NEW YORK (Reuters) - The record-breaking punitive damage award handed down in the Engle sick-smokers trial raised little more than a ripple in the stock market, showing that share prices already reflected expectations of a successful appeal by the industr

Shares of leading U.S. tobacco companies slid just after a Miami jury ordered cigarette makers to pay almost $145 billion in punitive damages in the first class-action case of its kind to go to trial. But the stocks quickly reversed direction to recover most of their losses by the end of the session. ``It was built into the stocks that (the companies) were going to lose,'' Davenport & Co.'s Ann Gurkin said. The tobacco analyst, who said she was ``disappointed'' with the size of the award, thinks the tobacco companies ``have a good chance for overturning this verdict on appeal.'' Immediately after the news, the S&P Tobacco Index .SPTOBC) tumbled more than 4 percent to 1,212.35. The index had been up more than 2 percent just minutes before Judge Robert Kaye read the verdict. But it quickly rebounded, ending the trading day off 0.79 percent at 1,258.89. To be sure, the industry has already been battered by the drumbeat of tobacco-related litigation, with the benchmark index down from its year-high of 2,034.84 reached Sept. 7. The landmark Engle case is considered a key hurdle for an industry that has already faced a storm of litigation, including legal action by 46 states that led to the $206 billion so-called ``master'' national settlement. While the size of award may seem stunning, analysts were doubtful that cigarette makers would ever have to pay damages that come close to those announced Friday. The award was ``meaningless,'' Morgan Stanley Dean Witter tobacco analyst David Adelman said. He agrees with many other analysts that the companies will win the case on appeal. When asked about the value of the punitive damages, Adelman said, ``They're so absurd it speaks to the absurdity of the process.'' The Engle award was easily the highest in U.S. history. It topped the $4.8 billion a California jury last year ordered General Motors Corp. to pay in a case brought by six people burned by an exploding gasoline tank. Bonnie Herzog, an analyst at Credit Suisse First Boston, said the amount of the award may have benefited the industry's appeal because Florida law does not allow awards that lead to bankruptcy. ``The size of the amount is contradictory to Florida law and I expect it to be reduced, and I also expect the industry to be successful in decertifying the case on appeal,'' Herzog said. William Ohlemeyer, a Philip Morris Cos. Inc. vice president and associate general counsel, said the judgement posed little threat to the company -- the leading cigarette maker -- or to the tobacco industry. ``This judgement is not an order of payment. It's the beginning of another process,'' Ohlemeyer said, speaking at a press conference held in New York shortly after the award was announced. ``The judgement will eventually be overturned on appeal.'' Earlier this week, Stanley Rosenblatt, lead attorney for the plaintiffs, said major cigarette makers should pay between $123 billion and $196.8 billion in punitive damages -- and the jury agreed, handing down an award that split the difference. ``There is no major shock in these numbers, more of a surprise in what he asked for,'' Sanford C. Bernstein analyst William Pecoriello said, referring to Rosenblatt. ``We had no doubt that the jury would give him what he asked for.'' Pecoriello said it was unlikely that Kaye would reduce the amount or decertify the class when all of the appeals motions were filed in the coming weeks. ``Ultimately, this will come under the U.S. Supreme Court and be thrown out down the road with the industry never paying a dime in damages,'' Pecoriello said. ``We expect Judge Kaye to give them no relief after the industry files the motions.'' Shares of Philip Morris slipped just after the award was read by the judge, but the stock rebounded to close off 3/16 at 24-11/16. The jury called for the company, which makes Marlboro, the No. 1 cigarette brand, to pay the most damages -- $73.96 billion. R.J. Reynolds Tobacco Holdings Corp.'s shares also dropped and then rebounded slightly to close down 15/16 at 26-3/16. The jury said the No. 2 tobacco company must pay $36.28 billion. Loews Corp., which operates Lorillard Tobacco Co., was ordered to pay $16.25 billion in damages. The stock closed down 7/16 at 63-1/16. Vector Group Ltd., the company formerly known as Brooke Group and owner of Liggett Group Inc., was ordered to pay $790 million in damages. The shares ended the day down 7/16 at 14-7/16. British American Tobacco Plc's American Depositary Shares slipped 1/4 to 12-1/2. Its Brown & Williamson unit was ordered to pay $17.59 billion. All of the issues except for British American Tobacco's ADS had been up slightly just before the verdict was read. The immediate financial threat of the Engle case, named after a Miami Beach pediatrician with emphysema, was eased in April. At that time, Florida's legislature put in place a $100 million cap on any bond needed during possible appeals. The same six jurors who decided Friday's award had found last year that the tobacco companies made dangerous products, conspired for decades to hide the health risks of smoking, and were liable for the illnesses of as many as 500,000 or more smokers in Florida. In April, they awarded a record-high $12.7 million to three plaintiffs for actual, or compensatory, damages.

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