TheStreet.com's DAILY BULLETIN
April 20, 2000
Market Data as of Close, 4/19/00:
o Dow Jones Industrial Average: 10,674.96 down 92.46, -0.86%
o Nasdaq Composite Index: 3,706.41 down 87.16, -2.30%
o S&P 500: 1,427.47 down 14.14, -0.98%
o TSC Internet: 806.86 down 29.67, -3.55%
o Russell 2000: 486.23 up 0.14, 0.03%
o 30-Year Treasury: 105 19/32 up 27/32, yield 5.844%
Companies in Today's Bulletin:
Triton PCS (TPCS:Nasdaq)
Commerce One (CMRC:Nasdaq)
In Today's Bulletin:
o Banking: Chase's Great Quarter May Be Tough to Match
o Wrong! Dispatches from the Front: Buzz Pumps the Market
o Evening Update: Evening Update: Apple Scores Big as a Slew of Earnings Reports Hit
o Bond Focus: Bond Focus: Stocks' Malaise Drags 10-Year Yield Below 6%
will answer your stock question this week on"TheStreet.com" on
Fox News Channel
. We're taping a day earlythis week, so you have to call Thursday, April 20, at 6:45 P.M. ET to geton. The number to call is 1.888.TELL FOX. (1.888.835.5369).
Also on TheStreet.com:
Internet: Commerce One Report Could Foretell B2B Fortunes
One analyst says a fumble by this B2B leader could mean bad things for other stocks in the sector.
Media/Entertainment: CNET Turns a Profit Half a Year Ahead of Schedule
The company also announced a buyback of shares in the face of a drastically fallen stock price.
Herb on TheStreet: Why Lucent's 'Beat' Doesn't Impress the Shorts
Let's just say the quality of these earnings doesn't pass the sniff test.
Telecom: Pennies From Somewhere
Lucent ekes out a penny surprise but questions plague its accounting practices and competitive position.
Banking: Chase's Great Quarter May Be Tough to Match
4/19/00 3:43 PM ET
first-quarter profits sailed comfortably above expectations, thanks chiefly to revenue from its capital markets businesses.
Recent market turmoil, however, could reduce the amount of investment riches at Chase in the coming quarter. Bank executives conceded as much during a conference call Wednesday when they disclosed that public securities in its venture capital unit are suffering a $930 million market loss so far this quarter.
In addition, first-quarter numbers show that the bank is performing patchily on Main Street, as well. Its credit card division is sluggish and the bank announced Wednesday that it took a $100 million charge in its auto loans business in the first quarter, shaving 8 cents off per-share profits.
In the first quarter, Chase generated net income of $1.36 billion, or $1.59 per fully diluted share, which is a 20% increase over the year-ago period, when it earned $1.32 per share. Analysts surveyed by
First Call/Thomson Financial
expected Chase to post $1.55 per share in the first quarter.
Early afternoon Wednesday, Chase's shares were down 3 1/2, or 4.35%, to $77. They are 24% off their 52-week high. Chase didn't comment.
The main sources of earnings in the first quarter were Chase's trading desks, which achieved $1.02 billion in revenue in the first quarter, a hefty 65% above the $618 million registered in the year-earlier period.
In addition, investment banking fees more than doubled to $648 million from $317 million the year before. Private equity gains from the
Chase Capital Partners
recently, were $500 million, way below the previous quarter's $1.31 billion, but also higher than $325 million in 1999's first quarter.
Combined, these three volatile sectors accounted for 55% of all noninterest income at the bank. Charles Peabody, a banks analyst at New York-based
, says Chase had a pretty good quarter, but wonders whether the markets-based revenue will continue to be strong. "This is going to be a very hard quarter to repeat," he says. (Peabody rates Chase a sell and his firm hasn't done any underwriting for the bank.)
Dina Dublon, Chase's finance chief, said during the conference call: "We will have quarter-to-quarter volatility on private equity gains." But she stressed that most of Chase Capital's strong long-term returns have come from realizing, or selling out of, companies, rather than market gains in the public companies in its portfolio.
The $930 million loss in the value of Chase Capital's public companies so far this quarter does not flow right through to the bottom line.
Dublon said it would be offset by $130 million from the sale of its position in
; the bank applies a discount to its gains or losses in the unit, which would bring the mark-to-market loss down to $480 million so far this quarter.
Because of the sluggish credit card division and the auto loan charge, the $348 million in first-quarter operating profits at Chase's consumer bank -- which accounts for a hard-to-ignore 40% of revenue -- were 12% below the year-earlier number, and nearly 20% below the fourth-quarter figure. Cards themselves earned $107 million, which was 7% off first-quarter 1999 earnings. The shortfall was due to higher interest rates that reduced the profitability of credit card loans, the bank said.
Dedicated credit card companies, however, have racked up huge growth in first-quarter profits, leading some to wonder whether they are growing at the expense of banks like Chase.
credit-card only companies are better at adapting and acquiring customers than the banks that have been in cards for some time," says Brian Divney, manager of Cherry Hill, N.J.-based
Timberline Financial Partners
, a hedge fund that has no position in Chase.
