March 21, 2000

Market Data as of Close, 3/20/00:

o Dow Jones Industrial Average: 10,680.24 up 85.01, 0.80%

o Nasdaq Composite Index: 4,610.00 down 188.13, -3.92%

o S&P 500: 1,456.63 down 7.84, -0.54%

o TSC Internet: 1,184.83 down 87.78, -6.90%

o Russell 2000: 549.20 down 25.57, -4.45%

o 30-Year Treasury: 103 13/32 up 4/32, yield 5.988%

Companies in Today's Bulletin:

3Com (COMS:Nasdaq)

Caldera (CALD:Nasdaq)

Aether Systems(AETH:Nasdaq)

MicroStrategy (MSTR:Nasdaq)

In Today's Bulletin:

o Market Roundup: New Tech Gets Battered, Sends Nasdaq Whistling Down as Dow Gains
o Wrong! Dispatches from the Front: Cramer Might Sea a Change
o Evening Update: Caldera IPO Priced Above-Range; 3Com Reports
o Bond Focus: Long-Term Treasuries Cheer Lower Oil and Tech-Stock Prices

Also on

Telecom: Wireless Investors Breathing in Aether No More

The stock is a third off its highs, as valuations start to fade even for momentum favorites.

Analyst Actions: Analyst Actions: Dell's Price Target, Tribune's Rating Hiked

Biotech/Pharmaceuticals: Biotech Investors Waving Bye-Bye as Another Selloff Unfolds

Shares get clipped for a third day over the span of a week despite a dearth of news.

View From the North: Canadian Biotechs Get Caught Up in Selloff Sparked by Genetic Announcement

Still, observers think there are solid biotech plays out there.

Market Features: Fed Meeting Preview: There's a Hike Coming, and It's Not the Last

Alan Greenspan and his Fed cohorts will keep laying on quarter-point rate hikes until the economy cools.

Market Roundup: New Tech Gets Battered, Sends Nasdaq Whistling Down as Dow Gains


Aaron L. Task

Senior Writer

3/20/00 5:16 PM ET SAN FRANCISCO -- Amid a lot of background noise, and a day ahead of an expected

Federal Reserve

rate hike, the bottom line is that the trend evident last week re-emerged today. That is, valuations matter.

It would be a gross oversimplification (as well as an increasingly tired trope) to say Old Economy stocks benefited at the expense of New Economy stocks. Still, the

Dow Jones Industrial Average

rose 85.01, or 0.8%, to 10,680.24 while the

Nasdaq Composite Index

shed 187.64, or 3.9%, to 4610.49 -- suffering the third-worst point decline in its history.

The final tallies set up the potential for deliciously cliched headline possibilities for tomorrow's newspapers and tonight's TV broadcasts. But -- as is often the case -- a casual glance does not tell the whole story.

Notably, the Dow's gains were inspired largely by technology components





(INTC) - Get Intel Corporation (INTC) Report



(IBM) - Get International Business Machines (IBM) Report

, rather than Old Economy cyclicals or consumer-focused names.

Other Dow movers included


(T) - Get AT&T Inc. Report

on the upside while


(XOM) - Get Exxon Mobil Corporation Report

was the biggest drag, falling 2.9% as crude prices declined.

Meanwhile, beyond tech bellwethers, the mood in the sector was depressed, if not worse.

A major catalyst for the Nasdaq's retreat was


(MSTR) - Get MicroStrategy Incorporated Class A Report

, which tumbled 61% after saying it would

restate its financial results for 1999. The Internet software developer said it was changing the way it recognized revenues for certain contracts following guidance by the

Securities and Exchange Commission


Concerns about revenue recognition go beyond MicroStrategy's specific case, but that firm's announcement heightened questions about using price to revenue as the "valuation standard" for Internet stocks, according to Barry Hyman, chief market strategist at

Ehrenkrantz King Nussbaum


It's the definition of standards here that

is very concerning," Hyman said. MicroStrategy's response to the SEC "changes the parameters. I don't look for a major Internet collapse, but we may have to go down somewhat more to wash out weaker ones."

Internet stocks were further saddled by an article in


that questioned the ability of many names in the sector to maintain operations at current cash-burn rates. Internet Sector

index plummeted 87.78, or 6.9%, to 1184.83, although few DOT components were mentioned in the survey, which was contradicted and criticized by many.

Among big Net names in the news,

America Online


added 3.4% after inking a

joint venture with



, which fell 14.9%.



fell 14.4% after (another)


article suggested the company could face increasing competition from a proposed online venture by the hotel industry.

Other so-called highfliers in the tech and biotech sectors also got battered today as momentum continued to show its power to move stocks down as well as up.

"It's a potential rout on the Nasdaq," Hyman said. "Clearly the winners are blue-chips because they represent actual earnings."

