Publish date:

daily07-18-99's DAILY BULLETIN

July 19, 1999


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Market Data as of Close, 7/16/99:

o Dow Jones Industrial Average: 11,209.84, up 23.43, 0.21%

o Nasdaq Composite Index: 2,864.48, up 25.11, 0.88%

o S&P 500: 1,418.78, up 9.16, 0.65%

o TSC Internet: 638.73, down 10.98, -1.69%

o Russell 2000: 465.26, down 0.54, -0.12%

o 30-Year Treasury: 90 31/32, up 9/32, yield 5.894%

Companies in Today's Bulletin:

Taiwan Semiconductor Manufacturing (TSM:NYSE)

U.S. West (USW:NYSE)

Broadcom (BRCM:Nasdaq)

Fidelity Federal Bancorp (FFED:Nasdaq)

In Today's Bulletin:

o Market Update: Weekend Report: No Rate Hikes in Europe Could Aid Wall Street Open
o Editor's Letter: The Coming Week on TSC
o The Coming Week: Earnings Will Keep Rocking, but the Week Belongs to Greenspan
o Europe: The Coming Week in Europe: Telecom Shares, Merger Talk Remain Focus




Due to breaking news regarding the disappearance of John F. Kennedy Jr.'s plane,'s inaugural television show on the Fox News Channel was pre-empted this past weekend. The show will definitely air next Saturday, June 24, at 10 a.m. ET -- don't miss it!

Also on

The Daily Question: Does Janus 'Get' the Web?

Also, the value of net asset value, more on fund directors' independence and two funds that work well together.

Fixed-Income Forum: What's My Mother-in-Law Doing in That Tax-Free Bond Fund?

Given the facts, choosing a taxable bond fund is a no-brainer.


Tax Forum: Would LEAPS on Boeing Stock Fly?

Also, applying the wash-sale rule to options trades, catching up on 10 years of missed IRA contributions and more.


Options Forum: European Means 'Cheaper' With These Options

Also: Reading options trades for sentiment and broker policies toward shorting stocks.

Market Update: Weekend Report: No Rate Hikes in Europe Could Aid Wall Street Open


Aaron L. Task

Senior Writer

In a relatively light weekend of (financial) news, some headlines from an overseas newspaper may carry the day.


European Central Bank

will not raise interest rates to support the euro, Spain's

El Mundo

reported Sunday.

"Neither the evolution of money in circulation nor inflation forecasts lead to the conclusion that the current level of rates needs to be changed," ECB board member Eugenio Domingo Solans was quoting saying in the newspaper.

The comments should alleviate fears generated by ECB President

Wim Duisenberg

, whose hawkish comments

Thursday roiled the U.S. bond market.

Perhaps in reaction to those comments and to the lack of further escalation of tensions between China and Taiwan over the weekend, Asian bourses got off to a solid start Monday morning. Japan's

Nikkei 225

was up 160.62, or 0.88%. Australia's

All Ordinaries

index was up 16.0, or 0.52% and New Zealand's


was up 11.61, or 0.53%.

In other overseas news, the Taiwan state development fund said it completed the sale of 9.8 million American Depositary Receipts, or ADRs, of

Taiwan Semiconductor Manufacturing

(TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report

. At an average price of $30.40, the sale raised about $300 million for Taiwan's treasury.

In other news

U.S. West



Qwest Communications


$40.5 billion buyout offer, confirming reports circulating Friday on


. Also,

Global Crossing


said it will proceed with its $12.9 billion purchase of


(FRO) - Get Frontline Ltd. Report




agreed to acquire

HotHaus Technologies

for $280 million in stock,



Late Friday,

SBC Communications


announced a deal with

Hughes Electronic




to provide satellite service to its 18 million customers.

Fidelity Federal Bancorp


signed a letter of intent to sell 51% of its common stock to an affiliate of

Lincolnshire Equity Fund II


In the Papers

In a shocking development,


Alan Abelson

included a positive mention of an Internet stock in his weekly column, specifically




Of course, this uncharacteristic optimism was sandwiched between more typically negative views of



Lernout & Hauspie



Elsewhere, Scott Satterwhite, manager of the

(ARTSX) - Get Artisan Small Cap Investor Report

Artisan Partners Small-Cap fund showered bullish praise on insurers

Chicago Title

(CTZ) - Get Qwest Corp 6 5/8 % Notes 2015-15.9.55 Report


Stewart Information Services

(STC) - Get Stewart Information Services Corporation Report

, as well as cement producers

Giant Cement



Lone Star Industries



Brett Robertson, managing partner at

Richmont Investment Management

in Dallas, gave positive mention to




Whole Foods Market



Hutchinson Technology



B.F. Goodrich


. The small-cap value manager had less pleasant things to say about




Neither Satterwhite nor Robertson made the



Value Line

list of top-100 mutual fund managers.

