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  • Author:
  • Publish date:'s DAILY BULLETIN

January 6, 2000

Market Data as of Close, 1/5/00:

o Dow Jones Industrial Average: 11,122.65 up 124.72, 1.13%

o Nasdaq Composite Index: 3,877.54 down 24.15, -0.62%

o S&P 500: 1,402.11 up 2.69, 0.19%

o TSC Internet: 1,107.80 down 27.78, -2.45%

o Russell 2000: 478.83 up 0.45, 0.09%

o 30-Year Treasury: 93 19/32 down 1 01/32, yield 6.631%

Companies in Today's Bulletin:


First Union (FTU:NYSE)

Compaq (CPQ:NYSE)

Inacom (ICO:NYSE)

In Today's Bulletin:

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TheStreet Recommends

o Retail: A Month After Sales Scrape, TJX Shuffles Toward Openness
o Wrong! Rear Echelon Revelations: It's a New Year, but the Focus Remains Largely Unchanged
o Evening Update: Gateway, Mandalay Issue Earnings Warnings in After-Hours Action
o Bond Focus: Surging Stocks Send Bond Yields to Highest Since Sept. 1997

Also on

Internet: Wall Street Not in Amazon's Corner After Latest Profit Setback

Investors ignore solid sales data as the bookseller fails to stanch the flow of red ink.

James K. Galbraith: The American Empire at Millennium's End

The U.S., like Britain in the 1920s, can't continue forever under the spell of financiers.

Hardware & PCs: Inacom's Slide Sprinkles Cold Water on PC Distributors' Merger Hopes

The stock slides 32% just a day after a rally on a deal with Compaq.

Internet: The Case Against 'Tokyo Joe' Threatens All Guru-Dom

In the first case of its kind, the well-known daytrading adviser faces SEC charges.

Retail: A Month After Sales Scrape, TJX Shuffles Toward Openness


Katherine Hobson

Staff Reporter

1/5/00 8:33 PM ET


(TJX) - Get TJX Companies Inc. (The) Report

has a New Year's resolution.

On Thursday, when it's scheduled to release its December same-store sales figures, the company for the first time will allow analysts and investors to call in and hear a prerecorded message providing additional details about monthly operating performance and trends, says Sherry Lang, vice president of investor and public relations at the off-price retailer, which operates under names such as

T.J. Maxx




Lang describes the call -- which won't offer the chance for Q&A and so differs from the more formal conference calls most companies hold after the release of quarterly earnings -- as "a convenience for me and for the callers." She explains that analysts and investors "won't be held up" waiting for their phone calls to the company to be returned and adds, "It was something that we'd wanted to do for a while, but we hadn't made it a priority."

More and more companies are making disclosure a priority in an environment of increasing "materiality," in which missing earnings estimates by a penny or sales growth by a percentage point can decimate a stock. In this climate, and with more individuals getting into investing, the

Securities and Exchange Commission

has been pushing to increase disclosure and combat selective information-sharing.

While Lang says TJX's shift doesn't come in response to any new climate of openness, the move may help to quiet grumbling from some people in the investment community after what happened when the company released its sales figures last month.

Silent Night

On Dec. 2, TJX reported a 1% decrease in November same-store sales. In a press release, Chairman and CEO Bernard Cammarata chalked up the drop to warm weather and said, in closing, "with inventories in good shape, we continue to flow fresh and exciting merchandise into our stores and look forward to a successful holiday season."

That upbeat comment didn't save the shares, which fell 14% that day and are now about 22% lower than they were before the sales report. Not only were sales softer than expected, but when analysts called the company to talk about the quarter, their earnings expectations were guided down about 2 cents, to 40 cents per share. That part wasn't in the press release. As a result, some analysts had to wait until later in the day -- keep in mind, TJX shares were falling -- to speak with the company in order to get their own guidance.

"It literally took hours to hear back," says one analyst who didn't want to be identified. "In that situation, where you're going to guide expectations lower, you should have a call." The analyst says clients were calling, asking what to do about the shares, but the analyst was still waiting to hear from TJX. "You had the sense that you were going to take your numbers down, but I like to chat with the company first."

