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Publish date:

daily02-06-00's DAILY BULLETIN

February 7, 2000

Market Data as of Close, 2/4/00:

o Dow Jones Industrial Average: 10,963.80 down 49.64, -0.45%

o Nasdaq Composite Index: 4,244.14 up 33.16, 0.79%

o S&P 500: 1,424.37 down 0.60, -0.04%

o TSC Internet: 1,140.26 down 31.35, -2.68%

o Russell 2000: 525.52 up 3.89, 0.75%

o 30-Year Treasury: 98 02/32 down 1 22/32, yield 6.208%

Companies in Today's Bulletin:

American Home Products (AHP:NYSE)

Warner-Lambert (WLA:NYSE)

Pfizer (PFE:NYSE)

Goldman Sachs (GS:NYSE)

In Today's Bulletin:

TheStreet Recommends

o Editor's Letter: The Coming Week on TSC
o Weekend Report: Warner-Lambert Ties the Knot With Pfizer, Ditching American Home
o The Coming Week: Strange Days Indeed -- Thinking About Stocks and Bonds
o The Coming Week in Europe: Germany's Dax Poised for Makeover

Also on

Wrong! Rear Echelon Revelations: State of the Web: Lessons from the Cable Resurrection

A recent investment by Microsoft may portend another miracle.

This Week in IPOs: Paying Attention to Those Men Behind the Curtain

With 28 IPOs in the queue this week, Ben's keeping his eye on the smart money.

The Coming Week in Asia: Tokyo Investors Contemplate a World Beyond Zero

Concerns are mounting about what will happen when its near-zero interest-rate policy ends.

Jim Griffin: Anecdotal Inflation

Despite the Fed's tightening, liquidity remains ample, sentiment is ebullient and the market keeps roaring.

Editor's Letter: The Coming Week on



Dave Kansas


2/6/00 6:34 PM ET

Despite all the advances of the Internet and the proliferation of information sources, individual investors still find themselves fighting for the kind of access enjoyed by the big dogs. And we're constantly trying to find ways to even the score, to level the playing field.

A number of investment banks and companies work in conjunction to limit access to conferences, presentations and other important events that help investors determine what's happening with the companies in which they invest. We, along with many of our colleagues, notably


, are constantly working to break through these exclusionary practices so that you can see and understand as much as any other investor.

This week

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

will host a conference in the desert of Southern California, but only journalists receiving special invitations will be permitted inside the hallowed halls. Though we were not chosen to join this cozy crew of something like 10 periodistas, we're still going to do our darndest to get you the information you require in order to invest wisely.

Eric Moskowitz

, one of our technology writers, will be working this week to break through the subjective barriers tossed up by Goldman. As ever, we'll be fighting for your access, for your information, for your benefit. Look for his renegade reporting all this week.

If you have suggestions about how we can hustle for you in order to continue breaking down arbitrary barriers, let me know. I can be reached at

For those who saw this week's television show on


, you know what it's like to see columnist

James J. Cramer

in the hot seat! This weekend he defended his stock picks, and

Herb Greenberg

and guest

Bob Olstein

had a lot of fun getting him to do so. This week, Jim will do the same. He's chatting on



at 5 p.m. EST on Thursday. It's wild and wacky to chat with Jim, so don't miss it! Also, it's free. All you have to do is register at

As ever, if you have any issue or concern you wish to contact us about, feel free to email our excellent customer service staff at Or, of course, you can email me and I'll make sure that your issues get handled.

So, get ready for another exciting week on

. We'll be hustling for you!

L'Etoile du Nord

Dave Kansas


Weekend Report: Warner-Lambert Ties the Knot With Pfizer, Ditching American Home


David Rheingold

Special to

2/6/00 7:45 PM ET

Like a potential bride who just can't find someone willing to settle down,

American Home Products


watched Sunday as its would-be partner



planned to merge instead with


(PFE) - Get Pfizer Inc. Report


Pfizer is expected to announce its acquisition of Warner-Lambert on Monday, pending approval from both boards, sources told


Sunday. According to


reports, the deal is valued at $91.4 billion including stock and assumed debt, and will create America's largest drug maker and the second-largest in the world.

American Home, which previously had failed to merge with


(MTC) - Get MMTec, Inc. Report


SmithKline Beecham

(SBE) - Get Switchback Energy Acquisition Corporation Class A Report

, has agreed to walk away from Warner-Lambert in exchange for $1.8 billion, sources told the

New York Times



over the weekend.

An American Home Products spokesman would not confirm the reports Sunday and declined to comment on the merger.

The breakup fee was specified in the company's initial agreement to merge with Warner-Lambert. Shortly after the two agreed to join in November, Pfizer upstaged American Home with an unsolicited counteroffer of $82 billion.

At first, Warner-Lambert refused to consider Pfizer's bid, but finally caved in last month.

Shares of Warner-Lambert closed Friday up 1 1/16, at 94 9/16, and Pfizer finished up 1/8, at 35 3/4. American Home fell 2 3/16 to finish at 45 1/2.

Representatives from Pfizer and Warner-Lambert could not be reached Sunday.