The "Follow Up" section of the paper included cautionary tales about declining demand for sports utility vehicles and implications for automakers such as





(F) - Get Ford Motor Company Report

. The section also noted a setback for

Lockheed Martin

(LMT) - Get Lockheed Martin Corporation (LMT) Report

last week -- a cutback in production money for the F-22 fighter by the

House Appropriations Committee

-- but also mentioned that the company inked a $2.5 billion deal with Israel on Friday for 50 F-16s.


also included a positive report on chip-equipment makers, notably industry giant

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

and lesser-known

TheStreet Recommends


(PNJA:Nasdaq). The weekly also featured the slowdown in online-trading growth and potential implications for online brokers such as

Charles Schwab







(AMTD) - Get TD Ameritrade Holding Corporation Report





TD Waterhouse



In a similar vein,

The New York Times

reviewed the decline in day-trading activity since the April swoon in Internet stocks. However, the piece was absent much stock-specific insight. In fact, other than

Exodus Communications



MCI WorldCom





-- the picks of

Fidelity Investments

growth fund manager Erin Sullivan -- the Sunday issue was light on "investable" news.

However, a primer on "accounting tricks" was certainly worth the price of admission.

Editor's Letter: The Coming Week on



Dave Kansas


Being in the news business has its moments. Getting to the heart of a matter, discovering something new, providing an insightful view on an important topic. But news also is unpredictable, as we discovered this weekend.

The tragic disappearance of

John F. Kennedy Jr.'s

plane pre-empted our inaugural television show on the Fox News Channel. Believe me when I tell you it was a good show, with

James J. Cramer


Herb Greenberg

slinging along with

Brenda Buttner

and others. Read Cramer's blow-by-blow

account of Friday's taping to catch up on what you missed. There's a chance the inaugural show will run before the bell on Monday morning, but we will definitely be back next Saturday at 10 a.m. EDT. We are, of course, undaunted. And we look forward to next week's show.

Television aside, we are continuing to hustle for information that will make you wiser investors. Through the scorching heat of summer, we are tracking important earnings news and other corporate developments. We know that you have a lot going on in the summer, so we encourage you to check in from time-to-time with our markets team to see how things are progressing in the stock market.

John J. Edwards


Justin Lahart


Aaron Task


Elizabeth Roy

and others are closely watching the financial markets so that when you bop in from the beach for a quick look-see, they will have the latest dope on what matters to you.

One of the show's ace performers,

Gary B. Smith

, will be getting cozy with readers on Tuesday, July 20 during a



chat. If you have questions about technical analysis, or Gary's swimming kids, be sure to get to the Yahoo! chat at 5 p.m. EDT. Registration is required, but it is free. Go to

If you have any comments, concerns or suggestions, don't hesitate to email me at I'll make sure your issues are handled promptly.

So get ready for another exciting week. Though it's deep summer, this stock market is showing few signs of relaxing. We'll be on the case.

L'Etoile du Nord,

Dave Kansas


The Coming Week: Earnings Will Keep Rocking, but the Week Belongs to Greenspan


Justin Lahart

Senior Writer

With titans like


(MSFT) - Get Microsoft Corporation (MSFT) Report

set to report their numbers, you might think the coming week is all about earnings. It is not.

That's a bit of a shame, since earnings have been so darn good. So far, according to

First Call


S&P 500

companies have been beating estimates by a hefty 3.8%. A second-quarter earnings gain of 15% over last year certainly seems doable. Moreover, companies have been extremely upbeat about their third-quarter prospects -- a good example of that was


(INTC) - Get Intel Corporation (INTC) Report

, whose uncharacteristic optimism on how its business is going helped push its stock higher despite earnings that were a bit below estimates.

But it's the chairman's show now.



Alan Greenspan

will be delivering his twice-yearly


testimony on Thursday, and until people see what he's had to say, nobody on Wall Street is going to have a heck of a lot of conviction on whether the market should be heading up or down. About half the people say the Fed will move rates up at its August meeting, half say it won't, and none of them seem to have much confidence that they're right.

Big Al has a tough act to put on. Since the Fed raised rates June 30, the economic data have been benign to downright benevolent. "Right now, based on all the numbers we've seen recently, you have to say the Fed stays on hold Aug. 24," said Don Fine, chief market analyst at

Chase Asset Management

. The problem for Greenspan, however, is that between now and then, there's "a whole other round of numbers," Fine added. "This time around, Greenspan will have to do a bit of a soft shoe."

It's likely that Greenspan will "lay out the guidebook" on monetary-policy thinking, said Mitchell Held, economist at

Salomon Smith Barney

, who also thinks "probability favors inaction at this point."

This all leaves Fine thinking Greenspan will give a pretty even-handed speech. "They have a neutral bias," said Fine. "It's hard for me to imagine Greenspan getting up, after all this

good data, and saying that they're moving toward tightening."

If Fine's right, that could be a darn fine thing for the stock market. Freed of its interest-rate worries, it could turn its focus to those fine second-quarter numbers and what companies have been saying about the third quarter. For bulls, that'd be a damn good thing.

There are those, however, that fret about how high stocks have gone and worry that any move up will be a last-gasp rally before a big fall. They point out how high P/Es have gotten, and say that with the bond yield near 6%, stocks are overvalued by 30%. They worry that this year will look like last year and the year before -- a summer top in late July and then a big decline. This is a stock market itching for a fall (and lookit all the trouble in China and Taiwan lately -- ominous).

