Publish date:

TheStreet.com's DAILY BULLETIN

April 7, 2000


Market Data as of Close, 4/6/00:

o Dow Jones Industrial Average: 11,114.27 up 80.35, 0.73%

o Nasdaq Composite Index: 4,267.56 up 98.34, 2.36%

o S&P 500: 1,501.34 up 13.97, 0.94%

o TSC Internet: 1,015.43 up 43.45, 4.47%

o Russell 2000: 532.50 up 14.46, 2.79%

o 30-Year Treasury: 106 16/32 down 4/32, yield 5.791%

Companies in Today's Bulletin:

Yahoo! (YHOO:Nasdaq)

Starbucks (SBUX:NYSE)

Palm's (PALM:Nasdaq)


In Today's Bulletin:

o Brokerages/Wall Street: NYSE Votes to Shutter Old Electronic System, Opposes SEC Order Book Plan
o Wrong! Rear Echelon Revelations: True Blue for Yahoo!
o Evening Update: Equity Mutual Funds Report First Weekly Outflow in 16 Weeks
o Bond Focus: Interest Rates Rise Ahead of Jobs Report

Ask Cramer

Got a stock question for Jim Cramer? He'll answer it this week on "TheStreet.com" on Fox News Channel. But you have to call during our show's taping on Friday, April 7, at 6:45 p.m. EDT to get on. The number to call is 1-888-CALLFOX (1-888-225-5369).

Also on TheStreet.com:

Asia/Pacific: Enter the Dragon: Figuring China Into the Asian Equation

Morgan Stanley Capital International is altering the makeup of its Asian indices.


IPOs: Doing Handsprings Over a Palm Competitor's IPO

Last month's Palm offering suggests there will be plenty of interest in Handspring's newly filed deal.


Mutual Funds: Rocky Mountain High: Sector Funds Propel Invesco to Forefront

The Denver-based firm ranked No. 3 in sales for January and February.


Tech Savvy: Looking Into the Pit of Civil Litigation Against Microsoft

The likely huge and almost endless litigation could turn the Justice Department action into a relative sideshow.


Brokerages/Wall Street: NYSE Votes to Shutter Old Electronic System, Opposes SEC Order Book Plan


Robert Kowalski

Staff Reporter

4/6/00 6:57 PM ET


New York Stock Exchange

board said today it voted to scrap a 25-year-old electronic system that links it with other exchanges, saying the system was antiquated and operated in an unworkable arrangement between stock market competitors.

The NYSE's board also rejected the concept of consolidating limit orders for stock trades, or Central Limit Order Book, even as

Securities and Exchange Commission


Arthur Levitt

calls for voluntary sharing of stock-order information between exchanges.

Both moves signaled what Big Board Chairman Dick Grasso said would be a major restructuring for the venerable exchange, which must submit its Intermarket Trading System, or ITS, plans for SEC approval.

"It is for us, in a very succinct way, a reinvention of the NYSE," Grasso said, as he and other exchange officials announced the actions and a report on the structural changes to the Big Board.

At the same time, however, Grasso took yet another step back from his announcement last year that the NYSE would go public.

On Thursday, he said that won't happen until after the conversion to decimalization, which may not happen until 2001. Even then, he said, the exchange may abandon the sale if it decides it no longer needs the capital that an IPO would raise to compete.

Grasso said the key driver behind the NYSE's demutualization plan was to put the exchange in a position to access capital that would fund changes and acquisitions to competing against electronic trading systems and exchanges that have such capabilities, Grasso said in an interview. "If you're not

competing, then you step back and say, 'What's the driver?' "

'Yes' to Technology

The Big Board's decision to scrap the ITS was welcomed by electronic trading networks, or ECNs, which didn't have ITS access and viewed the system as a barrier to competing with the Big Board.

"That was a very refreshing announcement," said Chris Concannon, associate general counsel at the


ECN in New York. "New York

exchange is essentially saying yes to technology."

Grasso said part of the NYSE's concern with ITS was the requirement that all of its users -- which include its chief competitor, the


market -- agree unanimously to any rule changes for the system.

The SEC's Levitt also has recently criticized the ITS' technology as outdated, and the agency Thursday said some replacement must be found.

"We, too, have raised concerns about ITS in its present form, but we think linkage between markets is necessary," SEC spokeswoman Joanne Bamberger said.

Nasdaq declined to comment on the Big Board's ITS plans.


The NYSE rejected the concept of a central order book, or CLOB, because it would stifle competition, said Alex Trotman, a member of the exchange's board and the former president and CEO of

Ford Motor Company


"We think the CLOB would bifurcate the market," he said. "We strongly feel that competition is healthy."

Concannon also welcomed the NYSE's opposition to the central order book. So does

Merrill Lynch

, although the brokerage also believes there must be electronic linkages between markets, a Merrill spokesman said.

The Big Board's action came amid widespread discussion in the securities industry in recent months about the future of the NYSE and Nasdaq, with increasing competition from ECNs.