Immaterial News

According to Lang, any delay in returning calls was an aberration. "In that one particular month, we reported sales that didn't meet our goals, and our call volume went up," she says. And she says that lawyers for TJX determined that any earnings guidance wasn't material. Prerecorded calls will be "first and foremost to give sales information," though if there's any other material information to disclose, the company could do it then.

No one's saying that TJX did anything illegal, wrong or even particularly unusual last month. Plenty of analysts say they had no trouble getting through to the company. "It was like any other sales day; I called up and talked to the company," says Dana Telsey, an analyst with

Bear Stearns


Goldman Sachs

analyst Barbara Miller and two other analysts also say they experienced no delays in getting their calls returned. (Bear Stearns hasn't done any recent underwriting for TJX, while Goldman Sachs has underwritten a bond issue.)

Moreover, some other retailers, such as

Pacific Sunwear



Claire's Stores


, don't offer prerecorded statements, while others, like

Abercrombie & Fitch

(ANF) - Get Abercrombie & Fitch Company Report

, don't even release monthly sales figures. That company got into hot water in October, when it allegedly gave an analyst a heads-up about sales figures before they were publicly released. The SEC is conducting a formal inquiry into the matter. (An Abercrombie spokesman couldn't be reached for comment.)

More Is Better

But while retailers aren't compelled to release monthly sales figures or hold conference calls, today's highly competitive investment climate means the more disclosure the better, says Louis Thompson, president and CEO of the

National Investor Relations Institute

in Vienna, Va. "Companies have less leeway in determining materiality," Thompson says. "If information is likely to cause a movement in the stock price, you're going to have to get it out." Appropriate ways to do that include news releases, conference calls and 8K filings, though since few individual investors are trolling


, "filings wouldn't do much to level the playing field," he says.

Analysts are demanding more and more guidance, and companies are obliging. And in a market where a penny or so variation in earnings estimates makes a difference, "your latitude in talking analysts down is pretty narrow at this point," says Thompson. Opening calls to the media and the public goes a long way to prevent any allegations of selective disclosure, he says.

TJX, like most of its peers, isn't planning to open its call to the public or the media, which means the retail investor will still be a step behind institutional holders. But its step -- albeit baby-sized -- may help encourage other companies to make their disclosure more transparent. That's a New Year's resolution worth keeping.

Wrong! Rear Echelon Revelations: It's a New Year, but the Focus Remains Largely Unchanged


James J. Cramer

1/5/00 8:31 PM ET

Traders think in groups. We like to think, Hmm, investors are taking the bank stocks now. Which banks haven't moved? Are the ones that haven't moved damaged goods? Are we stepping into a

First Union


or a

Bank One

(ONE) - Get OneSmart International Education Group Ltd Report

? Or how about the drugs? If

Johnson & Johnson

(JNJ) - Get Johnson & Johnson Report

has traction and


(MRK) - Get Merck & Company Inc. Report

is starting to move, how about


(ABT) - Get Abbott Laboratories Report

? Or is that recent


ruling too much of a drag? Is there anything good in the pipeline?

For much of last year, the only groups you had to think about were

B2B, Net infrastructure, telco and semiconductors. Any time you deviated from those groups, you only had a trade. Forays into health care and banking were financial felonies of your net worth. But it's a new year, and we are open-minded at

Cramer Berkowitz

. I saw the trading in


(C) - Get Citigroup Inc. Report

today and debated taking some

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

. I saw buying in



. It seemed like a Johnson & Johnson trade would cut it.

Cramer's Latest: Join the discussion on


message boards.

Or chat about New Tech 30 (formerly the Red Hots)


However, nagging in the back of my mind was what happens tomorrow? Will I read that the government is going to crack down on pharmaceutical pricing again? Heck, it is an election year and that would probably play well. Or is the same guy going to come on the tube and talk about 100-basis point hikes? Seems like there's always someone out there willing to pontificate on that score.

That's why, in the end, even though I'm schooled in thinking about groups, it was the usual groups to which I stayed attuned. And I suspect that unless rates are about to head dramatically lower, that as much as I might want that $36 Wells Fargo or that $91 Johnson & Johnson stock, it will be more lucrative for me to play the bounces in tech. Hmm, sounds a lot like last year.

However, I'm not giving up on learning about these out-of-favor areas. As we turn to earnings season, I will still be on the down-and-outer quarterly conference calls. But I have very little enthusiasm for them until I'm sure that all of the damage has been done and these bounces are nothing more than knee-jerk, one-day affairs.

