TheStreet.com's DAILY BULLETIN
October 13, 1999
Market Data as of Close, 10/12/99:
o Dow Jones Industrial Average: 10,417.06 down 231.12, -2.17%
o Nasdaq Composite Index: 2,872.43 down 43.52, -1.49%
o S&P 500: 1,313.04 down 22.17, -1.66%
o TSC Internet: 724.18 down 21.23, -2.85%
o Russell 2000: 424.68 down 5.51, -1.28%
o 30-Year Treasury: 98 18/32 down 14/32, yield 6.226%
Companies in Today's Bulletin:
In Today's Bulletin:
o Online Brokers: E*Trade Joins the Late-Trading Crowd
o Wrong! Rear Echelon Revelations: Follow the Bouncing Stock
o Evening Update: Intel Slides After Hours on Earnings Miss; Motorola Cites Iridium for Lackluster Results
o Bond Focus: Bonds Pare Losses as Stocks Reel
Also on TheStreet.com:
SiliconStreet.com: *Extra* What's Inside Webvan's Amended IPO Filing
Now, can somebody please explain why all this stuff couldn't have been included on the first go-round? Plus, join the discussion on our message boards.
Semiconductors: Intel Posts Another Quarter of Lower-Than-Expected Results
Intel's shares immediately dropped more than 5 points in after-hours trading.
Asia/Pacific: Y2K Issues Prove Nettlesome for Asia Stock Pickers
Portfolio managers are on alert as management competence and Y2K preparedness vary widely among countries in the region.
Latin America: As Mexico Recovers From Natural Disaster, Investors Look to the Banking Sector
Investors take notice as the unexpected dissolution of the political oppostion in Mexico clears the way for banking reform.
Online Brokers: E*Trade Joins the Late-Trading Crowd
10/12/99 9:29 PM ET
It's not exactly a crowd, but after-hours traders are getting some company.
has rolled out after-hours trading to its most active customers during the past couple of weeks, becoming the third major online brokerage to offer trading outside the standard trading day.
Talk about it on
E*Trade spokesman Patrick DiChiro confirmed Tuesday that the company launched extended-hours trading on Sept. 30 through
unit that runs an electronic communications network. The Menlo Park, Calif., online brokerage firm's move is in line with its summer announcement that it would offer trading beyond the market's 9:30 a.m. to 4 p.m. boundaries.
The late trading session, which runs from 4:05 to 6:30 p.m. EDT, will be rolled out to all of E*Trade's more than 1 million accounts during the next few weeks, he said. DiChiro couldn't provide any recent trade figures, but said that when late trading started, E*Trade did around 70 trades a session. Customers can get real-time quotes from Instinet and place limit orders at the same rates they pay during the day session.
E*Trade is at the end of the first wave of major brokerages that have begun offering after-hours trades for retail investors over the Internet.
Datek Online Holdings
brokerage customers to trade through the
ECN in July.
followed in August with trading through the
after-hours electronic trading system. So far, volume in individual stocks has remained thin.
are all planning to offer late trading within the next month or two.
E*Trade is likely to share details regarding the move Wednesday morning, when it reports fourth-quarter earnings and hosts a conference call.
Wrong! Rear Echelon Revelations: Follow the Bouncing Stock
James J. Cramer
10/12/99 6:43 PM ET
Sure the tape's going to be crummy tomorrow.
failed to meet expectations, and the market looks like it's wildly for sale. As I left the office tonight you could pick up any of the quality tech names, from
down a buck and a half from the last sale.
Tell me something I don't know. Tell me what is going to bounce first.
The dilemma we all face in this market of perfect information is that much of the market will be taken down at the opening because of Intel.
But then much of it -- barring a bond catastrophe -- will spend the rest of the day basing or trying to find footing to work its way back.
It's that regaining of footing that intrigues me. I have plenty of positions I am looking to buy into weakness tomorrow, but the question I have to face is how to figure out what will bounce and what will continue to cascade.
Let's be simple and break the market down into a few distinct asset classes: defensive growth, cyclicals, the Net, PC tech and the
(I am sparing the financials because if you want them right now you should just buy bonds, which seem somewhat tempting to me here, but I have bought none so far. And I am not covering cyclicals because they don't trade together during earning season, as each business has a different cycle and generalizations don't work right now.)