In February, the SEC announced it was studying options for eliminating fragmentation between the stock and options exchanges and ECNs. Last month, Levitt called for the exchanges to move toward a "national market system" by making public their limit-order books.

Doing so, he said at the time, would ease the conversion to decimalization, which refers to the trading of stocks in increments of pennies rather than the current system, which is based on other fractions of a dollar.

That conversion has grown increasingly contentious in the past week and the SEC has ordered the exchanges to begin quoting stocks in decimals by July 3.

But the

National Association of Securities Dealers

, which owns and operates Nasdaq, has said it won't be ready until next year to handle the increased volume that will come with trading stocks on smaller decimal intervals.

However that timing is resolved now also affects the Big Board's decision on whether to go public, Grasso said.

Wrong! Rear Echelon Revelations: True Blue for Yahoo!


James J. Cramer

4/6/00 7:37 PM ET




has come and gone and we did exactly what I said we would do: We bought it down 10.

What really happened here? Was it really not a better-than-expected quarter? Was there really some sort of issue that spooked people?

Yes and no. Yes, this time there were analysts who were not as jazzed about the quarter. They tended to be people who wanted Yahoo! to "save" the dot-com movement from its recent flirtation with oblivion. Yahoo! could never deliver enough for these people. To these summer soldiers Yahoo! had to raise the bar, blow the numbers to smithereens and make people feel that all was well in the dot-com biz.

Instead, Yahoo! simply did a great quarter. It did not pulverize the estimates or vaporize the estimates or crush the estimates. It beat them handily. It raised the bar, but not to some level that would be impossible to beat, which so many companies do, stupidly, in the name of keeping the momentum going.

Without the big pop in the stock, despite

Mary Meeker's

intoning that Yahoo could be the next


(MSFT) - Get Report

-- something that I actually believe -- holders panicked because the pattern has been that, a few days after reporting, lots of restricted stock comes off restriction. They didn't want to stick around for that avalanche.

So, we hold it. We hold it because we think that years from now it will be much higher. That is why we have held it for three years now.

I know that I belong to the church of what's happening now. I know that is my reputation. I plead guilty to it. But I hold on to my Yahoo! I just don't care what happens to this one short-term.

It's probably the only stock I feel that way about. Except maybe


(CSCO) - Get Report



(INTC) - Get Report




, Microsoft and


(NOK) - Get Report

. I just feel naked without them.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!, Cisco, Intel, AOL, Microsoft and Nokia. 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: Equity Mutual Funds Report First Weekly Outflow in 16 Weeks


Eileen Kinsella

Staff Reporter

4/6/00 8:16 PM ETEquity mutual funds reported outflows of $271 million in the week ended yesterday, the first outflow reported in 16 weeks, according to

AMG Data Services

. Technology funds reported the largest weekly outflow on record, at $756 million, while small-cap funds reported a second consecutive week of outflows, shedding $728 million.

Large-cap and aggressive growth funds continued to report inflows, of $766 million and $530 million, respectively. International equity funds reported outflows from all developed and emerging regions, while global equity funds reported inflows of $248 million. Large-cap equity index funds reported outflows in six of the last seven weeks. Taxable bond outflows slowed to $130 million, though outflows from high-yield corporates continued, totaling $545 million.


(SBUX) - Get Report

said Howard Schultz will step down as CEO to take a more visionary role at the company, focusing on long-term strategy. Schultz, whose resignation will be effective June 1, will stay on as chairman of the Seattle-based company and assume the newly created title of chief global strategist. He will be succeeded by COO and President Orin Smith.

The company also reported that March same-store sales rose 10%.

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

Allied Waste


said it is on track with its acquisition and asset divestiture program and expects growth to pick up later this year.

Dime Community Bancshares

(DCOM) - Get Report

said it expects to post third-quarter earnings of 49 cents a share, topping the five-analyst estimate of 45 cents.



said it knows of no reason for the recent decline in its share price and remains comfortable with the high end of consensus estimates for the first-quarter and calendar year 2000. The 16-analyst first-quarter estimate is for 32 cents.



said it sees second-quarter revenues below analyst estimates and second-quarter net income significantly below the year-ago $2 million.

Integrated Electronics


said it expects to post a second-quarter profit of about 17 cents to 20 cents a share, before items. The current six-analyst estimate is for earnings of 20 cents. After unusual cash items, the company said it sees a loss of about $1.5 million to $2.5 million, or about 4 cents to 6 cents a share.

Midway Games


said it expects a net loss in the third and fourth quarters as sluggish sales in home video and coin-operated games hurt results. The company said it expected a net loss of 23 cents to 27 cents a share in the quarter ended March 31, compared with the year-ago profit of 3 cents. The five-analyst estimate calls for earnings of 25 cents. Midway also said it expects a fourth-quarter loss and no longer anticipates record revenue and net income for fiscal 2000.

