deal, but I don't think they can get it done."
ETrade Group (EGRP) eased 31 cents to $45.69 despite receiving the go-ahead from regulators to enter the asset management business. This will allow the online broker to offer its own line of mutual funds and money market funds. Charles Schwab (SCH), meanwhile, was up $3.69 at $66.38 as it said the number of daily trades at its Web site increased by 65 percent in January to 153,000.
Hard to argue with the combination of a fresh Internet play and a well-established brand name. Prodigy Communications (PRGY) climbed another 38 percent to $49 on its third day of trading. Among the old guard, Yahoo (YHOO) fell 12 percent to $133.38, and Amazon.com (AMZN) was $5.88 lower at $98.63.
America Online (AOL), on the other hand, rose $2.38 to $160.88 after cutting a deal with MCI WorldCom (WCOM) to provide local content from AOL's Digital City guides to subscribers of the telco's new Internet-access service. MCI was up $3.56 at $83.
Among other movers, an outfit called Medi-Ject (MEDJD) soared 58 percent to $3.56 after saying it will offer its needle-free insulin injection system to diabetics through its Web site. And upscale online auctioneer Millionaire.com (MLRE) gained 13 percent to $9.88 after expanding its collection of goodies with an approximately $38.6 million buyout of Great Gatsby's Auction Gallery.
Egghead.com (EGGS) surged 9 percent to $18.88 after saying it had signed on as a featured software merchant for Microsoft's MSN.com portal. The higher profile should benefit Egghead, which reported a loss of 36 cents a share for the latest quarter.
Finland's Nokia (NOK/A), the world's leading mobile-phone maker, slipped 63 cents to $133 as it agreed to purchase US-based Diamond Lane Communications for $125 million in ready cash. Diamond Lane's expertise is in multi-service digital subscriber line access multiplexers, which is a darn fancy way of saying they make stuff that makes the Net go faster. Investors apparently are working out the specs of all that before deciding whether it will boost Nokia's bottom line.
Wal-Mart Stores (WMT), the world's biggest retailer, advanced $3.19 to $87.56 after posting a 21 percent increase in quarterly income to 70 cents a diluted share, topping estimates of 67 cents. And Sharper Image (SHRP), purveyor of life-size Darth Vaders and other such necessities, jumped 9.3 percent to $15.50 after coming through with profit of $1 a share and saying it will expand its online offerings.
AMR (AMR), parent of American Airlines, was down 13 cents at $55 as its disgruntled pilots miraculously overcame their assorted illnesses and returned to work. The pilots' union being fined $10 million by a federal judge also seems to have hastened their recovery.
Campbell Soup (CPB) advanced 44 cents to $40.69 after hitting estimates with quarterly income of 49 cents a share, down 27 percent from a year earlier. Despite all the nasty weather this winter, Campbell is finding that people just aren't slurping as much chicken and stars as they used to.
Lastly, Family Golf Centers (FGCI), the largest operator of driving ranges in the US, plunged 44 percent to $7.50 as it warned that fourth-quarter earnings will miss the green and come in around 4 cents a share. Analysts had been looking for par of 11 cents.
The company suggested that people just aren't playing as much golf as they used to. Put that in your economic indicators and putt it.
