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daily09-06-99's DAILY BULLETIN

September 7, 1999

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Market Data as of Close, 9/3/99:

o Dow Jones Industrial Average: 11,078.45 up 235.24, 2.17%

o Nasdaq Composite Index: 2,843.11 up 108.87, 3.98%

o S&P 500: 1,357.24 up 38.13, 2.89%

o TSC Internet: 595.82 up 33.91, 6.03%

o Russell 2000: 435.97 up 8.55, 2.00%

o 30-Year Treasury: 101 14/32 up 1 16/32, yield 6.021%

In Today's Bulletin:

o Editor's Letter: While the Weather Turns Cooler, Wall Street Heats Up
o Market Update: Weekend Report: Wind of Market Gains in Europe Blows Past the Barbecue
o The Coming Week: Market Will Savor Its Rally, but International Data Loom
o Europe: The Coming Week in Europe: ECB Press Conference May Highlight Bank's Rate Bias

Also on

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Editor's Letter: While the Weather Turns Cooler, Wall Street Heats Up


Dave Kansas


9/6/99 12:56 PM ET

Oh, August can be sluggish, can't it? Hard to tell given the last two days of last week. Hoo-hah, as

James J. Cramer

, our daily columnist likes to say. Down the chute Thursday, right back up it on Friday, and the market is just rolling into the hot-and-heavy days of early September.

Yup, back from the beach, back from the cabins, back from all those places where traders and investors hide during the scorching month of August. The desks will be full, and we'll be ready to roll right from Tuesday morning's bell, giving you the latest dope from the stock market and the latest ideas from a stable of the strongest columnists in financial journalism.

For starters, Tech Savvy columnist

Jim Seymour

checks in with a three-part series on



and its challenges for the future. How will the company handle broadband access, its anti-Net origins,


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and declining fees? Though it's merely a child next to

General Electric

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, AOL has become in its short life span the closest thing the Net has to an American institution -- and now that institution is at the crossroads. This series starts on Tuesday and will run through Thursday, only on


As many IPO watchers noticed, August felt like the Gobi Desert. But things are going to change fast, and our IPO columnist,

Ben Holmes

, is busy mining his database of deals to bring you timely information this week on the IPO market. Check out Ben's "

fever meter," which tracks which investment houses have produced the best first-day returns for investors in new offerings. For this special column, Ben has opened up his database to


readers to give them a full rundown of league stats for the past two months. It's a must-read for investors gearing up to face a new barrage of IPOs.

And what would a week be without the ever-busy James J. Cramer? The trader will offer up not one, but two chats on Thursday. Sure, he sometimes has some cross words for our dead-tree cousins, but he's not afraid to wade into a chat at

. He'll be there on Thursday beginning at 1 p.m. EDT, taking on questioners while in the heat of the action. After the close, Cramer will crack his knuckles and participate in a


Chat at 5 p.m. It's free, but registration is required at

We're excited to have the gang back from the shore, and it promises to be a rollicking week. We'll be ready to cover every base. And if you have a question, comment or concern, don't hesitate to email me at

L'Etoile du Nord

Dave Kansas


Market Update: Weekend Report: Wind of Market Gains in Europe Blows Past the Barbecue


Eric Gillin

Editorial Assistant

9/6/99 7:18 PM ET

Memories can be hazy after three long days of glaring sun, charred burgers and empty beer cans. Before all that, way back on

Friday, the

Dow Jones Industrial Average

partied into the weekend and finished up 235.24, or 2.2%, at 11,078.45. On Labor Day, European markets kept that vibe alive while most Americans took the day off.

Major European markets were up, with the only notable exception clad in a beret with a skinny cigarette pinched between its finger and thumb. In keeping with military history, the French were last seen retreating. The

CAC 40

was off 4.33 to 4668.04.

The United Kingdom's


index shimmied up 43.60 to 6375.70 while Germany's


boogied up 64.33 to 5400.55. Yet, the biggest winner in the European party scene was Greece's

General Share

index, which took home a bevy of beauties and soared 213.82 to 5621.67.


Stockholm General

was up 34.99 to 3933.22.

Much of the FTSE's move was due to

Vodafone AirTouch

, a Brit telecom, which admitted it has been privately canoodling with

Bell Atlantic


. The pair has been romantically linked for months, with most speculating that they would merge and form a nationwide U.S. mobile network. Vodafone was up 2.2% on the FTSE on news of the footsie.

