Skip to main content

daily02-09-00's DAILY BULLETIN

February 10, 2000

Market Data as of Close, 2/9/00:

o Dow Jones Industrial Average: 10,699.16 down 258.44, -2.36%

o Nasdaq Composite Index: 4,363.24 down 64.26, -1.45%

o S&P 500: 1,411.71 down 30.04, -2.08%

o TSC Internet: 1,146.83 down 14.54, -1.25%

o Russell 2000: 536.00 down 1.49, -0.28%

o 30-Year Treasury: 97 13/32 down 1 04/32, yield 6.301%

Companies in Today's Bulletin:

E*Trade Group (EGRP:Nasdaq)


Yahoo! (YHOO:Nasdaq)

eBay (EBAY:Nasdaq)

In Today's Bulletin:

Scroll to Continue

TheStreet Recommends

o Internet: Web-Security Stocks Rally, but Magic Bullet Isn't on Horizon
o Wrong! Dispatches from the Front: It's All About the Money
o Evening Update: Disney, Top Estimates, and More Postclose News
o Bond Focus: Cool Reception for New 10-Year Notes Ends Rally

"" on

Fox News Channel

Computer hackers are mucking up the works at some Internet titans. How will their handiwork impact your Net stocks? We'll get the "Word on TheStreet" with Ark funds portfolio manager, Christopher Baggini and


Herb Greenberg, Adam Lashinsky and special guest, "CapitalistPig" Jonathan Hoenig.

Also, funds writers Joe Bousquin and Dagen McDowell face-off on the best way to tap into this year's biotech boom. And "Chartman" Gary B. Smith and Adam Lashinsky check out two of the most asked about stocks inLashinsky's mailbag. All that and predictions.

"" on

Fox News Channel

airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET. FNC is Fox's 24-hour cable news channel. To find

Fox News Channel

in your area, call your local cable operator or see our "TSC on Fox TV" page at

Also on

Online Investing: Hackers Highlight Investors' Need for a Back Door to Their Brokers

If you can't afford to wait, make sure the Internet isn't your only means of access to your broker.

Online Brokers: Hackers Disturb but Don't Damage Brokers

E-brokers see the recent online hacking, which hit E*Trade today, as a problem they can manage.

Internet: E*Trade Message-Board Posters up in Arms About Shutdown

The reaction was far more muted when the likes of Yahoo! and eBay were hit.

Semiconductors: SOX Hits the Stratosphere as Chip Sales Soar

The worldwide desire to be online is driving the sector's continued success.

Internet: Web-Security Stocks Rally, but Magic Bullet Isn't on Horizon


George Mannes

Staff Reporter

2/9/00 8:53 PM ET

Though no one appears to have a magic bullet, business could improve for computer-security companies in the wake of the recent attacks on





(EBAY) - Get eBay Inc. Report



and other sites.

Computer security experts say there's little a site can do to prevent itself from falling victim to a similar scheme, but the incident will at least raise awareness about security issues among organizations that use computers.

On Wednesday, the third day of the attacks, shares in online security companies rose despite a broad market selloff late in the day. Shares in

Axent Technologies


rose 22%, and both

ISS Group



Check Point Software Technologies

(CHKP) - Get Check Point Software Technologies Ltd. Report

were trading higher.

Benefits Analysis

Just as the "Michelangelo" virus scare of 1992 heightened awareness of virus-protection software, the site outages of recent days will likely heighten awareness of, and demand for, other security measures. "In general, any security company benefits from this kind of stuff because usually people don't care about security," says Jeffrey Schiller, the network manager at the

Massachusetts Institute of Technology


Web Attacks:


Message Boards.

Defending against the scheme used to temporarily cripple the sites -- known as distributed denial of service, or DDOS -- is no simple matter, say experts. That's because the attack can't be prevented by security precautions at the target site; rather, it takes advantage of lax security at unrelated machines operated by third parties on the Internet. And because there are millions of computers permanently connected to the Internet -- operated by organizations without infinite time, money or other resources to devote to security -- hackers theoretically have numerous opportunities to bring down any site they choose to target.

"There is not a lot that can be done here by the victims to protect themselves," says Eugene Spafford, a professor of computer sciences at

Purdue University

and director of a research center devoted to computer and network security.

