Wall Street went into a tail-spin late Wednesday afternoon as a sudden drop in bond prices convinced investors they should pile out of stocks as quickly as possible.
The last-minute sell-off illustrates how fragile market sentiment is running. Earlier in the day, share prices were cautiously creeping higher amid hopes that corporate earnings may be more robust than previously expected.
"The proof's in the pudding," said Brian Belski, chief investment strategist at George K. Baum & Co. "We still have to see how lumpy the pudding will be."
Right now, it's looking a bit lumpier than the market would prefer. The Dow Jones Industrial Average fell 127.10 points to close at 9786.16, and the Wired Index was 6.35 lower at 630.04. The Nasdaq Composite Index shed 18.57 to 2461.72, and the S&P 500 was down 14.34 at 1286.41.
"The market has shaken off its hangover from Dow 10K," Belski said, but it isn't out of the woods. The Passover holiday beginning at sundown Wednesday and the Easter weekend likely will deter investors from going on the usual shopping spree that launches a new quarter. Belski isn't expecting another big advance for the market until next week.
One stock that took its knocks throughout the session was Pepsi Bottling Group (PBG), which fell US$1.25 to $21.75 on its first day of trading. With 100 million shares sold at an initial price of $23 apiece, the company raised $2.3 billion, making this one of the largest IPOs ever. But Pepsi had two things going against it.
First, it's not Pepsi.com.
Second, the sugar-water bottler went public just two days after Coca-Cola warned that its worldwide sales are now in a slump, prompting a number of analysts to slash their earnings estimates for the company.
"They fell into the Coke trap," Belski said, noting that investors are prudent to steer clear of Pepsi Bottling's stock in light of current conditions in the soft-drink market.
Still, conditions in the Internet market aren't exactly profits-a-plenty, and that doesn't stop investors from throwing money at any IPO with a dot-com pedigree. Latest example: ZDNet (ZDZ), representing the online assets of publisher Ziff-Davis (ZD), surged 89 percent to $35.94 in its trading debut. And this despite its parent tumbling 25 percent to $21.75 after being downgraded by Merrill Lynch.
Also, don't forget Priceline.com (PCLN), which advanced 20 percent to $82.88 on its second trading day after more than quadrupling in value on Tuesday. The provider of cut-rate plane tickets and hotel rooms now has a market value of more than $10 billion -- and has yet to make a dime.
Priceline pitchman William Shatner, on the other hand, made a bundle. Captain Kirk received 125,000 shares for being featured in the company's "really big" ad campaign, making his stake now worth about $10 million. Put that in your photon torpedo and smoke it.
America Online (AOL) rose $1.50 to $146 as Prudential Securities and BT Alex. Brown reiterated "strong buy" ratings for the company's stock. At the same time, Multex.com (MLTX) vaulted 53 percent to $62.50 after being named AOL's exclusive provider of brokerage research.
Charles Schwab (SCH) climbed $1.88 to $96.13 after saying it will boost spending to expand its Web offerings by $76 million this year. With a record 93,000 daily trades blasting through its pipeline in the fourth quarter, Schwab, along with other online brokers, has been struggling to keep its system running smoothly.
In tech, chip-equipment maker Etec Systems (ETEC) plunged 32 percent to $29.44 after warning that restructuring charges will result in a loss for the quarter ending 30 April. The company, which is cutting about 90 jobs, had its stock downgraded by SG Cowen & Co. and ABN AMRO.
For its part, LSI Logic (LSI) jumped 13 percent to $31.19 as Morgan Stanley Dean Witter hiked its rating for the chipmaker's stock to "strong buy" from "outperform." Intel (INTC) shed $2.44 to $119.13, and Advanced Micro Devices (AMD) was 25 cents lower at $15.50.
PeopleSoft (PSFT) slid 94 cents to $14.63 after warning that its first-quarter revenue won't be up as much as earlier expected. In January, the business-application maker predicted an increase of as much as 25 percent. Now it's saying 10 percent is about the best it can do.
Lucent Technologies (LU) gained 63 cents to $107.75 as it inked a five-year, $175 million pact to provide communications gear to about 750 new Home Depot stores. Lucent already has set up wireless systems at more than 600 other outlets of the fast-growing home-improvement chain.
Federal Express parent FDX (FDX) lost $4.69 to $92.81 after Goldman Sachs resumed coverage of the company with a tepid "market perform" rating. Investors would have preferred a stronger outlook, considering that FDX posted better-than-expected earnings this month and announced a two-for-one stock split.
DaimlerChrysler (DCX) advanced 69 cents to $85.81 as it issued a glowing progress report on how the automaker is integrating its US and European resources. The company also said "significantly better" sales in America will result in at least 4 percent growth in operating profit this year.
Lastly, Philip Morris (MO) fell $2.63 to $35.13 after being ordered by an Oregon jury to cough up $80 million in damages to the family of some poor guy who died of lung cancer. Although the Marlboro maker will appeal the decision, Morgan Stanley was sufficiently concerned about the prospects for future litigation that it downgraded Philip Morris' stock to "neutral" from "strong buy."
Considering how sentiment is running against the tobacco industry, does any investor want to be left holding the bag when these guys finally get their comeuppance?