In other London news, Britain's third-best bank,

National Westminster

, announced the purchase of the country's fourth-best insurer,

Legal & General

, for $17.25 billion. No one seems to know just how good the resulting company would be, but both stocks were trading down.

German baker

Kamps AG

announced that it will buy

Wendeln Brot und Backwaren GmbH

for $1.1 billion, creating the largest European baker. Kamps said the move would triple its annual sales and quadruple operating profit. Meanwhile, Americans tried to unscramble "Wendeln Brot und Backwaren GmbH."

Way out east, the sun was rising. The

Nikkei 225

index was up 126.52 to 17756.51, while the

Hang Seng

was up 206.85 to 13385.16.

Back in America,


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kept a Labor Day tradition alive. It went shopping and picked up

International Telecommunications Data Systems


in a $182 million stock swap.

In the Papers

While world news is too eventful, with car bombs testing the Israeli-Palestinian peace process and news from East Timor growing more horrible, in the financial sector it is, as they say, sleepy.

The New York Times

lords over economic data, numerical mashing and the intricacies of the market vagaries, leading with hard-core Street news, sexy rumors and whispers from vacationing gurus.

Oh wait, that's us.

The Times

has a story about fugitive money manager

Martin Frankel

, who was caught in an uber-expensive German hotel after a four-month international search. Frankel, suspected by the


of embezzling more than $200 million, had been staying in Room 5 for eight weeks before the authorities finally tracked him down on tips from cranky associates and a trail of credit card charges. The jury is still out on who was more inept: Frankel for his discreet choice of sanctuary or the FBI for not finding him sooner.

Other gritty articles from Monday include a hard-hitting behind-the-scenes expose of


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efforts to televise golf, new corporate attempts to downsize obese employees and a report on the circulation status of soft-core beer-porn magazines like







Meanwhile, both

The Washington Post



discussed the golden years, sort of.

The Post

looked at the phenomenon of post-retirement seniors getting jobs at vacation spots while


examined the idea of boomers thumbing their noses at the retirement age, begging the question: After the SUV, what?

The Coming Week: Market Will Savor Its Rally, but International Data Loom


Justin Lahart

Senior Writer

9/3/99 7:03 PM ET


Friday's big rally, inspired by that weak August

jobs report

, what's the market going to do for an encore? Well yeah, it'll take Monday off to eat lobster and get hammered at the beach, but after that?

Friday's action was just the latest feat for the amazing, death-defying U.S. stock market. Just as it looked like major indices were racing to complete one of those oh-so-scary head-and-shoulders patterns, just as evidence was mounting that the

Federal Open Market Committee

would again be hiking rates at its Oct. 5 meeting, just as all those worries about capital fleeing the U.S. seemed like they'd come true, in slipped the jobs report. Sometimes it almost seems like the market's rigged.

Let's consider this year compared with last year. On Sept. 3, 1998, the

S&P 500

finished at 982 -- it closed 38% higher on Friday. The 30-year Treasury yield is 80 basis points, or 15%, higher. Even with some pretty amazing earnings in the third quarter -- it looks like they'll gain better than 20%, year over year -- things are way more highly valued than they were then. And even back then one could have argued things were rather stretched.

'Why Can't We Break This Thing?'

"Why, if it is manifestly overvalued, can't we break this thing?" asked Howard Simons, quantitative strategist at

Fimat Futures

. "I think people have just gotten tired of being wrong and they've just said the hell with it." Too many times it has been a mistake to have gone short. It has been a mistake to have gone into cash. It has been a mistake to be bearish.

"Fundamentally, I do not like the market," said Simons. "Technically, I think the risk of a break is high. The market doesn't belong higher, but don't be surprised if we run up again."

Simons' sense is that if the market gets the idea that the


is on hold from here on out, and that its talk of the danger of high equity prices is more bark than bite, stocks could be in for a rocket ride. He notes that the recent period of uncertainty is similar to what the market went through in the spring and, as was the case then, there's been a lot of call selling. With stocks moving higher, and futures and options expiring the Friday after next, there could be a race to cover. "The comedians have been selling calls since last month," said Simons. "As we get toward expiration, we could have an unwinding to the upside that could be fierce."

That depends on stocks continuing to post gains, though, and whether


keeps on happening really depends on the Fed. Although in the wake of the August employment news, the market's perception is that the bank is on hold for the rest of the year, that is not necessarily the case, points out

Morgan Stanley Dean Witter

chief money-market economist Bill Sullivan.

