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Dow Pulls Back From 10,000

In Iceland, atop Europe's second largest glacier, the team attempted to interview scientist Bob Corell. The shoot was moved when a weather front rapidly swept across the glacier.
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A day after the Dow Jones Industrial Average waltzed to its first closing high above 10,000, the storied gauge Tuesday gave back 93.52 points, or 0.9 percent, to 9,913.26.

The Nasdaq Composite fell 12.55 points, or 0.5 percent, to 2,480.29.

Tuesday's selling was tied to a sense that the market had come a long way in just a few days and deserved a break. From Wednesday's session low to Monday's high, the Dow had leaped 415 points, or 4.3 percent.

And after Monday's Dow close above 10,000 and Tuesday's Federal Reserve decision to keep interest rates steady, some investors wondered what was left for an encore. That sort of thinking contributed to the day's weakness. Growth concerns surrounding Coca-Cola and Gillette didn't help matters.

The market barely moved following the Fed's 2:15 p.m. EST announcement that it would maintain short-term rates. Given the quiescent inflationary backdrop, the central bank's decision didn't surprise many on Wall Street.

"The economic data out in the last two weeks was actually softer than people were looking for," said M. Cary Leahey, managing director and U.S. economist at Primark Decision Economics.

"And [Federal Reserve Chairman Alan] Greenspan spends more time talking about the risks of economic weakness than of a pick-up in economic activity."

Initially, the market yawned in reaction to the Fed's announcement before weakness set in. Earlier in the day stocks showed little change following signs that Yugoslav President Slododan Milosevic might reduce his military presence in Kosovo. Russian Prime Minister Yevgeny Primakov said Milosevic is prepared to cut his troop presence in the region if NATO attacks cease.

In the U.S. market, only a sprinkling of groups could cobble together gains.

"The market averages have kept going up, but the average stock has not improved much here," said Roy Blumberg, portfolio manager at First Allied Securities. "It's very frustrating because you can't put together a diversified portfolio that has anything close to market performance since so little of the market is going up.

"Unless you're in tech or Internet or, recently, energy, what's moving?"

But one long-time market bull sees no reason to change his stance.

"We expect a continued uptrend in the market through at least tax season," said Arthur Bonnel, portfolio manager at the U.S. Global Investment Bonnel Growth Fund.

Bonnel looks for the market to consolidate and do some backing and filling once tax season is over, "which will provide a super buying opportunity. Any price correction over the next two to three months is going to be a good base for a year-end runup on the Dow that should bring it up close to 11,000."

Among broad sectors, the technology complex gave back early gains to trade lower. The transportation sector took top-performance honors after an upbeat outlook from U.S. Airways and positive analyst comments on Dela Air Lines sparked buying of airline stocks.

In Tuesday's market indicators:

  • The Standard & Poor's 500 Index lost 0.7 percent.
  • New York Stock Exchange losers beat winners by 17 to 12.
  • On the Big Board floor, turnover slowed 2 percent to 730 million shares.
  • Declining issues outnumbered risers by 22 to 17 in the Nasdaq Stock Market.
  • The Russell 2000 Index of small-capitalization stocks sank 0.2 percent.
  • In the bond market, the 30-year Treasury rose 24/32, to yield 5.587 percent.

Among the companies in the news:
  • Internet commerce company Priceline.com (PCLN) catapulted 53 points, or 331 percent, to 69 in its market debut. It priced 10 million shares at $16 a share, above the $12-to-$14 range expected. The company provides an online marketplace, mostly for travel and financial services, in which the buyer places a bid and Priceline.com finds a willing seller.
  • Coca-Cola (KO) gave back 1 1/2 to 63 5/16 after warning that global unit case volume should drop as much as 2 percent in the first quarter. The beverage monolith pointed to sluggish demand overseas, especially in Latin America and Europe. Coke also warned that it doesn't expect to reach its growth target of 7 percent to 8 percent in case volume in the fiscal 1999 year. The stock retreated 3 3/8 to 61 7/16.
  • Gillette (G) surrendered 3 1/4 to 60 3/8. CNBC reported that a Goldman Sachs analyst told clients that she anticipates first-quarter sales growth of 2 percent to 4 percent. The analyst had previously expected 5 percent-to-7 percent sales growth, according to CNBC.
  • U.S. Airways Group (U) tacked on 3 5/16 to 49 13/16. In spite of harsh weather that cancelled numerous flights, it expects to net 46 cents a share in the first quarter, in line with the First Call Corp. survey of analysts. U.S. Air also sees 1999 profits amounting to $5.60, matching the consensus view. The airline also set plans for a $500 million stock buyback.
  • Delta Air Lines (DAL) gained 2 to 71. Morgan Stanley Dean Witter raised its price target to $80 from $65.
  • Other carriers also rose. AMR was ahead 3 1/4 to 59 7/8, UAL 2 1/4 to 79 3/8, and Southwest Airlines 1 3/8 to 31 3/8.
  • America Online (AOL) put on 11 7/8 to 144 1/4 after PaineWebber fattened its 12-month price objective on the Internet portal to $215 from $125.

    Additionally, AOL provided details behind its alliance with Sun Microsystems (SUNW) to create "the industry's first comprehensive, multi-platform, E-commerce solution to accelerate the rapid move of businesses to the Net Economy." Sun shares gained 1 7/16 to 125 15/16.

  • Amazon.com (AMZN) drove ahead 15 1/16 to 164 11/16. The online retailing powerhouse introduced its auction service, Amazon.com Auctions.
  • Express Scripts (ESRX) said it will launch an online drugstore. The stock rose 17 13/16 to 91 7/8.
  • Cyberian Outpost (COOL) posted a 34-cent-a-share loss in the forth quarter, a nickel better than most analysts had expected, according to First Call Corp. The online retailer of computer hardware, software, and accessories said net sales ballooned 310 percent vs. the same quarter a year ago. The stock surrendered 2 1/8 to 19 9/16.
  • AboveNet Communications (ABOV) sprinted ahead 25 15/16 to 106 13/16 after the Internet services provider mapped plans for a two-for-one stock split.