TheStreet.com's DAILY BULLETIN
August 26, 1999
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Market Data as of Close, 8/25/99:
o Dow Jones Industrial Average: 11,326.04 up 42.74, 0.38%
o Nasdaq Composite Index: 2,805.60 up 53.23, 1.93%
o S&P 500: 1,381.79 up 18.29, 1.34%
o TSC Internet: 591.14 up 27.35, 4.85%
o Russell 2000: 437.86 up 0.74, 0.17%
o 30-Year Treasury: 10 325/32 up 1 04/32, yield 5.860%
Companies in Today's Bulletin:
Cyprus Amax Minerals (CYM:NYSE)
Phelps Dodge (PD:NYSE)
In Today's Bulletin:
o Truth Serum: The Summer of Undead Deals
o Wrong! Rear Echelon Revelations: The Market, Feeling Frisky, Romps
o Evening Update: Asarco, Cyprus Amax Open to Increased Phelps Bid; MarketXT Kicks Off
o Bond Focus: Bond Market Dusts Off the Rally Caps
"TheStreet.com" on the Fox News Channel
Ever wonder what happened to the "lost episode" of "TheStreet.com"? Wonder no more! This week's "Stock Drill" guest is Ken Schapiro, president of Condor Capital and the first ever "Stock Drill" participant. Join TheStreet.com writers as they drill Schapiro about his favorite stock picks.
And TSC's own "Chartman," Gary B. Smith, tells us what makes a chart say "buy" and what makes it say "sell."
The show airs Saturday at 10 a.m. ET and again on Sunday at 1 p.m. ET. For more info and how to find Fox News in your area, please see our TSC on Fox page, at www.thestreet.com/tv.
Also on TheStreet.com:
Brokerages/Wall Street: A Night Owl's Guide to After-Hours Trading: Update
Online brokers have brought after-hours trading from concept to reality while the large stock exchanges dragged their feet.
Biotech/Pharmaceuticals: Big-Cap Biotechs Are Too Rich for This Analyst's Blood
On Wednesday morning, Merrill Lynch's Eric Hecht made an anti-momentum call on the group, downgrading some major players.
Trader's Turret: Berko Hangs Up on Net2Phone
JJC's partner sees a battleground stock a different way.
Eye to the Keyhole: Made for Each Other: Wall Street Sleaze and Anthony Robbins
Using the old shell stock switcheroo, Allen & Co. cook up what amounts to a sneaky IPO for the infomercial giant.
Truth Serum: The Summer of Undead Deals
8/25/99 7:00 PM ET
The voice on the other end of the phone was a familiar one. A fellow cradle-to-grave
fan, a Brooklyn
and a brokerage firm employee. We talk weekly, about the pennant race, the Street and three-sewer stickball glories of the '70s.
This, however, was a special call. He'd just heard from some brokers at his firm that
was making a run at
, the computer retailer. "Can you check it out for me? These guys here say it's gonna happen," the voice said.
It was at this point that I read from the
legal manual, informing him that even if I knew it was happening (and I certainly didn't), he'd have to wait and read about it on the site. He grumbled.
The conversation moved on to Piazza, Parcells and to "catch ya later."
Later that day, though, a reader sent the following email:
- Love the column. Here's another one for you ... CPU -- rumored buyer: Staples, Amazon (AMZN) - Get Report.
Now, according to my Joyce Jillson horoscope in Tuesday's
New York Daily News
, I must "examine rumors with the utmost care." That all but guarantees that I'm not biting on anything this week.
Not that there's much to bite on, it being the last week of August. But even without the usual dearth of news, the Staples takeover talk and some other discussions made it the
Week of the Living Dead Rumor
This rumor harkens back to 1998, and
market watcher Paul Foster, who has trafficked in his share of trading-floor chatter and takeover possibilities.
After disappearing for most of this year, CompUSA emerged from
on Aug. 16. It mentioned the company as a target of
. Hey, and why not? A mail order computer company buying a bricks-and-mortar computer retailer; it makes perfect sense.
Start holding your breath now. Even Foster has given up on a CompUSA takeout. A CompUSA spokeswoman declined to comment.
"As of right now, there's no anticipation of a deal. Let's just say Staples is interested," says Foster. "What's the takeout price? Part of me believes this is a turnaround candidate and part of me thinks it could be another
," which just filed for bankruptcy protection from creditors.
CompUSA's shares have run up about 24% since Aug. 13, but it's a stock that resides below 10, so we have to keep in mind how it's all relative, regardless of whether your broker calls and says this deal's "gotta happen."
But CompUSA wasn't the only corpse of a rumor stalking the land of the living.
talk won't go away even though corporate titan and Revlon Chairman Ron Perelman could concentrate on business with
sucking his fingers in trendy New York restaurants (as one of the city's tabloids reported).
