daily10-03-99

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TheStreet.com's DAILY BULLETIN

October 4, 1999

http://www.thestreet.com

Market Data as of Close, 10/1/99:

o Dow Jones Industrial Average: 10,273.00 down 63.95, -0.62%

o Nasdaq Composite Index: 2,736.85 down 9.31, -0.34%

o S&P 500: 1,282.81 up 0.10, 0.01%

o TSC Internet: 647.12 down 0.26, -0.04%

o Russell 2000: 423.53 down 3.77, -0.88%

o 30-Year Treasury: 99 26/32 down 1 09/32, yield 6.145%

In Today's Bulletin:

o Editor's Letter: Boo! Halloween's Not the Only Scary Thing About October
o Market Roundup: Weekend Report: As Expected, Tankan Comes in Stronger Than Expected
o The Coming Week: Market on Edge Ahead of FOMC Meeting Tuesday
o The Coming Week in Europe: Bertelsmann Unit Pixelpark Launches IPO

Also on TheStreet.com:

Asia/Pacific: The Coming Week in Asia: Bankers Meeting Fails to Lift Fog Surrounding Yen Policy

Nevertheless, even a tepid word from Bank of Japan's governor can still spark powerful movement in the closely watched market.

http://www.thestreet.com/int/asia/789623.html

This Week in IPOs: Join the Party and Make Money Before Month's End

Health care and e-commerce deals look good. Also, watch for an upcoming IPO primer.

http://www.thestreet.com/comment/ipoweek/790240.html

Commentary Features: The Lone Wolf Indicators

Sometimes the measures of consensus say you have to go your own way.

http://www.thestreet.com/comment/cfeatures/790236.html

TSC

Technical Forum: Stock Trading Sure Has Changed Since the '70s

GBS marvels at Alteon's recent IPO moonshot and contrasts it with a reader's recollection of the bear market in the early 1970s.

http://www.thestreet.com/comment/techforum/789894.html

Vegas Vice: Bonus! Now We're Picking NFL Games!

Handicapping NFL games is fundamentally different from handicapping college games.

http://www.thestreet.com/comment/vegas/790053.html

Marc Chandler: Global Briefing: Don't Expect Big Dollar Moves in the Week Ahead

But Chandler's keeping an eye on Japan's tankan survey, key central bank meetings and U.S. employment data.

http://www.thestreet.com/comment/currency/790006.html

Today's Polls: You Said It: A

TSC

Weekly Poll: How Will the Market Handle the Fed?

The conclusion seems all but foregone, but who can guess what this wacky market will do? Why, you, of course.

http://www.thestreet.com/talk/polls/790074.html

Editor's Letter: Boo! Halloween's Not the Only Scary Thing About October

By

Dave Kansas

Editor-in-Chief

10/3/99 3:54 PM ET October's here.

This is the month that brings thoughts of carnage in the marketplace. Big drop in 1987, turmoil in 1997. There's no shortage of fear on Wall Street when October comes calling. And we're more primed than ever.

James J. Cramer

in the trading turret. A markets crew geared and ready. We're prepared to deliver the latest, most important information as we track each market turn.

Starting off this week, we'll have our eyes on the

Fed

. The

Federal Open Markets Committee

meets to talk policy on Tuesday -- lots of folks think it will sit tight rather than make a move. Our markets team will have an in-depth preview Monday late afternoon, and on Tuesday we'll have the story right at 2:15 as the Fed lets us know its latest trick.

Of course, we're also tracking events beyond October. One important issue: the looming New Year and the so-called Y2K computer problem. On Wednesday we'll kick off a series of stories that will highlight how Y2K is proving to be more a hoo-ha than a real menace. Sure, there's stuff to be concerned about, but how should investors view the coming turn of the calendar? We'll put it in perspective and give you the information you need to better understand the oft-discussed Y2K issues.

Wonder what happens with those after-hour trades?

Ian McDonald

has been tracking several stocks over the past week, and he'll provide readers with a view on how share prices can vary dramatically from ECN to ECN. Look for that story later this week.

Finally, a new column for those curious about the world of arbs. Like Area 51, arbs seem to inhabit a world of great interest -- and great mystery. Columnist

David Brail

, active in the arb world, explains in his column Risk Arb just how the game gets played. Can't tell you the next topic exactly, but it's about one of the bigger mergers on the cusp of closing. Read and learn how the pros scalp a teeny point here and there to make a profit.