What Happens

Most security experts think attackers hijack other computers around the Internet and instruct them to flood the target Web site with requests for information. The server of the target Web site cannot process the deluge of requests at once, so the time to download a Web page slows to the point that the page becomes inaccessible.

Hackers launching DDOS attacks take advantage of weak Internet security in different ways, say administrators of computer networks.

Prior to their planned attacks, they deposit rogue software on unsecured machines, explains Randy Marchany, a system administrator at

Virginia Tech

and a faculty member of the

SANS Institute

, a cooperative group that educates computer professionals about network security. That rogue software transforms these machines into either "client" machines that directly attack the target site, or "master" machines that direct the clients, Marchany says. "It's literally, the client machines are soldiers, the masters are sergeants ... and the hacker is the commander," he says.

Another element of the attack is that the messages sent to the target site usually have forged return addresses, making it difficult for targets to trace the true source of the attack, says Schiller, who manages MIT's computer network. That complication can be prevented by companies and Internet service providers making sure that they don't pass on Internet traffic with faked addresses, Schiller says. "Most end-users don't know how, and most ISPs don't bother because it doesn't help them," he says. Such a precaution would make it easier to find perpetrators, making DDOS riskier and deterring future attacks.


Software and security services from a variety of sources, says Schiller, could prevent hackers from hijacking an organization's machine to go after another site. (He says MIT itself doesn't rely on outside security vendors. "We roll everything ourselves," he says.)

Because of the decentralized nature of the Internet, a Net-wide solution to prevent DDOS isn't easy to craft, says Spafford. Even if someone came up with a solution tomorrow, it might take years to implement, he says. A legal approach, he suggests, might be to hold companies responsible, at least in civil court, for damage caused by people who used their unsecured computers for an attack -- sort of how a homeowner might be liable for an injury at his pool if he didn't put a fence around it.

In the end, it's a community effort. "Everybody depends on each other. And that's the thing a lot of people haven't realized yet," Marchany says. "My security depends on your security. We all have a responsibility."

Wrong! Dispatches from the Front: It's All About the Money


James J. Cramer

2/9/00 9:19 PM ET

My, my, I am taking heat on this bank call. And you know what I do when I take heat? I turn tail and go cry to my mommy?

I don't think so.

I buy more.

You know why? Because not everything can be



. Because sometimes you stumble on stuff that's just wrong and will be valued right. Soon. Like now.

Join the discussion on


Message Boards.

That's why we bought more




Goldman Sachs

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

into the weakness. (By the way, when people say that I should hang my head in shame for buying the financials, I say what the heck has been wrong with GS and CMB? These have been winners, not losers. )

Okay, I am conflicted. An affiliate of Chase owns a piece of

. But Chase doesn't own a piece of me. In fact, when they treated me like a joker when I wanted to get a mortgage, I dropped them like a hot potato. I buy stocks for one reason only: 'Cause I think they are going to go up. The bosses at Chase don't know me from Adam. Either that or they are the greatest actors since



While we are at it, I worked at Goldman. So maybe you think I am on the take to them, too. Heck no. If I thought they were screwing up, I'd short them so fast your head would spin. We are talking money, not children, or sports teams.

So, chastise me for not owning more


(CSCO) - Get Cisco Systems, Inc. Report

. Yell at me for not liking


(NOK) - Get Nokia Oyj Report

hard enough. But don't blast me because of the financials.

They are a work in progress.

'Cept the insurers. Which stink to high heaven.


James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long Chase Manhattan and Goldman Sachs. 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: Disney, Top Estimates, and More Postclose News


Eileen Kinsella

Staff Reporter

2/9/00 8:38 PM ET


(DIS) - Get Walt Disney Company Report

reported first-quarter pro forma earnings of 25 cents a share, before the retained interest in its Internet portal

(GO) - Get Grocery Outlet Holding Corp. Report

. The result edged out the 16-analyst estimate of 20 cents a share, and the year-ago pro forma 23 cents.

Chairman Michael Eisner said he does not see Disney becoming an Internet/entertainment company like

America Online



Time Warner


, saying Disney is already large enough and has strong enough content.