But though he once worked under

Morgan Stanley Dean Witter's

Byron Wien -- a guy who's among the worriers -- Tom McManus, equity portfolio strategist for

Banc of America Securities

, doesn't buy the stocks-are-overvalued talk.

"When people say the market is historically overvalued," said McManus, "they're comparing apples to oranges. Valuations are in the stratosphere -- compared to what? What they were in the '60s? What they were in the '40s?"

Things have changed. Even 10 years ago, the S&P 500 was stocked with far more industrial concerns -- manufacturing was a far greater part of our economy. With the shift to more of a services-based economy and the advent of information technology, the S&P is a very different index. Microsoft, the company that is now the largest component, traded (split-adjusted) at less than a buck 10 years ago.

"If you can understand why

General Electric

(GE) - Get General Electric Company (GE) Report

carries a higher P/E than

General Motors

(GM) - Get General Motors Company (GM) Report

," said McManus, "you can understand why today's P/Es are higher than in the past. I would contend that a service business is a higher quality business than a manufacturing business."

People who do valuation work have tried in various ways to capture the shift in the S&P, but things have moved at such a quick pace that they may not have altered their models quickly enough. "When something as revolutionary as harnessing the power of millions of computers networked together has occurred," said McManus, it's hard to keep up with the pace of change.

Europe: The Coming Week in Europe: Telecom Shares, Merger Talk Remain Focus


Marc Young

German Correspondent

Ever have to rush around and tie up a bunch of loose ends before you could pack the kids into the family van and head off to Orlando? If you have, then you have a good idea what Europe is going to feel like next week.

Most of Europe shuts down for the entire month of August and most of the Continent wants to be in vacation mode. Unfortunately for the suntan peddlers in southern France and Majorca, everyone seems to have something pestering them before they can head off.

Members of the

European Parliament

-- rarely seen as the most industrious lot -- are no different. Tuesday through Friday will see the parliamentarians gather in Strasbourg, France, for the first time since elections in June. The parliamentarians, however, elected amid dismal voter turnout across Europe, are itching to break for summer recess and will only be around long enough to be sworn in and choose a new president for the body.

As perfunctory as next week's gathering may seem, the parliament's new president could play a key role in whether the institution's power and legitimacy continues to grow after bringing down the

European Commission

amid a corruption scandal last spring.

The designated president for the postscandal EC,

Romano Prodi

, will speak before the parliament Wednesday after having met with prospective new commissioners over the weekend. Hopefully he won't have the same effect on members as he did on the continent's currency, the euro, when a few ill-timed

remarks helped put it on trajectory for all-time lows a few weeks back.

Telecom shares will likely maintain the interest of equity markets in the coming week, as rumors were rife Friday about a possible linkup between

Deutsche Telekom

(DT) - Get Dynatrace, Inc. Report

and Spain's


. While the talk was denied by both companies, such a merger can't be counted out as both former monopolies have been looking for a partner to keep from becoming globally irrelevant.

One company Telekom won't be working with, it seems, is

France Telecom


, which said Friday it was ending the pair's strategic partnership and would sell its nearly 2% stake in DT by the end of the year. The move came as no surprise, as France Telecom was particularly miffed at DT's botched merger bid for

Telcom Italia


two months ago. "Our partnership wasn't exactly crowned with success," said a France Telecom spokeswoman, according to the German daily


. Both companies' ADRs (shares traded in the U.S.) slipped on the news.

While economic data never goes on holiday, the coming week will bring some of the last reports that won't be influenced by the summer slowdown. On Tuesday, the Munich-based


economic institute will release its survey of western German business confidence for June. Consensus has sentiment in Europe's largest economy picking up during the month.

A recent surge in imports "implies that demand is picking up and

that there is probably a recovery of investment activity already underway in Germany and Euroland at large," says Markus Schulte, an analyst for

Stone & McCarthy Research

in London. "We're convinced there will be a solid turnaround in the second half of the year."

Also next week, the EU's statistics office,


, will release June harmonized consumer prices data for the 11-member euro area on Thursday. Inflationary pressures are expected to remain absent from euro-economy.

While July and August


have yet to be reported, the expectation is that inflation may have also taken the summer off. We hear it rented a bungalow in on the Greek isle of Santorini.

John J. Edwards III on MarketTalk

Monday, July 19

Chat with John J. Edwards III on AOL's MarketTalk at 3:30 p.m. EDT. MarketTalk is hosted by Sage Online.(Keyword: PF Live)

Gary B. Smith on Yahoo!

Tuesday, July 20

Gary B. Smith will be chatting on Yahoo! at 5 p.m. EDT. Register for Yahoo! Chat at: It's free!

Catch the on the FOX News Channel July 24! Join host Brenda Buttner and TSC regulars like Jim Cramer, Herb Greenberg and Dave Kansas. Saturdays at 10 a.m. ET and again on Sundays at 1 p.m. ET.

Copyright 1999,