If you have questions, or if there's something I can do to make your experience with

TheStreet.com

better, please don't hesitate to email me at

dkansas@thestreet.com. Meantime, get ready for another exciting week on

TheStreet.com

. It's October. And we're ready.

L'Etoile du Nord

Dave Kansas

Editor-in-Chief

Market Roundup: Weekend Report: As Expected, Tankan Comes in Stronger Than Expected

By

Thomas Lepri

Staff Reporter

10/3/99 8:26 PM ET

Tonight we start where the weekend ends, the

tankan

.

Investors worried about the dollar's recent weakness against the yen are anxiously watching how currency markets react to the

Bank of Japan's

tankan survey of business sentiment, which came in at a negative 22, up from the June's negative 37 and the survey's third consecutive rise. Economists polled by the

Nihon Keizai Shimbun

had expected the tankan diffusion index for large manufacturing companies to climb to a negative 26.

But currency markets weren't having any outsized reactions to the survey. Though the tankan was relatively strong -- remember, it's still negative -- traders have been acting with high expectations for some time. The dollar was lately trading at 104.9 yen, marginally below its New York close.

The

Nikkei

was trending higher in early trading, up 35, or 0.2%, to 17,747.56.

The tankan comes against the larger backdrop of a possible recovery in Asian demand, a recovery that may help

Boeing

(BA) - Get Report

introduce a new, longer-range version of its 777 jet sooner than the company previously expected, Chairman and CEO Philip Condit told

Bloomberg News

today. The new 777-200x is designed to fly 18-hour nonstop routes between such cities as Los Angeles and Singapore, but slack demand has slowed the project's launch. Condit said that Boeing may be able to gather enough orders to start production on the jet within the next six months.

There's been a smattering of other corporate news around the globe this weekend.

UAL

(UAL) - Get Report

unit

United Airlines

and its international Star Alliance partners will try to block the $3.8 billion joint takeover bid by

Onex

and

AMR

(AMR)

unit

American Airlines

for Star Alliance member

Air Canada

.

The Chicago Tribune

today reported that UAL and Star Alliance partner

Deutsche Lufthansa

will try to buy at least 35% of Air Canada's outstanding shares in a bid that could be announced as soon as tomorrow.

Two weeks after reaching a tentative deal on a new contract with the

United Auto Workers

,

DaimlerChrysler

(DCX)

is running into some unforeseen labor problems north of the border. Yesterday the

Canadian Auto Workers

union threatened to go on strike at DaimlerChrysler's Canadian operations if the company's

Magna International

parts supplier doesn't let the union organize at its

Integram

seating plant. There are about 550 nonunionized jobs at the Integram plant, and the CAW represents about 15,000 DaimlerChrysler workers in Canada.

In the U.K.,

National Westminster Bank

is still working on ways to repel the

Bank of Scotland's

pesky $38 billion hostile takeover bid.

The Sunday Telegraph

reported today that NatWest's advisers are working on plans to break up the bank by disposing of enough operations to raise up to $8.27 billion, which it will return to shareholders through a special dividend. The paper wrote that the planned divestitures would "leave the core retail and commercial bank intact."

Meanwhile, the

Sunday Times

reported that in an effort to restore confidence in its leadership, NatWest is scheming up a management shake-out that "is likely to extend to the top reaches of the bank."

Over on the continent, German acetate and basic chemicals firm

Celanese

, which

Hoechst

plans to spin off later this month, warned that it expects to post a "significant" second-half operating loss this year due to class action lawsuits over faulty plastic that Hoechst's

Ticona

unit, now part of Celanese, allegedly provided for plumbing systems in the U.S. Celanese also said that its future earnings may be hurt by additional claims coming out of class action lawsuits

Specifically, the company said it would sustain charges of 70 million to 80 million euros in the second half of 1999 and that future losses may total as much as 109 million euros. And as if that weren't enough, Celanese said that civil suits related to charges of price fixing in the sorbate -- rest easy, that's sorbate, not sorbet -- market could cost it another 90 million euros.

In the Papers

Intel

(INTC) - Get Report

is about to become the latest casualty of the

Barron's

ongoing war with large-cap technology and Internet firms. The paper's cover story this weekend focuses on what it sees as the chipmaker's slowing revenue growth in the face of recent shrinkage in the high-end PC chip market. The publication suggests that the company's current price-to-earnings multiple of 33 hasn't yet priced in that coming slowdown.