The $100 million charge was to so-called auto lease residuals. Chase bundles up its auto loans and leases and sells them as bonds, a process called securitization. The retained portion of these securitizations are called residuals, and banks usually value them based on a range of assumptions they make themselves. Chase apparently made the charge because prices in the used-car market had not been as strong as it had estimated.
Also potentially worrying, Chase's costs exceeded revenue in the first quarter. Expenses were 19% over the year-earlier number, while revenue was 16% higher. "Expenses were too high for the level of revenue growth," Chase's Dublon said, but added, "We are taking advantage of good times to invest" in recruitment and technology.
Wrong! Dispatches from the Front: Buzz Pumps the Market
James J. Cramer
4/19/00 12:09 PM ET
Editor's note: The following is an addendum to an earlier mock interview that James Cramer conducted with a fictional portfolio manager named Ben "Buzz" Gould.
We pulled up with
during a marketing tour in Las Vegas, Nev., this morning. He was his old effusive self and it was a pleasure to hear him back in his
offensive mode. Here are the results of the Q&A.
Buzz, how did it go yesterday?
We rallied 16% in the aggressive growth mutual fund and I could have made it 18%, but I decided I had moved
enough for a day. My only regret was that I didn't walk
back up to my basis of $85. Maybe that will be today's business.
(Grabs cell phone, hits 1, gets trading sidekick Batch Hammer:
short, some BEAS -- take it up to $85 and then nail it to $90 with
. Blitzkrieg the thing, Batch, just like the old days.
Back to Cramer.
So now you are up again for the year?
Oh, we're back and bigger than ever. In fact I have grown quite bullish on the prospects of the market here.
Hey Buzz, aren't you worried about the
getting tougher now that your kind of stocks are coming roaring back?
My investors don't care about the Fed. My bosses don't care about the Fed. What is the deal with the Fed? Who cares about the Fed? The Fed only impacts
and some of those companies my grandparents used to trade. Get a life, Cramer. That guy who called you an idiot yesterday -- yeah, I read your column -- he may have had a point. Oh yeah, thanks for boosting
for me today. I was able to blow out a bunch of stock right into your hype! (
So what happens now, the
just goes right back up as if nothing ever happened? Even though some of your compadres are down 40% to 80%?
We are concerned about some of the weaker hands in our mutual fund buying club. Monday night at Privilege (special emergency meeting of the Young Turks) we agreed to do what we call a "Marshall Plan" to bail out our weakened compatriots. You saw some of our handiwork yesterday with all of those highflying Nasdaq stocks we walked up.
We all go in and buy a ton of the hammered fund's top 10 holdings. We put those guys back up on their feet so they can do some buying in no time. I wouldn't worry. Our Marshall Plan buyings always work. We are seasoned at bailing out our buddies. We have to do it a couple of times a year, but it sure does spook the shorts. Hoo-hah! Betcha Julian wished he had a Marshall plan going. But who can walk up
? Are they going to hurt you today?
How much is Intel down?
Five points right now.
Hmmmm, let me take care of that. (
Flips cellphone back on.
Batchy. Batchy Hammer, listen, go buy 2000 Intel April 125 calls -- I don't care that they go out tomorrow -- try to get
short. Then take 1000 calls from Goldman, same contract. Makes sure you are doing it simultaneously. When they are in trying to cover their short, go into Merrill as a size buyer, take 250,000 and then bid it at $126 in the Box!)
Jim, I don't think you will have to worry much longer about Intel. What was that other company?
Well, why don't you just ask me about
for Pete's sake? Hey listen, I would love to shmoooze more here, but I gotta money show I have to give where I am predicting
and I just want to check my charts out before I give my recommendations. Back to ya!
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long BEA Systems, Intel, and America Online. 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: Evening Update: Apple Scores Big as a Slew of Earnings Reports Hit
4/19/00 9:32 PM ET
soared 6 11/16 to 127 13/16 in postclose
action after posting second-quarter earnings of 88 cents a diluted share, beating the 19-analyst estimate of 81 cents and up from the year-ago 84 cents which includes items. Revenues rose to 27% to $1.94 billion from $1.53 billion and gross margins rose to 28.2%, up from 26.3% a year ago. The company also set a 2-for-1 stock split.
For more on Apple's
earnings, check out coverage from
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
said its first-quarter losses were 9 cents a share, which beat the 19-analyst estimate of a loss of 12 cents for the quarter and matched the year-ago per-share results. Earnings were adjusted for its 2-for-1 stock split effective today.