The strategist noted a "flight to quality" within the tech sector, as evidenced by strong gains from bellwethers such as Intel and


(DELL) - Get Dell Technologies Inc Class C Report

-- which received positive comments from

Salomon Smith Barney

. Other notable tech gainers included

Micron Technology

(MU) - Get Micron Technology, Inc. (MU) Report




. While the

Nasdaq 100

shed 4%, the older-tech

Morgan Stanley High Tech 35

slid just 1.2%.

Among big losers today were tech names such as


(INSP) - Get Inspire Medical Systems, Inc. Report


Adaptive Broadband

(ADAP) - Get Adaptimmune Therapeutics PLC Sponsored ADR Report



(RMBS) - Get Rambus Inc. Report

, as well as biotech plays such as




Protein Design Labs

(PDLI) - Get PDL BioPharma, Inc. Report

. The

American Stock Exchange Biotech Index

shed 11.8%.

Few Alarm Bells Ring

Despite the Comp's big decline, most traders took a somewhat relaxed attitude about the session.

"These are the markets we've been in," said Sam Ginzburg, senior managing director of equity trading at


. "This is what the Comp does. It's not something that's alarming me."

Like many, Ginzburg noted trading volumes were down as many players chose to sit out the action ahead of tomorrow's Fed meeting.


New York Stock Exchange

trading, 917.7 million shares were exchanged while declining stocks led advancers 1,569 to 1,381. In

Nasdaq Stock Market

action 1.5 billion shares traded while losers led 3,029 to 1,293. New 52-week highs bested new lows 45 to 30 on the Big Board while new lows led 116 to 81 in over-the-counter trading.

"Tech is not going away but it's going to struggle here because it moved so far so fast," said Robert Harrington, co-head of block trading at


. "Valuations are still out of whack."

Once the Fed meeting has passed, the focus will return to earnings and growth, the trader said. "Some highfliers will show good growth and revenue and will go up. Some will show things aren't so good" and will continue to suffer.

Finally, Harrington noted the Nasdaq is still struggling on a technical basis after having its "upside momentum" broken last week. Last

Thursday's intraday low around 4455 will be a short-term focus for market players, he said.

Among broader market averages, the

S&P 500

dipped 7.84, or 0.5%, to 1456.63 while the

Russell 2000

dumped 25.57, or 4.5%, to 549.20.

Among other stocks in the news,

TheStreet Recommends

Lehman Brothers


fell 4% despite reporting

earnings well in excess of expectations. The

American Stock Exchange Broker/Dealer Index

slid 4%

Among other indices, the

Dow Jones Transportation Average

fell 24.24, or 0.9%, to 2599.59, the

Dow Jones Utility Average

slid 1.88, or 0.7%, to 288.05; and the

American Stock Exchange Composite Index

shed 4.73, or 0.5%, to 1106.27.

For coverage of today's top stocks in the news, see the Company Report, published separately


Wrong! Dispatches from the Front: Cramer Might Sea a Change


James J. Cramer

3/20/00 3:28 PM ET

Ah, those fun-loving margin clerks. Are they having a good time of things. "With a snip, snip here and a chop, chop there and a couple of puts and calls, that's how they pass the day away..."

You get the picture.

We are debating buying some stuff back but I figure we wait until things get nastier. That little buy program makes things a little less attractive. We will probably add fives and 10s at the close so we can sell them into tomorrow's opening bounce.

Some of us think this is just an aftershock, a weakened wave that breaks the remaining dishes and glass. Me? I think it could be a sea change: out of soft into hard, out of concept into earnings, out of Net into iron.

The emphasis is on "could."

We are watching closely. Too early to draw a conclusion.

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. 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: Caldera IPO Priced Above-Range; 3Com Reports


Eileen Kinsella

Staff Reporter

3/20/00 8:06 PM ET



posted third-quarter earnings of 27 cents a share, ahead of the 24-analyst estimate of 25 cents, and the year-ago 24 cents which includes items. 3Com announced plans to exit the high-end networking business and sell its dial-up modem and its PC card businesses, as part of a series of moves intended to reignite growth. The company said it will narrow its focus on high-speed Internet access for the consumer market with DSL and cable modems.

3Com said the moves complete a reorganization that began with the sale of a 4% stake in its



unit. The company also announced plans to buy closely held

Call Technologies

for $90 million.

For more on this

story, check out coverage from

joint newsroom.

Robertson Stephens

priced 5 million shares of



at $14 each, above the estimated $10-to-$12 range. The company develops software based on the Linux operating system.

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



reported a first-quarter loss of 19 cents a share, which included a gain of 10 cents a share. The lone-analyst estimate was for a loss of 16 cents a share, while the year-ago loss was 24 cents a share. Corel said it expects results in the next two quarters to mirror the first-quarter financials, based on its revenue and cost structures.

Micron Electronics


reported second-quarter earnings of 6 cents a share, beating the 14-analyst estimate of 4 cents and the year-ago 4 cents. The company said it hired an investment banker to unlock the value of its Internet unit.

