TheStreet.com's DAILY BULLETIN
May 31, 2000
Market Data as of Close, 5/30/00:
o Dow Jones Industrial Average: 10,527.13 up 227.89, 2.21%
o Nasdaq Composite Index: 3,459.48 up 254.37, 7.94%
o S&P 500: 1,422.45 up 44.43, 3.22%
o TSC Internet: 816.36 up 64.13, 8.53%
o Russell 2000: 476.70 up 19.33, 4.23%
o 30-Year Treasury: 102 04/32 down 16/32, yield 6.086%
Companies in Today's Bulletin:
Micron Technology (MU:NYSE)
NRG Energy (NRG:NYSE)
In Today's Bulletin:
o Market Roundup: Nasdaq's Thunderous Rally Lures Few Back to Optimism
o Wrong! Dispatches from the Front: So Much for Weak Data
o Evening Update: Evening Update: NRG Energy IPO Priced Below Range at $15 a Share
o Bond Focus: Treasuries Retreat as Stocks and Consumer Confidence Surge
Also on TheStreet.com:
Economic News: Consumer Confidence Beats Expectations, Rising to 144.4
Economists had been expecting a decline in May to 136, according to a Reuters poll.
Dear Dagen: What If a Company Goes Public and No One Buys?
It can happen when the issuer and the underwriter miscalculate demand for the new shares.
Online Brokers: Ernst & Young, E*Trade to Form Online Advice Firm
Ernst & Young's entire network of around 1,000 advisers will be made available.
Nothing but Net: Buyers Come Out for a Net Sector Rout
Hordes of Internet stocks are gaining ground on a day that's left other sectors in the dust.
Tech Savvy: Playing the Odds in Telco: Will WorldCom-Sprint Ring True?
Despite fears of a scuttling, Seymour sees the deal going through because it's not anticompetitive.
Market Roundup: Nasdaq's Thunderous Rally Lures Few Back to Optimism
5/30/00 5:41 PM ET
It appeared as though the extended holiday weekend left stocks refreshed and ready to go to work today. But once again, that troubling little
word had market watchers wondering if most participants are still out on vacation.
Nasdaq Composite Index jumped 254.37, or 7.9%, to 3459.48, the tech-laden index's largest percentage gain and second-largest point gain ever. The
Dow Jones Industrial Average also had a good day, rising 227.89, or 2.2%, to 10,527.13, The
S&P 500 sailed up 44.43, or 3.2%, to 1422.45 and the small-cap
Russell 2000 rose 19.33, or 4.2%, to 476.70. Still, as has been the case in the past few weeks of trading, volume was nothing to write home about. (See below.)
"The market is just in an oversold condition. I think you saw the start of this
comeback on Friday," said Ray Hawkins, vice president of block trading at
. "There is some pressure off the sell side; it's not really much of a surprise that you would see it up today." Hawkins said some of the flurry could be due to end-of-the month portfolio adjustments but also mentioned that volume is low as many hang back ahead of the economic data due out later this week.
Investors will pay close attention to that end-of the-week stream of data, including the
Purchasing Managers' Index,
new home sales and the
employment report, for clues to what the
Fed will do next. Today, the
reported that its
Consumer Confidence Index hopped nearly 7 points, to a four-month high of 144.4 after declining for three months. The reading suggests most Americans have not yet felt the pain of the recent series of interest-rate hikes.
Indeed, many market watchers think the Fed is far from finished with its series of rate hikes as it tries to rein in the economy. "The economy is extraordinarily strong. The Fed will keep raising rates as far and as long as it takes to knock the market down," said Charles Blood, director of financial markets strategy at
Brown Brothers Harriman
. Despite the Fed's insistence that it is not targeting the stock market, the economy is being sustained by the market, he said.
Even with the recent dips, stocks have not given back enough, Blood said. "The Nasdaq is only back to where it was last November."
Furthermore, Blood said the firm's longer-term view continues to be "very bearish," saying it expects the S&P 500 to drop 30%, measured from its peak, with probably a further 20% to 25% to go from its current levels. The Dow is seen dropping by similar percentages, while the Nasdaq is seen falling further down than the other proxies, said Blood.