Random musings:

Site really rocked today. New spirit. Fantastic.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. Cramer's fund may be long or short certain stocks in his B2B rotisserie league or Red Hot index. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Evening Update: Gateway, Mandalay Issue Earnings Warnings in After-Hours Action


Tara Murphy

Staff Reporter

1/5/00 8:00 PM ET



warned investors that it would miss the fourth-quarter 23-analyst estimate of 49 cents a share. Gateway blamed the poor outlook on soft December business-to-business sales as a result of Y2K concerns and processor supply problems. The company expects to report fourth-quarter earnings of roughly 37 cents a share, which includes a charge associated with its pact with

America Online



According to the agreement, AOL would make an $800 million investment in Gateway, which would pay $85 million to market its software through AOL services. Despite the disappointing fourth-quarter forecast, the company said it was comfortable with the first-quarter 14-analyst estimate of 41 cents a share and the fiscal 2000 23-analyst estimate of $1.83 a share.

In other post-close news (earnings estimates from

First Call/Thomson Financial

; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures



said it agreed to sell its

PDM Division

, in a cash and debt deal valued at $12 million. Inso expects to assume a fourth-quarter charge of roughly $4.7 million due to the sale. Structural Dynamics Research bought the outstanding shares of Inso's units,

Sherpa Systems


Inso France Development


Earnings/revenue reports and previews

Alliance Semiconductor


said it would assume a fourth-quarter pretax gain of $908 million to cover overseas investments. Alliance's investment with Taiwan-based

United Microelectronics

in the merger of

United Semiconductor


United Silicon

created the gain. Alliance said it would hold about 3.2%, or 283.3 million shares of the merged company.

AHL Services


cautioned investors that its fourth quarter and fiscal 1999 earnings would miss analysts' consensus estimates. The company said its expects to post fourth-quarter earnings between 28 and 30 cents a share, falling far below the nine-analyst estimate of 43 cents. For fiscal 2000, the company expects to report earnings between $1.23 a share to $1.25, again missing the 9-analyst estimate of $1.39. The company named

start-up costs, higher taxes and interest expenses as the culprits for the poor report.

American Eagle Outfitters


reported a 16.9% increase in December same-store sales from the year-ago report.

(BYND) - Get Beyond Meat Inc. Report

said that it would report a fourth-quarter loss of between 65 and 68 cents a share, beating the seven-analyst estimate of a 76-cent loss despite missing revenue expectations. cited soft consumer sales as it shifts to a business-to-business company for the disappointing revenue forecast. The company sees its revenue for the fourth quarter between $34 million to $35 million, up 167% from the year-ago report.

Hot Topic


posted a 24.5% rise in December same-store sales.

Mandalay Resort Group


said that its fourth-quarter results would miss analyst consensus estimates and the year-ago report as a result of slow holiday business. The 19-analyst estimate has the company pegged to post fourth-quarter earnings of 25 cents a share, an increase from the year-ago report of 16 cents. Mandalay said it considers the lower-than expected earnings a "one-time event."

Northland Cranberries


posted first-quarter earnings of 2 cents a share, in line with the three-analyst estimate and up from the year-ago 1-cent profit.

Separately, Northland said its has entered a $32 million agreement to sell its private label juice unit to



Standard Motor Products

(SMP) - Get Standard Motor Products Inc. Report

warned investors that it expects to post a higher-than-expected fourth-quarter operating loss of $11 million.

The company blamed the disappointing outlook on product returns and factories operating below capacity. Standard Motor also said that it would assume a fourth-quarter post-tax charge of $7 million as a result of restructuring changes. The single-analyst consensus estimate forecasts the company to report a fourth-quarter loss of 2 cents a share.

Tollgrade Communications


said it expects fourth-quarter earnings of 75 cents a share, pummeling the three-analyst estimate of 38 cents. The company cited a rise in sales of its


system products to



and strong sales of its


test access technology for the stellar earnings forecast.

Zany Brainy


reported 1999 holiday sales of $87.6 million, up from the year-ago $60.5 million.

Offerings and stock actions



said it set a 2-for-1 stock split.

Analyst actions


upped its price target on


(INSP) - Get Inspire Medical Systems Inc. Report

to 160 from 132.