"If you pay close attention to the Fed, first, they perceive the current condition in the labor markets as tight, and I don't think that broad interpretation will change in light of the latest data," said Sullivan. "Second, they're still looking at the trajectory of consumption and the interplay of consumption and equity wealth."

Look Overseas for the Big Numbers

There is little in the way of U.S. economic data to hinder the perception of the Fed staying pat in the coming week. The only really major report to come out, the August

Producer Price Index

, is not expected to offer much fodder to the tightening argument. There will be, however, a bevy of Fed officials giving speeches, and

Big Al Greenspan

himself will take to the stage on Wednesday.

Yet the most important economic news will likely come from overseas. Germany reports its July

industrial production

data Wednesday, and it is widely expected to be the first of a series of reports that will show a flourishing European economy. That's important in these days when

people are talking about a rebalancing of world economic growth, and a subsequent movement of funds away from U.S. shores.

Even more weighty: Japan's

gross domestic product

figures for the April-June period.

Expectations are that that number will come in flat. If it comes in strong, it could pose problems for the U.S. markets. Japan's previous GDP release hurt the bond market badly -- its unexpected strength took away the argument that rates would stay on hold because the world economy was at risk. This GDP report will be more of a currency story -- everybody knows, after all, the world economy's on the rebound. If the bond market moves on it, it'll be because the dollar has.

Europe: The Coming Week in Europe: ECB Press Conference May Highlight Bank's Rate Bias


Marc Young

German Correspondent

9/4/99 12:25 AM ET

The wait for higher interest rates in Europe starts now.

Even though nobody expects the

European Central Bank

to change rates at its meeting next week, everyone will be hanging on President

Wim Duisenberg

, who will offer his two (euro) cents on monetary policy for the first time since mid-July. Back then, Duisenberg put a mild spook into about-to-be-vacationing traders by noting a tightening bias was "creeping" into the ECB's considerations.

Sure, Duisenberg's words weren't beaten into the planet's collective consciousness as deeply as

Federal Reserve


Alan Greenspan's

"irrational exuberance"

quip, but it was arguably his most powerful sound bite since 11 countries dropped their marks, escudos and francs in favor of a common currency this past January.

His cleverly timed comment propped up a flagging euro, which was flirting dangerously close to parity with the dollar at the time. On Friday, the euro was back at $1.06. Duisenberg gave the new currency just enough breathing room for stronger data to show Europe's economic recovery was taking hold.

The fact that the continent's economy does seem to be rebounding means that during Thursday's press conference, Duisenberg will likely have to answer the question of whether the ECB has now adopted a tightening bias, rather than merely crawling toward one.

Even if the bank does opt for such a bias, many observers don't think a rate hike is imminent.

"Business sentiment is probably still too fragile for the ECB to begin tightening policy this year," says Catherine Lee, an economist for

Greenwich NatWest

in London. "As the upturn in growth takes hold,

they'll be able to take back this year's rate cut."

No move this Thursday, perhaps, but the key point remains that euro-area rates are likely to go in only one direction at this point.

The coming week will also present data that are sure to be scrutinized by the ECB and the market alike. On Wednesday morning, German

industrial production

for July will provide insight into Europe's largest economy, although the central bankers will have to wait until Friday to check out Spain's IP for the month.

Figures for second-quarter

gross domestic product

for France and Germany will be released on Tuesday and Thursday, respectively. Both reports are likely to show the low point of growth for the year in the eurozone's top two economies.

In the equity markets, financial issues will likely hold interest for investors amid speculation of further mergers and consolidation in the sector. On Friday, Britain's third largest bank

National Westminster


said it was in discussions to buy life insurance and pensions provider

Legal & General Group

. While in Frankfurt,



chairman announced the bank would create a regional investment bank with its European partners.

The European aerospace industry could also provide some excitement next week, after Germany's leading business daily


reported Friday the German government was actively promoting a merger between




, owned by



, and France's

Aerospatiale Matra


On the political scene, regional elections on Sunday in Germany could make Chancellor Gerhard Schroeder's chance of passing his financial reform package more difficult if his center-left SPD party fares poorly.

With a slew of local elections spread out over the next six months, stubbornly high unemployment and slumping poll ratings, Schroeder will probably be one of the last people pleased when the ECB does finally pull the trigger.

John J. Edwards III on MarketTalk Tuesday, September 7

Chat with John J. Edwards III on AOL's MarketTalk at 1:30 p.m. EDT. MarketTalk is hosted by Sage Online. (Keyword: PF Live)

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