For today at least, stocks managed to shrug off some of that gloom and doom, helped by news of mergers and some optimistic research from investment firms. Hawkins of J.P. Morgan said he expected the upside to continue tomorrow as well, even if it is on scarce volume.
Optimistic comments from new
analyst Dan Niles boosted the PC and semiconductor sectors. Niles, who just joined Lehman from
, predicted that 2000 will be "the best year of revenue and EPS growth for the computer hardware companies since 1996." Of the companies mentioned in the note,
moved up 5.9%,
rose 3.8% and
Philadelphia Stock Exchange Semiconductor Index
sailed up 11.1% , rebounding from last week's 2.2% slide, while the
Philadelphia Stock Exchange Computer Box Maker Index
bounced 5.3%, also regaining lost ground after losing 1.9% last week.
The telecom sector was buzzing on news of deals in the sector.
rose 6.5% after it confirmed a deal to buy British mobile phone company Orange from
for $37 billion. Vodafone rose 10.6%.
Vodaone also said an IPO of its U.S. mobile joint venture with
will take place this year. Bell Atlantic edged up 1.7%.
reportedly is in talks to acquire optical networking equipment company
for up to $5.7 billion in stock. The stock lifted 4.3%. The
Nasdaq Telecommunications Index
rang up 9.7%.
Internet stocks were strong, with
TheStreet.com Internet Sector
index up 64.13, or 8.5%, to 816.36.
jumped 5, or 10.3%, to 53 1/2 on news about the chips
plans to use in the Internet appliances it's developing with the service provider.
Breadth was extremely positive, on light-to-moderate volume.
New York Stock Exchange:
2,019 advancers, 919 decliners, 842.1 million shares. 43 new 52-week highs, 53 new lows.
Nasdaq Stock Market:
2,724 advancers, 1,303 decliners, 1.441 billion shares. 39 new highs, 138 new lows.
For a look at stocks in the news, see the Company Report, published separately.
Wrong! Dispatches from the Front: So Much for Weak Data
James J. Cramer
5/30/00 3:40 PM ET
Mixed day for the accelerated-bull thesis. We were hoping that May was going to be a weaker month. We had weak data from the auto group -- they have inventory build -- and we have had some cessation in the housing market. But today we received a preliminary snapshot indicating that
core retail store sales held up. In fact, May turned out to be a pretty good chain-store month, excepting
. And the
consumer confidence figures were too upbeat for the
In a world where we are looking for slowing data from stores across the board, we didn't get it today. Remember the dilemma we face. If we are to jump-start
the 1994 track, we need to see consistent slower sales from in everything, from stores to cars.
(In 1994, we had the same mixed signals right about now, which delayed the last-Fed-tightening rally that we were all waiting for. I was hoping, bullishly, for weaker data than we got so we could short-circuit things and begin a sustained rally sooner than we had in '94.)
The May snapshot we saw today from retailers around the country was supportive of still more hikes. The no-more-hikes crowd, which was gaining some credence, was set back from this data. The at-least-one-more-hike-camp gained more credence. Just like in 1994. We are still very much on that year's roadmap.
Trying to make sense of this allergy season. Drugstores say that sales are strong because of allergies. But drug analysts are hinting that it is not a strong Claritin season -- the key driver of
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. 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: Evening Update: NRG Energy IPO Priced Below Range at $15 a Share
5/30/00 7:43 PM ET
Salomon Smith Barney
priced 28.17 million shares of
at $15 a share, below the estimated $16 to $18 range. The company is a wholly owned unit of
Northern States Power
, one of the largest independent power generators in the U.S.
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
Fiber optic subsystem provider
posted first-quarter earnings of 2 cents a share, a penny better than the seven-analyst estimate and the year-ago earnings.
Back to top
Steel container maker
said the parties who have offered to recapitalize the firm have cut the planned payout to shareholders to $20 a share from $21. The reduction is due to adverse developments in the U.S. high-yield debt market and weaker-than-expected results for the rigid packaging industry, the company said.
