Wall Street's 10K run last week was exciting, sure, but the market really isn't in shape for such a strenuous workout.
Stocks fell in late-afternoon trading Monday after sticking to a narrow range for most of the session. Investors put aside their enthusiasm for big numbers and focused instead on mundane matters like corporate earnings and interest rates. The market remains generally healthy, make no mistake, but it doesn't look buff enough for some major mountain climbing.
The Dow Jones Industrial Average dropped 13.04 points to close at 9890.51, and the Wired Index was 10.89 lower at 620.57. The Nasdaq Composite Index shed 25.35 to 2395.92, and the S&P 500 was down 2.28 at 1297.01.
Much buzz du jour about Microsoft (MSFT), which is said to be suddenly keen to settle its antitrust case with the US Justice Department and more than a dozen states. Discovering new reserves of flexibility, unnamed execs in Redmond are being quoted as saying the company now might indeed be able to satisfy regulators that it can play nice with the other kids.
"It would be worth their while to settle as long as the settlement makes sense," said Michael Kwatinetz, an analyst with Credit Suisse First Boston. "To make sense for the DOJ, Microsoft would have to give ground. To make sense for Microsoft, they'll have to avoid breaking up the company."
A key issue here is Microsoft's unfortunate tendency to use its market dominance as a lever in forcing business partners to toe the line, often to the detriment of competitors' interests. An unnamed company official told the Associated Press that Microsoft is willing to address "concerns about our contract language," but that "any settlement must preserve Microsoft's ability to innovate and add new features to our products."
Translation: "We'll stop bullying other companies if you'll accept our browser as a component of the Windows operating system, and not a separate product intended to crush Netscape like a potato bug."
Kwatinetz believes Microsoft finally has woken up to the fact that antitrust cases are often won in the court of public opinion, and that the company has to come off as looking at least a little conciliatory if it wants the government's gunslingers to holster their weapons.
"They were very arrogant in how they initially responded to things," he said of Gates & Co. "They've come to understand that this is not good for their image." Still, Kwatinetz views any compromise as "a tough settlement to make. Both parties have huge things they're trying to get which may be incompatible."
Whatever else, Microsoft's overtures sounded good to investors, and the company's stock advanced US$1.63 to $172.81. The company's shares received an additional boost from word that Microsoft is set to start shipping its new flagship product, Windows 2000, in the second half of the year, with a final version out by early October.
As for Netscape Communications, it seems Microsoft no longer has to worry about taking the firm to the cleaners; America Online (AOL) is doing it for them. Netscape's new papa could dump as much as 20 percent of the company's 2,500 employees, The Wall Street Journal reported, with a "broad reorganization" now in the works. This could include a number of Netscape programmers receiving pink slips, and the company's Netcenter resources being combined with AOL's online operations.
Traders, typically, think all this belt-tightening is swell, and pushed AOL's stock $10.75 higher to $130. Separately, ING Baring Furman Selz reiterated a "strong buy" rating for AOL's shares, which the broker expects to reach $180 within nine months.
From the rumor mill: Broadcast.com (BCST) surged 37 percent to $116.50 after Business Week cited an unidentified source as saying the company is in talks to be acquired by Yahoo. If so, the deal would be sweet music for Broadcast.com's early investors, who have watched their shares triple in value since the company went public in July. Yahoo (YHOO) was $5 lower at $165.
In tech, Dell Computer (DELL) fell $2.38 to $37.88 after Donaldson, Lufkin & Jenrette Securities cut its earnings estimate for the company. Analyst Kevin McCarthy said he expects Dell to ship fewer PCs this quarter, and thus foresees the company earning just 15 cents a share. The Street's consensus estimate is a penny higher.
International Business Machines (IBM) dipped $1.38 to $167.19 as BancBoston Robertson Stephens slashed its first-quarter earnings estimate for Big Blue to $1.37 a share from $1.42. Still, the brokerage maintained a long-term "attractive" rating for the company's shares.
MediaOne Group (UMG) jumped 13 percent to $68.69 on news that it will be purchased for about $60 billion by Comcast (CMCSA). The merger would create America's third-largest cable concern, after Time Warner and AT&T's Tele-Communications Inc., with about 11 million subscribers. This didn't sit well with investors, though, and Comcast's stock tumbled $5.38 to $64.75.
On the other hand, traders were pleased as pie with how continuing consolidation in the cable business will affect Internet service provider At Home (ATHM). The cable-based ISP climbed $6.19 to $140 on hopes that such marriages will bode well for purveyors of high-speed access.
Similarly, CNET (CNET) gained $5.38 to $93.25 after launching a new online directory aimed at users with warp-speed Web access. The directory, a joint venture with NBC, will be jam-packed with the sort of audio and video content that can frazzle a lesser dial-up connection.
In finance, Merrill Lynch (MER) slipped 81 cents to $89.94 after pouring cold water on speculation that the securities house may merge with Chase Manhattan Bank. However, Merrill CEO David Komansky reportedly told analysts that his company may consider hitching up with a commercial bank at some point in the future. Chase (CMB) was 56 cents lower at $81.94.
Lastly, diet maven Jenny Craig (JC) is looking to get fat on the Internet. The operator of weight-loss clinics soared 31 percent to $4.50 as it revamped its Web site and said it will peddle a new line of nutritional supplements only via the Net.
What, they figure we're all just sitting around in front of the computer all day? What would give them that idea?