Meanwhile posted a narrower-than-expected pro forma loss of 30 cents a share, compared with the two-analyst estimate of a loss of 47 cents. The year-ago loss was 12 cents a share.

For more details on's

earnings, see the coverage from's

joint newsroom.

In other postclose news (

earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified


Earnings/revenue reports and previews

Cox Communications


reported fourth-quarter earnings of 18 cents a share, including a gain of $259.3 million from investments. The year-ago earnings of 57 cents include a gain of $665.4 million from investments. The eight-analyst estimate was for a loss of nine cents a share. No per share figures from operating income were provided.

Credence Systems


reported first-quarter earnings of 71 cents a share, blowing past the eight-analyst estimate of 52 cents and the year-ago loss of 32 cents. The company said sales increased 284% from a year ago.


(CSX) - Get CSX Corporation Report

posted fourth-quarter earnings of 20 cents a share, a penny shy of the 10-analyst estimate and down from the year-go 51 cents. The company said it was hurt by higher costs taken by the railroad in handling traffic on its expanded network. CSX said it expects to report first-quarter earnings "well below" its year-ago earnings of 36 cents. The four-analyst estimate for the first quarter is 34 cents.


(OI) - Get O-I Glass Inc Report

reported fourth-quarter earnings of 23 cents a share, in line with the 10-analyst estimate. The year-ago loss of $1.24 includes items.


(RCII) - Get Rent-A-Center Inc Report

reported fourth-quarter earnings of 52 cents a share, a penny ahead of the six-analyst estimate and better than the year-ago 29 cents. The company said diluted earnings per share would have been 70 cents before goodwill amortization of 18c a share for the quarter.

Tricon Global Restaurants

(YUM) - Get Yum! Brands, Inc. Report

posted fourth-quarter earnings of 78 cents a share, better than the single-analyst estimate of 72 cents and the year-ago 55 cents. The company said it expects it increase operating earnings-per-share by 23% to 27% in 2000.



said it expects earnings this year will be more than double last year's levels due to sharply higher oil and natural gas prices. Unocal estimated its 2000 earnings, excluding its agricultural products segment, will be $1.40 to $1.50 a share, compared with 1999 earnings of 65 cents a share. The current 19-analyst estimate calls for earnings of $1.57 a share in 2000.


(UNM) - Get Unum Group Report

posted fourth-quarter earnings of 57 cents a share, missing the 14-analyst estimate of 72 cents and the year-ago 75 cents. The company said the lower results were due to higher levels of terminated business in the group disability line, slower new sales and higher claim costs in some parts of its operations.

In other earnings news:

Mergers, acquisitions and joint ventures

Landry's Seafood Restaurants


said it will buy

Rainforest Cafe


for about $125 million in cash and stock.

Offerings and stock actions

Cadence Design Systems


authorized the repurchase of an additional 15 million shares of its stock.


York International


said it has hired

Warburg Dillon Read

to help it review its financial and strategic alternatives. The company named Michael Young as CEO to replace John Tucker, who has held the post since October. York also said CFO Robert Galvin has left the company.

Bond Focus: Cool Reception for New 10-Year Notes Ends Rally


Elizabeth Roy

Senior Writer

2/9/00 4:33 PM ET

Today's 10-year Treasury note auction got a cool reception from investors, and that put a stop to a rally that had been underway in much of the Treasury market.

Then, in the session's final hour, comments by Treasury Secretary

Larry Summers

triggered an additional decline in the price of the 30-year bond. Summers indicated that issuance of 30-year bonds will continue indefinitely. Last week, an article in the

New York Times

suggested that might not be the case.

Treasury issues were mixed before the auction results were announced at about 1:30 p.m. EST, with the two-year note down and longer-maturity notes and the 30-year bond moderately higher. Demand for the 30-year issue has been running high because of government plans to reduce the supply of long-dated issues. Intermediate-maturity notes got moving around midday, when the stock market's decline accelerated. As for the two-year note, with the


poised to hike short-term interest rates at least once more, it seldom goes anywhere but down.

By the end of the day, the 10-year note (which is quickly displacing the 30-year bond as the Treasury benchmark) was down 6/32 at 95 16/32, lifting its yield 2.8 basis points to 6.646%. The two-year note finished up 1/32, trimming its yield 2 basis points to 6.648%.

