midday01-25-00

TheStreet.com's MIDDAY UPDATE

January 25, 2000

http://www.thestreet.com

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In Today's Bulletin:

o Midday Musings: Volatility the Only Certain Thing as Market Rocks on Downside
o Herb on TheStreet: Timing News Announcements With Lockup Expirations

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TheStreet.com Community

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Also on TheStreet.com:

Wrong! Dispatches from the Front: When Nothing Happens

Bulls shy away again today, leaving bears in the spotlight.

http://www.thestreet.com/comment/wrong/869283.html

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SiliconStreet.com: Webvan Takes Us Back to the Future

The Internet grocer finds the new economy of clicks depends on the old economy of keeping the veggies fresh.

http://www.thestreet.com/comment/siliconstreet/869002.html

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IPOs: Neoforma's Stellar Debut Bodes Well for IPO Market

After a dry month so far, IPOs are starting up again in full force.

http://www.thestreet.com/stocks/ipos/869121.html

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Telecom: With Teleglobe Deal, Williams Goes Long Distance

And Teleglobe, through its new U.S. network, may attract more attention from the Street.

http://www.thestreet.com/tech/telecom/868691.html

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Midday Musings: Volatility the Only Certain Thing as Market Rocks on Downside

By Thomas Lepri
Staff Reporter
1/25/00 1:21 PM ET

Glance at the sector proxies at midday and you'd get a pretty unambiguous notion of where the market was: down. But you'd miss the much more interesting story of where the market had been.

Major Indices INDEX CHANGE % VALUE Dow -58.64 -0.53% 10,949.53 S&P 500 -4.41 -0.31% 1397.50 Nasdaq -16.38 -0.40% 4079.70 Russell 2000 5.32 1.02% 517.62 TSC Internet -12.09 -1.07% 1115.68 BOND CHANGE PRICE YIELD 30-Year Treasury 13/32 93 21/32 6.616% Market data as of: 1:05 PM EST, Tue Jan 25 2000

In particular, the spastic perambulations of the Nasdaq Composite Index today are worth noting. The Comp opened at 4125, nearly 30 points above its Monday close. But within 20 minutes, it had swung down more than 80 points to 4042, about 54 points below break-even. Another 20 minutes after that, it had made the 80-point trip back north, coming within a hair of its opening high.

The Nasdaq's travails since then -- a low of 4080 and a high of 4121 -- have been calm by comparison. Everybody's favorite tech proxy lately was down 16 to 4080, despite gains in Qualcomm (QCOM Quote), Intel (INTC Quote) and Oracle (ORCL Quote).

The other proxies were lower, too. The Dow Jones Industrial Average was down 59 to 10,950, while the broader S&P 500 was up 4 to 1398.

The market is becoming well accustomed to this sort of volatility. After all, the Nasdaq has been averaging intraday ranges of more than 100 points for the past month. And with trading volume and market valuations at unprecedented levels, there's little sign that trend will stop, especially with tech at the helm.

"I wouldn't hold my breath," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. "When the day comes that tech has had its run, the market will have its problems. Money isn't going to flow toward stocks like Deere (DE Quote). That money is going to leave the market."

Proceed with caution. The talk on trading desks today was that momentum investors are in the crosshairs as long as the whipsaw keeps its edge.

"You've just got to pare back your risk," said one trader. "And you have to know what you're doing. It's a very positive market for those who know their companies well, and very negative for people think they're just going to get in here and make a ton of money, the day traders. Those types are going to get bludgeoned.

"And that's great. I'd love to see it. Because sooner or later, we'll have to shake some of these people out of the market."

Individual stocks were moving along with earnings news. Merrill Lynch (MER Quote) was up 5.6% after reporting a blowout quarter. Dow component ExxonMobil (XOM Quote), meanwhile, was reacting more modestly to its own upside report, up 0.3%.Day traders 'are going to get bludgeoned,' one trader said. 'And that's great. I'd love to see it.'

Texas Instruments (TXN Quote) was up 2.7 on strong earnings, igniting the rest of the semiconductor sector. Intel (INTC Quote) was up 0.8%; Applied Materials (AMAT Quote) was 1.8% higher; LSI Logic (LSI Quote) had gained 3.7%.

The bond market was moving only modestly higher, with the 30-year Treasury up 13/32 to 93 21/32, putting its yield at 6.62%. The 10-year note, meanwhile, was up 3/32 to 95 9/32 and yielding a more attractive 6.68%. (For more on the fixed-income market, see today's Bond Focus.)

"It's almost unanimous that rates are going higher," said Hyman. "Substantially higher. To use the excuse that the market is reacting to rates -- what else is new?

"We're not at the bottom," he continued, "we're at the top. We should be asking where it peaks. My clue is around 6.75%. And I think the surprise down the road will be the rally in the bond market we get in the second quarter."

That sentiment may have been helping bank stocks, which were gathering momentum. Dow components American Express (AXP Quote) and Citigroup (C Quote) each were solidly in the black.

Small-cap and Internet shares were mixed. TheStreet.com Internet Sector index was down 12 to 1116, and the Russell 2000 was off 5 to 518.