Tibco Software


posted first-quarter earnings of 1 cent a share, ahead of the two-analyst expected loss of 1 cent and the year-ago loss of 4 cents a share.

Mergers, acquisitions and joint ventures

North Fork Bancorp


, which is battling for control of

Dime Bancorp


, said Dime shareholders have voted enough proxies to defeat a proposed $1.4 billion merger with

Hudson United


, according to a Delaware judge.



said it entered a strategic relationship with


(ROCK) - Get Gibraltar Industries, Inc. Report

to help Gibraltar develop an e-business strategy.

Offerings and stock actions

Hooper Holmes


said its board declared a 2-for-1 stock split.

Analyst actions

Diamond Offshore Drilling

(DO) - Get Diamond Offshore Drilling, Inc. Report


Transocean Offshore

(RIG) - Get Transocean Ltd. Report

: both UP to buy from outperform at

ABN Amro



Digital Lightwave


said a federal appeals court dismissed all parts of a settlement appeal that pertain to the company.

Integrated Electronics


said it appointed H. David Ramm as president, CEO and executive director, effective immediately. Ramm, who most recently was president of a subsidiary of



, succeeds Jim Wise, who was named vice chairman.

Bond Focus: Long-Term Treasuries Cheer Lower Oil and Tech-Stock Prices


Elizabeth Roy

Senior Writer

3/20/00 5:15 PM ET

Heartened by a steep drop in the price of oil and the retreating

Nasdaq Composite Index

, long-term Treasury prices improved for the sixth consecutive session today, dropping their yields to new lows for the year.

But volume was exceedingly light on the day before the

Federal Open Market Committee's

second meeting of the year, which is universally expected to produce a hike in the

fed funds rate

from 5.75% to 6%.

With no major economic indicators to give the Treasury market direction, just $18.1 billion of securities changed hands, according to tracker


. That's 46.4% below average for a Monday over the past month.

Instead, long-term yields were guided by falling commodity prices. Commodity prices have been climbing for much of the last year, breeding worry among bond investors that prices in general will start rising at a faster rate. Long-term yields go up and down with inflation expectations.

The falling Nasdaq Comp also contributed to the long-maturity rally, by erasing some of the outsized gains that Fed Chairman

Alan Greenspan

thinks are fueling economic growth at an unsustainable rate by encouraging too fast a pace of consumer spending.

To the extent that the Fed hopes its interest-rate hikes rein in the stock market, the focus of its concern is "more likely the Nasdaq than the Dow,"

A.G. Edwards

bond market strategist Bill Hornbarger said.

But while long-maturity issues rallied, the short-maturity ones that reflect investors' near-term expectations about the Fed lost ground, indicating no change in the consensus that fed funds rate hikes (there have been four 25-basis-point moves since June) will keep coming until there is clear evidence that the economy is slowing.

Regarding tomorrow's FOMC meeting, the

fed funds futures

contracts listed on the

Chicago Board of Trade

were fully expecting a 25-basis-point rate hike, and put the odds of a 50-basis-point hike at 30.2%.

The benchmark 10-year Treasury note ended up 5/32 at 102 10/32, dropping its yield 2.1 basis points to 6.183%, its best close since Dec. 13. The 30-year bond rallied 7/32 to 103 19/32, cutting its yield to 5.990%, the lowest since Sept. 24. But the two-year note fell 2/32, lifting its yield 3.5 basis points to 6.532%.

The split performance of short- and long-term Treasuries drove the inversion of the Treasury yield curve to new extremes. The difference in yield between the two-year note and the 10-year note widened from 29.3 basis points to 34.9, while the difference between the two-year and 30-year yields went from 49.1 basis points to 54.2.

At the Chicago Board of Trade, the June

Treasury futures contract gained 4/32 to 95 11/32.

Economic Indicators

Today's only economic release, the

federal budget

report for February, showed a slightly larger deficit in that month than had been anticipated. Outlays exceeded revenues by $41.7 billion, vs. an average forecast among economists polled by


of a $40.3 billion deficit. But the deficit was narrower than the February 1999 deficit of $42.3 billion. Through the first five months of fiscal 2000, the cumulative deficit is $188 million, compared to a cumulative deficit of $26.4 billion during the first five months of fiscal 1999.

Currency and Commodities

The dollar weakened against the yen and the euro. It lately was worth 106.36 yen, up from 106.72 Friday. The euro was worth $0.9728, up from $0.9720. For more on currencies, please take a look at



Currency Watch column.

Crude oil for April delivery at the

New York Mercantile Exchange

sank 4.7% to $29.43 a barrel from $30.91 on optimism that next week's meeting of


oil ministers will produce an agreement to boost output.

Weakness throughout the commodity complex dragged the

Bridge Commodity Research Bureau Index

down 1.8% to 212.99 from 216.88.

However, gold for April delivery at the


rose to $286.80 an ounce from $285.00.


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