Modis Professional Services


said it sees first-quarter earnings in line with expectations and said it is exploring a public offering for part of its e-business Idea Integration unit. The current nine-analyst estimate calls for 18 cents.

Mergers, acquisitions and joint ventures



said it agreed to buy a 295,000 barrel-a-day refinery from a joint venture between


(TX) - Get Report



for $420 million.



said its proposed $8 billion offer to acquire

Times Mirror


has cleared an antitrust hurdle. The

Justice Department

granted early termination of the Hart-Scott-Rodino antitrust waiting period.

Bond Focus: Interest Rates Rise Ahead of Jobs Report


Elizabeth Roy

Senior Writer

4/6/00 5:53 PM ET

Treasury prices retreated in unison today for the first time in over two weeks. Rising stock prices and an indication that the labor market has tightened even further provided excuses, but market analysts mostly credited profit-taking and bet-hedging ahead of the release of the March

employment report.

The benchmark 10-year Treasury note finished down 13/32 at 104 8/32, lifting its yield 5.3 basis points to 5.923%. Shorter-maturity issues performed even worse. The five-year note lost 11/32 to 98 20/32, lifting its yield 8.8 basis points to 6.221%. And the two-year note fell 5/32 to 100 7/32, lifting its yield 8.5 basis points to 6.380%.

The 30-year bond shed 2/32 to 106 18/32, lifting its yield half a basis point to 5.787%.

At the

Chicago Board of Trade

, the June

Treasury futures contract rose 4/32 to 98 17/32.

The only economic news of the day was that the weekly count of

initial jobless claims dropped to a new generational low. Just 260,000 first-time claims for state unemployment insurance were filed last week, the fewest since the week ended Dec. 1, 1973. The four-week average of claims also dropped to a 27-year low.

But today's action mostly reflected "some profit-taking off of recent gains, as well as squaring up prior to tomorrow's number," said Ken Logan, managing analyst at


, referring to the jobs report.

The employment report is the most important economic release to hit the Street each month, and the March edition, which will be released at 8:30 a.m. EDT tomorrow, is even riskier than usual.

The most important number in the report -- the number of nonagricultural jobs created -- is forecast to be 376,000, on average. That in itself is a big number. Over the last 12 months, an average of 216,000 new nonfarm jobs were created. But some economists are

forecasting that the report will count as many as 625,000 new jobs, with temporary hiring of workers to conduct the Census accounting for at least 100,000.

The bond market doesn't like big payrolls increases, because they indicate that the economy is growing at a rapid clip. Bonds perform best when economic growth is slowing.

A big payrolls number won't necessarily upset the bond market if it can be explained away by Census hiring and other special factors. But the time it takes for traders to analyze the report could be a treacherous few minutes.

"The market will look through the headline number to the nongovernmental portion -- and also at the wage numbers," said Doug Johnston, Treasury market strategist at

Lehman Brothers

. The wage numbers are the portion of the jobs report that measures average hourly earnings. There, the market wants an increase of 0.3% or less, since a larger increase would suggest that the tight labor market is forcing employers to pay up for help, a situation that could lead to higher price inflation.

But in spite of today's action, and in spite of the fact that long-term Treasuries remain deep in overbought territory as far as technical analysts are concerned, market analysts say it still makes more sense to buy long-term Treasuries than to sell them.

"It all comes back to technicals," Logan said. With the supply of corporate and other risky bonds increasing relative to the supply of Treasuries, which is shrinking as the federal government uses surplus funds to retire its debt, "there's no sellers of Treasuries out there."

Bond guru Bill Gross, manager for



(PTTRX) - Get Report

Pimco Total Return, the world's largest bond mutual fund, holds this view and reiterated it in his latest monthly commentary, published today on the company's

Web site.

"While most high-tech investment has been funded via IPOs in the stock market," Gross writes, the purchase of their products has eaten into the cash flow of the Old Economy, leading to record levels of corporate bond issuance in order to fund those investments. On top of that, the raging success of tech stocks has convinced Old Economy CEOs that their own stocks are cheap by comparison, even at 30 times earnings. Stock buyback upon stock buyback has followed that specious logic, almost all funded by corporate debt offerings."

The result, Gross concludes, is increasing corporate debt and its corollary, declining corporate credit quality. "The New Age Economy is ultimately a global economy that favors government more than business due to the Treasury's higher cash flows and diverging credit quality."

Currency and Commodities

The dollar fell against the yen and rose against the euro. It lately was worth 104.73 yen, down from 104.92. The euro was worth $0.9577, down from $0.9621. For more on currencies, please take a look at



Currency Watch column.

Crude oil for May delivery at the

New York Mercantile Exchange

fell to $25.69 a barrel from $25.83.


Bridge Commodity Research Bureau Index

fell to 210.72 from 212.22.

Gold for June delivery at the


fell to $282.7 an ounce from $283.80.



Copyright 2000, TheStreet.com