So far, Revlon hasn't been acquired.
We're depending on our readers for sources, rumors and ideas. Send any to our Truth Serum hotline at
Wrong! Rear Echelon Revelations: The Market, Feeling Frisky, Romps
James J. Cramer
8/25/99 8:26 PM ET
You can never be long enough when the market romps like this. That's just the nature of the beast. Oh, periodically, I have bet the allowable max on the black jack of a market and tipped the dealer 10 cents a share on the go out.
But most often you are where I am, getting it right, but not as right as I would like it, owning the
, but not in the quantity I would like, in part because we were already having a good year and didn't want to jeopardize it, and in part because we are cautious by nature and don't want to be greedy.
As I sit back and analyze what has gone right these last few weeks I keep coming back to two things: the peak in the bonds and Intel. Ever since Intel got bullish, you had to be bullish. It was the seminal call and I thank the good folks at that great company for making it for us.
(And shame on those who panned Intel for speaking bullishly even as their last quarter was not so hot. I remember who you are and intend on reaming you next time around for it.)
The bonds were tougher. They bottomed for no particular reason except we now find that commodities leveraged to the economy seem to be collapsing, taking the cyclicals with them. With the bonds out of the way, with Intel waxing positively and with no earnings news ahead, save for the occasional
, it was clearer sailing than most people dreamed of.
So what happens now? Seasonally we are still in a strong period. The period between now and the days following Labor Day usually wrack up good gains. I want to lock in some of these gains now, but I have been letting them run and using dips like the
drops as gifts to get longer.
And I am trying not to get too bullish too late.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Intel, American Express, Amgen and Microsoft. 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: Asarco, Cyprus Amax Open to Increased Phelps Bid; MarketXT Kicks Off
8/25/99 8:28 PM ET
Cyprus Amax Minerals
decided to reconsider a three-way union with
. The two companies initially turned down a proposal form Phelps to pursue their own expected merger. Today, Asarco and Cyprus said they would begin trio merger negotiations if Phelps upped its all-stock offer to $3.3 billion from $2.5 billion.
, formerly Eclipse Trading, today began offering after-hours trading to retail clients of
Morgan Stanley Dean Witter's
Dreyfus Brokerage Services
. Clients can trade the top 100
stocks and the top 100
Nasdaq Stock Market
issues, 6 p.m. to 8 p.m. EDT Monday through Thursday.
will be updating MarketXT's 10 most active issues in
Got a Minute? and in the Evening Update.
(Quotes as of 8 p.m. EDT.)
, up 1/4 to 95 9/16 on 5,500 shares.
, up 1/4 to 103 1/2 on 3,850 shares.
, up 1/4 to 59 3/8 on 2,000 shares.
, up 3/8 to 49 3/8 on 1,800 shares.
, up 13/16 to 113 3/8 on 1,100 shares.
Pharmacia & Upjohn
, up 1/8 to 51 1/2 on 1,000 shares.
, unchanged at 49 1/4 on 1,000 shares.
, down 1/4 to 137 7/8 on 1,000 shares.
, unchanged at 24 5/8 on 600 shares.
, up 1/4 to 68 7/8 on 500 shares.
Night-Owl's Guide to After-Hours Trading for more information on postclose trading.
John J. Edwards III
In other postclose news (earnings estimates from
; earnings reported on a diluted basis unless otherwise specified):
Earnings/revenue reports and previews
Forest City Enterprises
reported second-quarter earnings of 21 cents a share, greatly missing the two-analyst estimate of 95 cents and the year-ago 54 cents.
posted a third-quarter loss of 7 cents a share, better than the 14-analyst estimate of a 10-cent loss but down from the year-ago 16-cent gain.
posted a second-quarter loss of 36 cents, falling short of the single-analyst estimate of a 33-cent loss and the year-ago 24-cent loss.
reported a fourth-quarter loss of 12 cents a share, greatly missing both the eight-analyst estimate of a penny gain and the year-ago 25-cent gain.
NCI Building Systems
reported third-quarter earnings of 71 cents a share, missing the two-analyst estimate of 86 cents but up from the year-ago 58 cents.
posted second-quarter earnings of 3 cents a share, in line with the two-analyst estimate and up from the year-ago 3-cent loss.
Mergers, acquisitions and joint ventures
announced it plans spend C$350 million over the next two years for the dual acquisition of
. The transaction's cost includes payments based on performance estimates. Newbridge, which already holds a 30% interest in both companies, plans to merge Time Step's virtual private network technology, which secures communication on networks, based on the Internet and Northchurch's high-speed router development business.
announced plans to buy auto dealership owner
for stock and debt. The transaction calls for Sonic to exchange about 5.1 million shares and take on about $175 million in debt. FirstAmerica stockholders will hold an estimated 15% of Sonic's outstanding common shares after the deal is completed.