For more on Commerce One's
earnings, check out coverage from
reported first-quarter earnings of 2 cents a share, surprising analysts who had expected a loss of 6 cents. The company said strong growth in traffic was responsible for the unexpectedly profitable quarter. CNET Networks expects to stay in the black for all of 2000. Previously, the company had predicted operating income only for the fourth quarter
reported a first-quarter pro forma loss of 1 cent a share, short of Wall Street's expectations that it would break even but narrower than the year-earlier pro forma loss of 2 cents a share. The Internet-service company posted a net loss of $676.5 million, or $1.75 a share, compared with a loss of $18.1 million, or 8 cents, in the 1999 quarter. Revenue rose 75% in the latest quarter, to $138 million, from $78.7 million a year earlier. The company said the number of new subscribers had more than tripled, to 1.5 million.
reported first-quarter earnings of 10 cents a share, better than the five-analyst estimate of 8 cents . The company said when 307 million shares are assumed outstanding, earnings before charges are 9 cents a share. Excluding a gain, year-ago earnings were 3 cents a share.
posted first-quarter earnings of 25 cents a share, in line with the five-analyst estimate and up from the year-ago 22 cents a share. The company said earnings before amortization of intangibles were 32 cents in the latest first quarter compared with 29 cents a year ago.
posted a first-quarter loss of 14 cents a share, excluding goodwill. The results are wider than the year-ago report of an 8-cent loss. The three-analyst estimate, which included goodwill, expected the company to report a 58-cent loss.
Mergers, acquisitions and joint ventures
said Cigna expects to purchase nearly $3 billion of pharmaceuticals from Cardinal over the next three years.
said it increased its ownership of Mexico's largest retailer,
Wal-Mart de Mexico
, by 6% to almost 60% for about $600 million.
Offerings and stock actions
authorized the repurchase of up to $100 million of its common stock. The company also said in a statement that it authorized the purchase of up to $25 million of
. Electric Lightwave is an 82%-owned subsidiary of Citizens.
said it approved a 15-million share buyback.
priced 46.3 million shares of
at $14 each, the top of the expected $12 to $14 range. The Vancouver, British Columbia-based company builds fiber-optic networks.
set a 2-for-1 stock split.
Following an earlier announcement from
that it voluntarily
pulled an FDA application for its hypertension drug
, the company said four patients among thousands in clinical trials required breathing tubes because of severe reactions to the medicine.
Bond Focus: Bond Focus: Stocks' Malaise Drags 10-Year Yield Below 6%
David A. Gaffen
4/19/00 3:11 PM ET
It was a reasonably subdued session for bonds, but a bit of positive influence from the poor action in equities this afternoon sent the benchmark 10-year note's yield below 6% in the last hour of trading before the 3 p.m. EDT futures close.
Excepting that, traders' were chiefly concerned with movements in the yield curve, as participants sold short-dated securities and bought long-dated securities in anticipation of upcoming supply on the short end, and buybacks on the long end.
The benchmark 10-year Treasury bond was up 13/32 to 103 22/32, dropping the yield up to 5.998%. The 30-year bond was higher, up 28/32 to 105 19/32, yielding 5.852%. The day's only major economic release was the international trade deficit, which -- surprise -- reached an all-time record of $29.2 billion in February. The market shrugged off the report, however.
Equity weakness in the afternoon was a marginal contributor to the strength in the long end of the bond market today. Early in the day, only the 30-year bond, which has been influenced by declining supply, was higher, but most maturities on the yield curve stabilized and rallied into the afternoon.
"There's some benefit flowing into bonds" from equity weakness, said Tony Crescenzi, chief bond market strategist at
. "The market's come to grips that the stock market has stabilized, and it's already factored in notion that stocks will be a little more stable, so I don't think that we're going to get too much more of a negative downdraft" when equities rally.
Meanwhile, the two-year Treasury note gained just 1/32 to 100 1/32, yielding 6.315%, narrowing the spread between two-year notes and bonds to 46 basis points in terms of yield, compared with 55 basis points one week ago.
The Treasury said today it will auction $12 billion at its regularly scheduled two-year note sale next week, and traders have begun selling the two-year to cheapen the note up. And they're buying long-dated securities, as the Treasury Department will buy back $2 billion in bonds with maturities ranging from 2020-25 tomorrow.
That amount, announced
yesterday, was a bit of a disappointment for a market expecting more in the way of buybacks, due to the heft of April tax receipts, but the bond has recovered somewhat today.
The international trade deficit widened to a record $29.2 billion in February, as imports increased 1.5% while exports fell 0.2%. On a year-over-year basis, exports are increasing -- up 9.5% -- but imports outpaced that, rising 18.8%.
Currency and Commodities
The dollar rose against the yen and the euro. It lately traded at 104.8 yen, up from 104.71. The euro was worth $0.9394, down from $0.9469. For more on currencies, please take a look at
Crude oil for May delivery at the
New York Mercantile Exchange
rose to $27.40 a barrel from $26.11.
Bridge Commodity Research Bureau Index
rose to 213.66 from 212.75.
Gold for June delivery at the
fell to $282.5 an ounce from $283.
TO VIEW TSC'S ECONOMIC DATABANK, SEE: http://www.thestreet.com/markets/databank/920121.html
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