The piece comes at a sensitive time for semiconductor stocks, whose outlook has come under closer scrutiny after

Apple

(AAPL) - Get Report

disclosed its supply chain problems with

Motorola

(MOT)

, and in the wake of the massive earthquake that rocked Taiwan a week and a half ago. Intel has already taken hits in

after-hours trading late Friday, when word of the story came out.

Besides the Intel story,

Barron's

also features an slobbering interview with former

Fed

boss

Paul Volcker

, "the man who broke the back of inflation," in case you haven't heard. The piece comes replete with a photo of Volcker in mid-testimony, holding one of his characteristic stogies.

The international monetary fund that everyone loves to hate -- namely, the

International Monetary Fund

-- is set to receive some barbs from a report by the U.S.

General Accounting Office

. According to

The Financial Times

, which cited a draft copy of the report, the GAO charges that the IMF has been understating its lending capacity -- some $77 billion, by the IMF's account -- by discounting $19 billion in reserve funds it claims to need. The report notes that the IMF hasn't touched that reserve in more than 20 years.

In his usual short Sunday "Basis Points" column in

The Washington Post

, Fed insider

John Berry

wrote that Tuesday's

Federal Open Market Committee

isn't likely to yield any change in interest rates. Moreover, he writes, "the odds also are against an announcement that they are even leaning in that direction. The reality is that core inflation is tame, and some Fed officials are likely to argue that it actually is still declining."

So there.

The Coming Week: Market on Edge Ahead of FOMC Meeting Tuesday

By

Justin Lahart

Senior Writer

10/1/99 8:52 PM ET

One day it's the dollar, the next it's a mad

Ballmer, on another it's gold.

And whenever these things happen, you hear a pretty convincing argument why they shouldn't push the market lower. The dollar is doing fine against most currencies, the recent movement having really been a case of yen strength.

Microsoft

(MSFT) - Get Report

has been telling people its stock is overvalued for a long time now -- who cares if its president spells it out. Gold's price spike is all about the limits central banks have put on selling and has nothing to do with what's going on in the economy. And no, there's no

Long Term Capital Management

-esque gold carry trade out there.

The fear passes, stocks perk up a little, and the next big worry scuds in. Stocks fall down some more. And so September passes.

What do you think's in store for the week ahead? Tell us on our

message boards.

Sometimes it seems like the market is just looking for bad news, searching for an excuse to go lower. You start to think maybe all those people who have been talking about how stocks are overvalued are right. Maybe the market finally couldn't bear the strain.

It's a change from the experience of the last couple of years, when very real events came and knocked the market down when it hit high valuation levels. We've gotten used to our big catalysts. It's something to think stocks might keep falling without one.

"I've been worried about a correction of at least 10%, and perhaps 20%, since the beginning of the summer," said Byron Wien, chief investment strategist at

Morgan Stanley Dean Witter

. "I still think we have further to go. I don't think it's a bear market. I just think that valuations have been overextended."

The idea that stocks have some more downside isn't all that rare these days. It is October, after all. Throw a rock on Wall Street, and you'll probably hit someone who thinks stocks are going to have another tough month. There'll be a capitulative selloff, the common wisdom goes, and then we'll run on back up to new highs by the end of the year.

"I think the big surprise is that it's going to go down and stay there," said Wien. His second surprise will be that there will be a rotation in the market. Different stocks will be the leaders. For once, portfolio managers might actually beat the

S&P 500

. If there are any left who aren't closet indexing, that is.

The coming week is a worrisome one for the market, and no doubt the most worrisome thing about it is the

Federal Open Market Committee

meeting on Tuesday. It is unlikely that the FOMC will hike rates, though there is an outside chance that they'll go. The real focus of attention will be the Fed's policy directive -- about half the economists out there think it will go to a tightening bias. For the equity market, that might actually be the worst of all worlds -- it keeps people on the worrying wall until the November Fed meeting. A tightening now, and the perception would be that the Fed's done for the year. It'd cause some pain, sure, but would also help the market put in a rock-solid bottom.

Joe Carson, chief economist at

Deutsche Bank Securities

, is among those who thinks it's a tightening bias on Tuesday and then a tightening on Nov. 16. And while the Treasury market seems to have resolved itself to a Fed that eventually takes back all of last year's cuts, Carson thinks that the central bank will go further than that.