In Other News

America Online's


borders could soon extend a lot father than its name indicates. The Internet service is in talks to buy out partner


50% stake in

AOL Europe

, the London


reported Sunday. The negotiations were prompted by AOL's merger with

Time Warner


, which is a competitor of German media giant Bertelsmann, the newspaper said.

Separately, AOL Europe is poised to surpass


as the largest Internet service provider in the U.K. next month, AOL Europe chief exec Andreas Schmidt told the

Sunday Times


Last week's record $181 billion merger of European telecom giants




will not jeopardize Vodafone's plans for a European Internet portal with France's


. At least that's according to Vivendi Chairman Jean-Marie Messier, who tells the

Journal du Dimanche

in Paris that he still expects the companies to launch their joint venture by the end of June.

In other M&A news ... Montreal-based

BCE Emergis

announced Sunday it had acquired

United Payors & United Providers


for $580 million. United Payors, based in Rockville, Md., processes claims between insurance companies and health care providers.

Days after a class-action lawsuit was filed in New York against


(BID) - Get Sotheby's Report



accusing the pair of fixing commissions, the

Financial Mail

in London reported Sunday that the European Union is investigating the two auction houses. An EU spokesman told the newspaper the probe would focus on the European art market.


Alaska Airlines

(ALK) - Get Alaska Air Group, Inc. Report

flight made an emergency landing Saturday night after developing problems with its rear stabilizer, the same piece of equipment that gave pilots trouble before last weekend's Alaska Airlines crash off the coast of California. Less than 10 minutes after takeoff, the plane safely returned to Reno/Tahoe International Airport with no injuries to any of its 140 passengers.

In Europe's ever-consolidating defense industry,

BAE Systems

is considering a $2.07 billion bid for

Lockheed Martin's

(LMT) - Get Lockheed Martin Corporation (LMT) Report

Aerospace and Electronic Systems

unit, the

Sunday Times

reported. BAE is the company formed by

British Aerospace's

purchase of



Thousands of miles away from the court battle over Web browsers,


(MSFT) - Get Microsoft Corporation (MSFT) Report

is wading into a much more innocuous realm: online gambling.

Bill Gates

has told the


that his company will provide the software if

Richard Branson

wins his bid to run the U.K.'s National Lottery. Branson wants to reinvigorate the lottery with the help of the Internet, interactive television and mobile phones.

And finally, it's official:

Hillary Clinton

has become the first First Lady to seek public office. She formally announced her candidacy for the U.S. Senate from New York Sunday.

In the Papers

For betting heavily on technology stocks,




1999 fund-family survey. Following it were







Morgan Stanley Dean Witter


Associates First Capital


, a Dallas-based finance company, could become a takeover target if its stock price continues to lag,


speculates. The magazine notes that its stock has taken a dive despite the company's strong performance.



General Electric

(GE) - Get General Electric Company (GE) Report



(C) - Get Citigroup Inc. Report


American International Group

(AIG) - Get American International Group, Inc. Report

as potential buyers.


also features an interview with money managers Mark Bronzo and Daniel Portanova of

Groupama Asset Management

. Their stock picks include

Morgan Stanley Dean Witter



Merrill Lynch




(TGT) - Get Target Corporation Report






(NOK) - Get Nokia Oyj Sponsored ADR Report



(MDT) - Get Medtronic Plc (MDT) Report






(KMB) - Get Kimberly-Clark Corporation (KMB) Report



unnerved its competitors last month when it asked farmers not to sell it genetically modified corn for use in Doritos or Fritos chips, the

Washington Post

reported Sunday. The company, a unit of


(PEP) - Get PepsiCo, Inc. Report

, told the newspaper it has merely heeding its customers uncertainties. U.S. food producers as a whole have not buckled to concern over genetically modified crops, although America has not seen the consumer backlash that Europe has.

David Rheingold is a New York-based freelance writer. At the time of publication he was long Pfizer, although holdings can change at any time.

The Coming Week: Strange Days Indeed -- Thinking About Stocks and Bonds


Justin Lahart

Associate Editor

2/4/00 9:05 PM ET

Let's begin by taking a moment to think about the relationship between stocks and Treasuries the way an asset allocator would.

We know that stocks, over the long run, offer better returns than bonds do. We also know that Treasuries are a safer investment, offering a pretty much risk-free return. So some money goes into stocks and some money goes into bonds. When Treasury yields go up, they return more. So a little more goes into bonds and a little less goes into stocks. When the bonds rally, and yields go back down, the money heads in the opposite direction.

This is important stuff to bear in mind given the strange recent happenings in the bond market, where a cutback in forthcoming supply has forced an inversion in the yield curve and caused a significant rally. Traders reckon the 30-year will turn into an

antique pretty soon -- and it's beginning to get priced like one.

Where its yield was as high as 6.75% in mid-January, it closed at 6.27% on Friday. The yield on the 10-year (which has pretty much turned into the benchmark) closed at 6.54%. Last month, it had been as high as 6.78%.

