Markets Shrug at Warnings, Fed Meeting

A fresh crop of earnings warnings couldn’t keep the stock market from closing mostly higher Monday, after last week’s poor finish.

With the Federal Reserve set to begin a two-day meeting today, both stock and bond markets seemed fairly sanguine Monday about the outcome.

The Dow industrials gained 138.24 points, or 1.3%, to 10,542.99, while the Nasdaq composite added 66.78 points, or 1.7%, to 3,912.12.

Smaller stocks were strong, with the Standard & Poor’s index of 600 smaller issues rising 1.7%.

In the bond market yields fell across the board.

Wall Street was a place of picking and choosing on Monday: Many tech stocks rose, but so did drug and food stocks--two groups that often have gained at tech stocks’ expense.

The biotech sector was mixed as industry leaders announced the first drafting of the human genetic code. Many of the stocks have rocketed in recent weeks.

With the Fed pondering today and Wednesday whether to raise short-term interest rates again, many bond dealers believe the central bank’s decision will be to stand pat. All 29 dealers that trade directly with the Fed expect it to leave the target for overnight bank lending at 6.5%.

Still, some economists believe the Fed may indeed tighten credit another notch, amid conflicting signals about whether the economy has in fact slowed.

Falling Treasury yields on Monday indicated investors in the market were betting against a rate hike. The 10-year T-note yield slid to 6.10% from 6.19% on Friday.

The bond market also was helped by the White House’s revised estimate of the federal budget surplus this year, to $211 billion from $167 billion. That will help retire the nation’s debt ahead of schedule, some analysts said.

In the stock market, investors predictably pummeled the latest batch of companies warning about weaker-than-expected second-quarter earnings, including Owens Corning, down $3 to $11.75, and Omnicare, down $8.81 to $9.38.

But rising stocks still outnumbered losers on the New York Stock Exchange and on Nasdaq, though in thin trading.

Among Monday’s highlights:

* Philip Morris led food stocks higher, rising $3.75 to $27.19, after it won the bidding for Nabisco Holdings, which rose $1.13 to $52.75. Other food issues rallied on the news, with Earthgrains up $1 to $18.94, ConAgra up $1.25 to $19.75, Quaker Oats up $1.69 to $74.88 and Wrigley up $2.88 to $81.38.

In the beverage sector, Anheuser-Busch jumped $2.94 to $79.25, Pepsico rose $1.50 to $43.56 and Coca-Cola gained $1.13 to $59.

* Drug stocks rose after PaineWebber raised its rating on Johnson & Johnson to “buy” from “neutral,” though it left its earnings estimates unchanged. J&J;, a Dow stock, rose $5.75 to $95.50.

Other winners included Amgen, up $3.31 to $69.94; Lilly, up $1.25 to $86.56; Merck, up $1.63 to $74.25; and Alza, up $4.81 to $61.25.

* In the biotech sector, genome-research leader Celera Genomics slid $13 to $114. It has surged from $51 in late May. Also in the sector, Human Genome Sciences fell $2 to $143.38 and Visible Genetics lost $5.56 to $39.94, while Affymetrix gained $5.80 to $181.48 and Genome Therapeutics surged $2.19 to $31.94.

* The Internet stock sector was mixed after last week’s hammering. Inktomi led the losers, down $25.31 to $115.06 after losing a contract with Yahoo. EBay slid $1.44 to $52.44 and America Online fell $1.63 to $51.88.

But Amazon.com inched up 6 cents to $33.94, Spyglass gained $2.44 to $35.19 and Redback Networks surged $19.06 to $154.56.

* Among major tech issues, IBM rose $2.53 to $114.41 and Oracle rose $3.19 to $82.69, but AT&T; slid $1.56 to a 52-week low of $32.81 after brokerage Salomon Smith Barney trimmed its 2000 earnings estimate to $1.74 a share from $1.80.

Market Roundup, C12-C13