Lone Star Steak House & Saloon

(STAR) - Get iStar Inc. Report

said it would shut down 24 "underperforming" restaurants in the U.S. The company, which operated more than 300 restaurants as of August, said the closures would take place in Ohio, New York and Pennsylvania.

For a look into this evening's after-hours trading action, please check out's

The Night Watch.

Bond Focus: Surging Stocks Send Bond Yields to Highest Since Sept. 1997


David A. Gaffen

Staff Reporter

1/5/00 6:33 PM ET

From bad to worse.


started the day underwater, pulling back from yesterday's gains in the realization that, well, despite yesterday's downturn in the stock market, the situation hasn't improved for bonds. At least one


rate hike still looks likely, the economy is rolling along, and nobody wants bonds. If that wasn't enough, the

Dow Jones Industrial Average

kindly tacked on 125 points today.

Bonds worsened as the day waned, in part because the

Nasdaq Composite Index

, down 100 points early, regained its footing and pushed into positive territory before finishing off 25 points.

"Today's price action is more like the trend," said Richard Schwartz, senior vice president at

New York Life Asset Management

. "Generally, I think bonds are going to be under pressure, and the reprieve will only come if there's an equity market correction."

Lately the 30-year Treasury bond was down 1 4/32 to 93 15/32, bumping the yield up to 6.63%. That's the highest closing yield for the 30-year bond since Sept. 1997. At one point, the yield touched 6.64%, right around when the Dow was up 200.

The market: Join the discussion on


Message Boards.

Yesterday seemed like the first recognition by stock traders that rising bond yields make stocks look less attractive. (Never mind the year of hemorrhaging bonds just completed.) That line of thinking didn't last long. Bonds, which opened up poorly on indications that stocks were going to have a decent, if not quite euphoric day of trading, deteriorated as equities turned an OK day into a near-celebration.

What's been on the bond market's mind lately is the wealth effect. The theory goes that rising stock prices enhance consumer confidence and translate into more spending, boosting the economy. But the effects of higher stock prices on consumer spending are debatable -- many believe it has a lagging effect, if any effect at all -- but bond participants right now seem convinced a stock market correction is about the only thing that might ward off more Fed rate hikes. (That, or an economic slowdown, but the market seems to have stopped believing that will happen, if it ever did.)

"The bond market has absolutely bought into the wealth effect argument," said Mitch Stapley, chief fixed income officer at

Kent Funds

in Grand Rapids, Mich. "The idea is, we have to break the

stock market to slow the economy. You could crush oil and the CRB and they're just looking to see what the latest tick on the Dow is."

For the record, February oil futures, traded on the

New York Mercantile Exchange

, finished down 64 cents to $24.91. The

Bridge/Commodity Research Bureau Index

closed down 35 cents to 201.90. Generally, lower commodities prices makes bond investors worry less about inflation.

Right now the

fed funds futures

traded on the

Chicago Board of Trade

are pricing in one hike, and building in 35% odds of a 50-basis point hike to 6% on Feb. 2. Some believe the market is setting itself up for a potential rally by building in all this bad news now.

By assuming at least one, if not two, rate hikes, some strategists think the market is primed for a 'sell the rumor, buy the news' type response when the Fed acts to stave off inflation.

However, that type of bold sentiment hasn't translated into anyone stepping in front of this bond market now, which resembles a snarling boar that's been pushed down a mountain.

"Just because the market is oversold doesn't mean the selling is over," said Mike Ryan, senior fixed-income strategist at


. "The sentiment is pretty poor, technical support won't show up until another 15 or 20 basis points

higher, and there's no sponsorship. There's no one willing to stand up and say, '6.5% is my line in the sand.'"

Schwartz could hardly disagree. Bonds "probably do represent value, but I don't feel smart enough to pick the bottom," he said. "I'm not ready to bottom-fish here."

Today's most important monthly economic release was the

factory orders

report, released by the

Commerce Department

. Factory orders rose 1.2% in November, compared with a 0.9% forecasted increase, according to


. Orders were unchanged in October, revised upward from an original 0.2% decrease. The market doesn't often react to this release, seeing as how it serves mostly as an update of the earlier-released

durable goods



Street Sightings

Adam Lashinsky will appear on's Street Review hosted by Mike Green Thursday, Jan. 6. The show begins at 6:05 EST.

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