Offerings and stock actions
announced a 3-for-2 stock split through a stock dividend to shareholders of record Sept. 9. On Sept. 23, one share will be distributed for every two shares held.
New Era of Networks
announced a share repurchasing program that would bring in 10% of the company's outstanding shares during the next 12 months. As of June 30, the company had roughly 32.7 million shares outstanding.
announced plans to close two San Jose, Calif., manufacturing facilities and slice its workforce in half, eliminating 500 jobs. The computer disk maker is attempting to concentrate its finished disk output production in Malaysia. Komag said it would assume a significant one-time third quarter charge for the restructuring. In a cost-cutting effort, Komag previously reduced its U.S. workforce by to 1,050 from 1,950. The company said its San Jose facility would now employ 350 people, focusing on research and process development.
said it was in ongoing talks for potential corporate transactions that could be "material" if completed.
Bond Focus: Bond Market Dusts Off the Rally Caps
David A. Gaffen
8/25/99 4:12 PM ET
Bear market? What bear market?
Feeding off of yesterday's seemingly neutral statement from the
, the Treasury market ran roughshod over all challenges to its muscle-flexing rally today. Durable goods? Dead. Weak two-year auction? Dead. Neidermayer?? Dead!
Day two of the post-rate hike rally dropped the yield on the 30-year Treasury bond to its lowest level in three months. Of late, the 30-year Treasury was up 1 5/32 to 103 26/32, dropping the yield 7 basis points to 5.86%.
This closing yield is the best for the bond since May 28, and the force of this rally has surprised some in the market. Not that long ago the bond market was gloomily selling off after a powerful July
and many were privately, if not publicly, pondering the odds of a 50-basis-point rate hike by the Fed come Aug. 24. The market retreated from that stance with the release of a couple of friendly inflation numbers in the last two weeks, and yesterday's somewhat dovish
statement solidified the market's recent positive tone.
"The market is acting like there's no possibility of the Fed tightening further in here and I think that's stretching it a little bit," said Maryann Hurley, a vice president in trading at
. "Yes, we have a neutral bias, and yes, the statement was friendly, but yes, they are going to watch the data. The Fed believes at this point that the economy is growing above target, and they're hoping that the economy is going to slow down on its own."
report is any indication, it is not happening yet. Durable goods orders rose 3.3% in July, following a revised 0.5% in June. The market was anticipating a 1% increase in orders. This report tends to be volatile from month to month, and businesses were letting inventories run down in the second quarter. Economists anticipate businesses will build up inventory in the third quarter and early in the fourth quarter to guard against Y2K problems, but they aren't sure this is the reason for the huge build-up in orders in July.
Excluding volatile transportation orders, durable orders rose 3.7%, compared with the
consensus estimate of a 1.1% increase. The huge increase in July already has economists projecting that GDP could grow by 4% in the third quarter, a growth rate the Fed had previously deemed unsustainable without the economy feeling the effects through wage inflation or price inflation.
"I think the door is still open for further rate increases if the data justify them," said Russ Sheldon, chief economist at
. "GDP growth is probably expected to bounce to 4%
in the third quarter which doesn't sound consistent with the Fed not moving rates again."
Sheldon believes the market is acting too confident in the wake of the Fed's statement, which does make it seem if the Fed is comfortable with this year's two rate hikes (the first was at the Fed's previous meeting June 30).
"Today's increase in the federal funds rate, together with the policy action in June and the firming of conditions more generally in U.S. financial markets over recent months, should markedly diminish the risk of rising inflation going forward," the statement says. The Fed raised its target on the fed funds rates to 5.25% yesterday, the second 25-basis-point rate hike of the year.
"Obviously, the Fed statement most powerful thing here, and it tends to mitigate secondary economic indicators," said Michael Krauss, chief technical strategist at
. "Even if
the durable goods number is strong, it may not have same kind of negative effect as we had two months ago."
Krauss added that technical buying in the futures market also added to the rally late, as the September bond contract rose above the July high of 117 21/32, a key resistance level for technical buyers.
will release its first revision to second-quarter GDP tomorrow at 8:30 a.m. EDT, originally estimated at 2.3%. Because of the rise in the trade deficit, this figure is expected to be revised downward (consensus forecast is for 1.8%), but that belies the economy's true direction -- the trade deficit is a drag on the economy because consumer demand in the U.S. is feeding increased exports to this country.
sold $15 million in two-year notes this afternoon at a bid-to-cover ratio of 1.87, and traders indicated the auction was somewhat weak.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
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