There's a lot of talk about how artificial this situation in the bond market is, given that the

Federal Reserve

has been raising rates and will probably continue to do so. But it's also a situation that looks like it will persist -- the budget deficit isn't what it once was and the U.S. does not need to issue as much debt. The risk-free return on Treasuries is less than it once was and, all other things being equal, that means stocks are more attractive.

Now comes a wrinkle.

The Fed appears keen to slow down the economy, and the economy is being driven by a very buoyant consumer. And one of the big things driving the consumer is the stock market. Or so most economists are beginning to posit; many now even say that their forecasts for economic growth depend heavily on what happens in equities. So if the stock market doesn't at least start treading water here, the economy will keep on cooking.

"The consumer has benefited from the wealth effect," said

Salomon Smith Barney

economist Mitchell Held. "And they're going to have to get hit with the wealth effect."

Back in the day

, when the Fed got to hiking rates, the Treasury market would sell off, sending yields higher. And asset allocators, seeing those higher yields, would sell some stock and buy some bonds. Unfortunately for the Fed, these aren't the old days anymore.

"It's just making the Fed's job more difficult," said Tony Crescenzi, bond-market strategist at

Miller Tabak

. "The markets are easing while they're tightening. They've lost control of financial conditions to the markets. The Fed will perhaps have no choice but raise short-term rates to levels we haven't seen in a long time."

It makes for sort of a Super-Bizarro market dynamic. Let's say, for example, that when January

retail sales

figures get released next Friday, they come in soft. (Economists forecast they'll come in pretty strong, but never mind that right now.) That would mean the consumer is slowing down, which in turn would mean the Fed wouldn't have to get medieval on the market. Which means the market could go higher, which would boost the consumer, which brings us back to square one. Whenever the stock market sells off, the Fed outlook improves. Whenever it goes higher, the Fed outlook deteriorates.

If you want to make a market forecast, volatility ain't a bad one.

"I continue to want to sell rallies and I continue to want to sell the dips," said Larry Rice, chief investment officer at


. It'll be sort of like the first half of last year, when the market bounced higher and lower, except "we're going to have more swings and more pronounced swings."

For agile traders, that sounds like heaven.

The Coming Week in Europe: Germany's Dax Poised for Makeover


Marc Young

German Correspondent

2/5/00 12:30 AM ET

BERLIN -- When most people think of German stocks, they think of the

Deutsche Aktienindex

(more commonly known as the


), which serves as a surrogate for the broader equity market just as the


does in the U.S. or the


in the U.K.

Benchmark indices are selective clubs that seldom experience more than a slight tinkering of their makeup to represent a sector or an economy better or fill gaps left through mergers and takeovers. The Dax, however, faces a number of possible changes that could drastically alter its character this year.

The first of those changes could be announced in the coming week; the

Deutsche Boerse

's working group for indices meets Tuesday to discuss the equity market landscape. It has long been known that one Dax berth would need to be filled following the merger of utilities





. However, the sudden friendly resolution of the


(VOD) - Get Vodafone Group Plc Sponsored ADR Report




battle royale means that the German telecom's place will now also need to be filled.

But besides making a general assessment of the current makeup of the Dax and other Deutsche Boerse indices such as the




and the

Neuer Markt



, the working group will be besieged by a flood of possible new contenders this year due to spinoffs and initial public offerings.

The Dax operates under a 35/35 principle; that is, a company must be within the top 35 for both market capitalization and turnover to be considered. However, those criteria won't make things easier for the Deutsche Boerse, since a number of new candidates will easily fulfill them.

Most likely to fill the Veba-Viag spot will be





(EPC) - Get Edgewell Personal Care Co. Report

, but another Siemens spinoff, semiconductor maker


, is expected to go public later this month. With an expected $20 billion market cap, it could also make the grade.

The children of the electronics giant are just the start though.

Deutsche Telekom

(DT) - Get Dynatrace, Inc. Report

has announced its intention to float both the company's Internet and wireless units,




, later in the year. Also lurking in the background is the eventual listing for

Deutsche Post

, which is likely to be the largest German IPO since DT in the mid-'90s.

Besides the prestige for the companies involved, meddling with the composition of the Dax could have considerable consequences. For example, Deutsche Telekom's rather manipulative capital increase last summer increased the company's Dax weighting even though the former state-run monopoly is not yet legally allowed to sell all of the shares. The boosted Dax weighting caused index-linked investment funds to buy DT shares, thereby artificially supporting Telekom's flagging share price right after the failed merger attempt with Telecom Italia.

Any of the new Dax entrants can also expect such an index-fund boost, as fund mangers scoop up the stock of the newly added companies, dump those of any firms booted off the list, as well as readjust positions to any reweighting of other shares.

But all the commotion doesn't have investors that concerned. They believe the Dax shakeup could provide momentum for the whole market. "It's not such a bad thing, I think," says Klaus Martini, a Frankfurt-based fund manager for

DWS Funds

. "If new dynamic companies join the index it could help make things more interesting generally."

That may be true, but perhaps the only trouble will be when people think of German stocks and the Dax, it definitely won't be the Dax they thought they were thinking of.

Street Sightings:Vern Hayden will be a guest on CNBC's PowerLunch, Tuesday, Feb. 8 at 12 p.m. ET.

Copyright 2000,