Federal Communications Commission
said it will soon propose easing rules that require
to sell off some television stations as part of its acquisition of
. The FCC said the proposal would also loosen rules prohibiting a company from owning two television networks.
Back to top
Bond Focus: Treasuries Retreat as Stocks and Consumer Confidence Surge
Elizabeth Roy Stanton
5/30/00 5:34 PM ET
Treasury notes and bonds gave back most of last week's gains today, reacting to a surprisingly strong May
Consumer Confidence Index
and to soaring stock prices.
Both developments support the view that the
Fed will have to continue to raise the
fed funds rate in order to slow economic growth to a pace that does not threaten to ignite inflation.
The benchmark 10-year Treasury note slid 11/32 to 100 28/32, lifting its yield 4.7 basis points to 6.374%. Shorter-maturity issues had an even tougher day. The two-year note, for one, fell 3/32 to 99 25/32, lifting its yield 6 basis points to 6.744%.
The 30-year Treasury bond lost 16/32 to 102 5/32, lifting its yield 3.6 basis points to 6.093%. At the
Chicago Board of Trade
, the September
Treasury futures contract replaced the June contract as the most actively traded, and it fell 17/32 to 94 21/32.
The Consumer Confidence Index, which had been expected by economists polled by
to dip to 135.9, instead rose to 144.4 in May from a revised 137.7 in April. The index hit an all-time high of 144.7 in January.
That's bearish for bonds because a high level of consumer confidence is essential for strong consumer spending, and consumer spending is the principal driver of economic growth.
And it's surprising, bond market analysts said, that consumer confidence didn't moderate in May, with the Fed hinting at additional interest-rate hikes and the
Nasdaq Composite Index
The index reading is "further evidence that it's going to take a lot of patience and Fed work to cool the economy down to a sustainable level," said Josh Stiles, Treasury market analyst at
The rise in consumer confidence "confirms our long-held view,"
chief economist David Orr said in a research note, "that the unemployment rate is by far the key determinant of consumer confidence, not stock prices." The unemployment rate hit a 30-year low of 3.9% in April, and some economists are predicting a drop to 3.8% in May, when the
is released on Friday.
The huge rally in stocks also depressed Treasury prices, for the same essential reason. Stock prices may not be the key determinant of consumer confidence, but rising stock prices are also seen as driving consumer spending.
Treasuries "were already on the defensive with the strong stock opening before the 10 o'clock number," Stiles said, referring to the Consumer Confidence Index.
The underperformance of short-maturity Treasuries is further evidence of the stock market's influence,
senior fixed-income strategist Michael Ryan said. When Treasuries are being driven -- in either direction -- by the action in stocks, short-maturity issues usually lead the way, for the simple reason that they are the most liquid portion of the Treasury market. In other words, they are the easiest to liquidate in order to buy stocks, or to buy with proceeds from stock sales.
Also, when expectations about the Fed are shifting in response to stock-market moves, that affects short-term Treasuries most directly, since the interest rate controlled by the Fed is a short-term rate.
Today's rise in short-term Treasury yields relative to long-term ones, "tells you that
the selloff was more equity-related than consumer-confidence related," Ryan said.
Currency and Commodities
The dollar fell against the yen and rose against the euro. It lately was worth 106.43 yen, down from 107.15. The euro was worth $0.9299, down from $0.9310. For more on currencies, please take a look at
Crude oil for July delivery at the
New York Mercantile Exchange
rose to $30.35 a barrel from $30.00.
Bridge Commodity Research Bureau Index
fell to 223.39 from 224.98.
Gold for August delivery at the
rose to $275.50 an ounce from $275.00.
Chat with Christopher Edmonds on AOL's MarketTalk, hosted by Sage at 4 p.m. EDT, Wednesday, May 31.(AOL Keyword: Live)
To view the TSC Economic Databank, see: http://www.thestreet.com/markets/databank/946975.html
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