The market: Join the discussion on


Message Boards.

Today's auction was the second of three segments of the so-called quarterly refunding, in which the

Treasury Department

sells new intermediate-term notes and long-term bonds. Yesterday, it auctioned new five-year notes. Tomorrow, it will sell new 30-year bonds.

The reception an auction gets often sets the tone in the Treasury market. The quality of the reception is measured by the bid-to-cover ratio it produces. The bid-to-cover ratio compares the volume of securities dealers bid for to the amount for sale. Higher is better.

Today's auction of $10 billion 10-year notes produced a bid-to-cover ratio of 1.45. The average for the previous five 10-year auctions produced an average bid-to-cover ratio of 1.95.

Demand for the notes was weak for two closely related reasons, said Matt Frymier, a Treasury note trader at

Banc of America Securities

in San Francisco. The wild swings in the Treasury market over the last two weeks left dealers gun shy, for one. "The recent volatility in the marketplace makes the auction process hazardous," Frymier explained. "You put a bid in and then you don't know the results for half an hour. That's a long half hour. Given the current environment of big spread moves, extreme volatility and choppiness, it scares professional players out of participating to the extent they would normally."

At the same time, those wild swings left the 10-year Treasury's yield below the two-year's yield. Why bother buying 10-year notes at a yield of 6.54% -- the yield at which the new issue was awarded today -- when you can get a two-year note at a yield of 6.648%?

Meanwhile, the 30-year bond, which was down about half a point after the 10-year auction results were announced (after trading up as much as 30/32 in the morning) ended down 30/32 at 97 20/32, lifting its yield 7.1 basis points to 6.303%.

Its decline accelerated after Summers told reporters in Washington: "I expect Treasury to continue to use the entirety of the yield curve as a way of holding down our borrowing costs." The remark was interpreted to mean that the Treasury will continue to issue 30-year bonds.

The Treasury has never said anything but that it would continue to issue 30-year bonds. Last Wednesday, when it announced the details of the quarterly refunding, it said only that it would curtail issuance in the 30-year sector in particular. Some future auctions of five- and 10-year notes would be "smaller," but some future auctions of 30-year bonds would be "significantly smaller," and there would be one fewer 30-year auction a year than before.

But the next day's

New York Times

characterized the announcement as "a move that could eventually eliminate the 30-year bond altogether." The 30-year bond, which had gained 1 27/32 on Wednesday, gained another 2 on Thursday, dropping its yield to the lowest level since mid-November.

Terming the article "very irresponsible,"

Paribas Capital Markets

senior bond strategist Richard Gilhooly said it had helped drive the bond's price significantly higher. Summers' comments refuted the


conclusion, "and that's why the long bond just collapsed," he said.

Regardless of the precise rationale for the late-day selloff, it underscored the fact that the 30-year issue is subject to forces that make it unreliable as a touchstone. "Once again we see that the 30-year trades in a world of its own,"

Banc One Capital Markets

senior financial economist Anthony Karydakis said. "This kind of price action explains why it has been deprived of its status as a benchmark for the Treasury market."

At the

Chicago Board of Trade

, the March

Treasury futures contract ended down 30/32 at 93 19/32.

Economic Indicators

There were no major economic releases today. The highlight of the next few days is the January

retail sales

report, due out Friday at 8:30 a.m. EST.

The weekly

Mortgage Applications Survey

detected increases in both refinancing and new mortgage activity. The Refinancing Index rose to 436.7 from 384.4, while the Purchase Index rose to 307.1 from 292.6.

Currency and Commodities

The dollar weakened against the yen and the euro. It was lately worth 109.00 yen, down from 109.51 yesterday. The euro was lately worth $0.9930, up from $0.9854 yesterday.

Crude oil for March delivery at the

New York Mercantile Exchange

fell to $28.60 a barrel from $28.02 yesterday.


Bridge Commodity Research Bureau Index

advanced to 212.64 from 210.38 yesterday.

Gold for April delivery at the


gained sharply again, to $308.50 an ounce from $301.70 yesterday.


Street Sightings

James J. Cramer will be chatting on Yahoo! Thursday, Feb. 10 at 5 p.m. EST. It's free!

Copyright 2000,