"I think the market is being a little bit complacent," he said. "There's more inflation in the economy in 1999 then we had at any time in 1994

when the Fed was tightening aggressively, and yet no one cares."

Investors will have their share of overseas willies to worry about in the coming week. The

Bank of England

and the

European Central Bank

are both meeting midweek. There's been some chatter in the market that the ECB might raise rates, though it's important to remember that European traders are a little bank-shy since the BOE's surprise hike last month.

More important than those may be the

Bank of Japan's

tankan, set for release Monday. A closely followed sentiment index, it could spark some big moves in dollar/yen. There's been some speculation that it could come in stronger than expected, which could set off another dollar drop. If it comes in below expectations, however, there's a chance that the Bank of Japan would take advantage of the resulting yen weakness to intervene in the currency market and further prop up the dollar.

The week closes with the September

jobs report

-- always a hard thing to predict, and harder still this time around on account of Hurricane Floyd. Some economists, like Carson, think it will have little effect, and others think it will take a chunk out of payrolls. That leaves forecasts all over the place. No matter how the report comes in, someone will be wrong. Could be some volatile trading after that one.

The Coming Week in Europe: Bertelsmann Unit Pixelpark Launches IPO

By

Marc Young

German Correspondent

10/2/99 12:25 AM ET

BERLIN -- Following the announcement that Germany's pre-eminent author

Gunter Grass

has won this year's

Nobel Prize

in literature, it is perhaps fitting that the German media sector will figure prominently in the financial headlines next week.

Much of the focus will be on the initial public offering of the Berlin-based online services firm

Pixelpark

, which is owned by Germany's global media powerhouse

Bertelsmann

. Bertelsmann says the Pixelpark IPO on Monday will be only the first in a series of strategic listings to enable its various subsidiaries to embark on an aggressive round of acquisitions and growth.

Pixelpark, which designs Web sites and offers online expertise to large corporate clients such as

Deutsche Telekom

(DT) - Get Report

and the

New York Museum of Modern Art

, is hoping to raise upwards of 60 million euros ($63 million) by selling its shares for an initial price of between 12 and 15 euros. Only 20% of the shares will float on the

Neuer Markt

-- Germany's answer to the

Nasdaq

-- while Bertelsmann will hold 60% and Paulus Neef, Pixelpark's founder and chairman, will retain the remaining 20%.

While Pixelpark's stated intention to make rapid acquisitions both domestically and abroad should be enough to pique investors' interest in the multimedia sector, the recent assertion by Bertelsmann Chairman Thomas Middelhoff that strengthening the company's Internet operations is a priority should really get their juices flowing, principally because Bertelsmann owns a large chunk of

barnesandnoble.com

(BNBN)

.

Not only does Middelhoff have ambitious plans to grow the Bertelsmann empire, but he also wants to speed up changes in Germany's corporate culture. The drones slaving away in Europe's multimedia industry will no doubt be overjoyed to hear claims from Neef and Middelhoff that both the Pixelpark and future Bertelsmann listings will incorporate employee-incentive programs that mirror those in the U.S. in order to attract quality workers.

"Our first goal is to bind all current and future employees to the firm by means of a stock-options program, thereby increasing the attractiveness of the company worldwide," Neef said in a recent interview.

Away from the equity markets, the

European Central Bank

will hold its monthly press conference on Thursday to discuss monetary policy. No change in interest rates is expected, but ECB President

Wim Duisenberg

may be called on to elaborate on ECB Vice President

Christian Noyer's

slightly hawkish rumblings last week.

"Recent comments by Noyer throw up chances of an

early ECB rate hike,

but we are sticking to our view that a hike early next year is still the most likely outcome," says Joachim Fels, an economist for

Morgan Stanley Dean Witter

in London.

Among the most interesting economic data for Europe's monetary authorities to mull over next week are the reports for August on German manufacturing orders Wednesday and German industrial production Thursday. Both are expected to show further recovery in Europe's largest economy.

In the political arena, France's parliament will debate the implementation of a mandated 35-hour workweek on Tuesday, a day after employers will take to the streets to protest the measure and French unions will no doubt mount equally vigorous counterdemonstrations.

Well aware of the zest his countrymen put into their protests, French President

Jacques Chirac

will avoid the whole hullabaloo by traveling to Madrid for an official state visit to Spain on Monday. Perhaps he might read Grass'

The Tin Drum

on the plane over.

Copyright 1999, TheStreet.com