S&P 500 Changes Move Stocks -- Tell Us Who's Next

Harley-Davidson (HDI Quote) and Biogen (BGEN Quote) were each soaring on news that they will join the S&P 500 after the close of regular trading Friday, replacing Fleetwood Enterprises (FLE Quote) and Foster Wheeler (FWC Quote).

Biogen was up 9.8%, while the Hog had moved 5.8% higher. Fleetwood was down 7.1% and Foster Wheeler was off 12.9%.

Who might be next to zoom into the index? Let us know by choosing one of the top five stocks, by market cap, that are eligible for the S&P but are not currently in it. Or submit your own nomination on our message board.

Who do you think will be next? Veritas Software (VTRS:Nasdaq) Level 3 Communications (LVLT:Nasdaq) Cox Communications (COX:NYSE) Qwest Communications (QWST:Nasdaq) JDS Uniphase (JDSU:Nasdaq)

Market Internals

Breadth was solidly negative on strong volume.

New York Stock Exchange: 1,102 advancers, 1,751 decliners, 636 million shares. 25 new 52-week highs, 139 new lows.

Nasdaq Stock Market: 1,726 advancers, 2,220 decliners, 1.05 billion shares. 116 new highs, 71 new lows.

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For a look at stocks in the midsession news, see Midday Movers, published separately.

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Herb on TheStreet: Timing News Announcements With Lockup Expirations

By Herb Greenberg
Senior Columnist
1/25/00 6:30 AM ET

Back to biz:

Just a coincidence? That's what you can't help but wonder when you see companies release stock-lifting news on the same day their IPO lockups expire. Lockup expirations can be bad news, if for no other reason than the expectation that insiders will immediately sell, causing the stock to tumble. But that wasn't the case for drugstore.com (DSCM Quote), which lucked into announcing Monday -- the day its insiders could start selling shares -- that Amazon.com (AMZN Quote) was boosting its stake in the company.

Rather than continue falling, as it has been doing for several months, it lifted 5 7/8, or 20%, to close at 35. Was the timing of the announcement a coincidence? Not according to a drugstore.com spokeswoman, who says the company had been scheduled to report earnings yesterday, which happened to be the same time it came to an agreement with Amazon, "which we had to disclose; we had to announce the agreement because it was material."

Chemdex (CMDX Quote), meanwhile, rose 10% after announcing an online agreement with DuPont (DD Quote) yesterday, the same day its lockup expired. A coincidence? Not according to a spokesman, who says the deal has been in the works for months, and was just signed.

Then there's Lennox International (LII Quote), which announced that its stock was being included in the Standard & Poor's SmallCap 600 on Monday, again, the same day its lockup expired. A coincidence? Nope, or so says a spokesman: "We released it when it was timely."

Then why didn't they release the news last Thursday, when S&P did?! Doesn't really matter. Lennox's stock, in decline since its offering, slipped 1/4 to close at 9 13/16.

Herb's Latest: Join the discussion on TSC Message Boards .

Cynic's corner: "Had to love that strategy," writes one of this column's regular correspondents. "Lend money to franchisees who turn around and pay royalties and interest to the lender. The lender (Boston Chicken) looks great and becomes a darling of Wall Street, even while the franchisees are losing boatloads of money.

"So let's see, now: Amazon is going to buy stock in other companies (Greenlight.com, drugstore.com) who will, in turn, pay big fees to Amazon for listing/promotional rights. Amazon's bottom line will look better, even while Greenlight and drugstore.com lose boatloads of money. Deja vu all over again?"

Well, that's what some folks th-th-think!

Bankruptcy blues: Planet Hollywood (PLHYA Quote) investors never did get it, and they're still not getting it. This time the company's CEO announced that its bankruptcy plan has been approved by the courts and that the company's stock is expected to start trading on Nasdaq within a month, according to Reuters.

Investors, in classic knee-jerk style, assumed the CEO was referring to the existing stock, which has been trading on the Bulletin Board ever since its delisting last August from the NYSE. As a result, that stock yesterday rose about 25 cents, or 153%, to nearly 41 cents. OK, that's not much in the dollars department, but it's the point that matters. And the point is that investors are bidding up a stock that no longer exists. Or at least it doesn't according to the company's reorganization plan, which said all existing stock would be "cancelled."

Has something changed? My assistant, Mark Martinez, asked the company, which only said that it has "no comment" on the issue of "new" vs. "old" stock.

The manipulation of the stocks of bankrupt companies has been a long-running theme in this column. Still, "I've never seen a total misunderstanding like this of bankruptcy on the public's part," says one veteran investor in distressed securities. "Manipulators have moved to bankruptcies because they're recognizable names."

Even unrecognizable names. DecisionOne Holdings (DOCI Quote) said last summer that its existing stock would be cancelled as part of its bankruptcy. Yet it soared from a few pennies to almost 7 not long ago as part of the recent Linux craze. It now trades at around 1, "which is still too high," according to our bankruptcy expert.

Personal note: Just a word of thanks for the overwhelming number of notes of condolence following the death of my father. Your thoughts were touching and deeply appreciated by my family.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at [e-mail]. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

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