First -- don't laugh -- let's analyze PC and PC-related tech. If Intel were an atomic bomb, these stocks are ground zero. I tend to think that nothing lives at ground zero on the Wednesday of an Intel disappointment. But I am lean in this group and so far I am not hearing that demand was an issue. That leaves open the possibility that a stock like Microsoft could rally as things calm down toward the end of the day. I earmark that with a price of 90 and change as something I might want to buy.
Defensive growth seems very right to me. I would think that people might rotate into nonearnings-risk names such as
. I bought a great deal of those in the last few days and I think that bet might pan out. I would be interested in sticking some bids in for drug stocks that are pulled down by programs.
The Net -- now here is the quandary. As long as Intel says demand stayed strong, I would think you would have to buy the Net if it got hammered. These stocks have a cycle of their own. That's why I was buying more
and AOL as I was leaving the office tonight.
Finally the Red Hots. Here is a group that seems leveraged only to themselves. It declined 3% today after three wild up days. I know these stocks have the best earnings momentum there is. That said, these stocks have very, very vicious corrections. I think these, however, might be the place to be. They are growing much faster than Intel and still have their quarters ahead of them.
That intrigues me. When the Red Hots drop another 3% to 4% tomorrow, I am stepping in and buying more of my faves. They should turn first. That's where I will be looking the hardest for opportunity.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Procter & Gamble, Colgate, Intel, Yahoo!, AOL, Juniper, Redback, VeriSign and Conexant. 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: Intel Slides After Hours on Earnings Miss; Motorola Cites Iridium for Lackluster Results
10/12/99 9:00 PM ET
third-quarter results made for unhappy investors, after the chipmaker missed analyst consensus estimates. The company posted third-quarter earnings of 55 cents a share, greatly below the 23-analyst
First Call/Thomson Financial
estimate of 57 cents and the year-ago 45 cents a share. "Average selling prices were down from the second quarter and a little lower than we expected," said Intel CFO Andy Bryant in an interview with
reported on the disappointing results in a
story this evening. Intel's shares were slapped around in after-hours trading (see below).
In other Intel news, a federal court has rejected a patent lawsuit by
against Intel, which alleged Intel behaved in a coercive and illegal manner when it refused to supply the company with information Intergraph needed to create its own products. Intel argued that its intellectual property rights permitted its behavior.
didn't surprise investors with its third-quarter results. The company posted third-quarter earnings of 53 cents a share, in line with the 27-analyst estimate and up from the year-ago 7 cents a share. According to
, Motorola pointed the finger at
financial woes and soft activity from Iridium gateway operators for a slowdown in its third-quarter satellite sales. For the quarter, the company assumed a $994 million charge to cover its exposure to Iridium.
Intel took a late-night beating. In after-hours trading on both
, the company took heavy losses and led trading on news that its third-quarter earnings didn't measure up to analyst predictions.
On Island, Intel traded on 384,036 shares, easily besting the next nine most-actives
. On MarketXT, which recently began opening at 4:30 p.m. EDT, the company traded on 11,050 shares, the first time a stock has traded that heavily on the system in months, possibly ever. Intel may have attracted investors, but it wasn't popular.
Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 8 a.m. to 8 p.m. EDT. Prior to Sept. 15 Island offered trading from 8 a.m. to 5:15 p.m. EDT
MarketXT, formerly Eclipse Trading, offers after-hours trading to retail clients of Morgan Stanley Dean Witter's (MWD) Discover Brokerage and Mellon Bank's (MEL) Dreyfus Brokerage Services. Clients can trade 200 of the most actively traded New York Stock Exchange and Nasdaq Stock Market issues, 4:30 p.m. to 8 p.m. EDT Monday through Thursday. Prior to Oct. 11, MarketXT traded issues from 6 p.m. to 8 p.m.
updates the most active issues on both MarketXT and Island ECN in Got a Minute? and in the Evening Update.
In other postclose news (earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified):
Mergers, acquisitions and joint ventures
said that its suitor
, which said it would acquire Viasoft for $9 a share, has held out a tender offer until Oct. 29, while it awaits regulatory approval.
Earnings/revenue reports and previews
Bob Evans Farms
warned investors that it would post second-quarter earnings of 36 cents to 39 cents a share, falling below the five-analyst estimate of 42 cents. The company blamed the anticipated weak results on softer sales and increased costs.
posted third-quarter funds from operating income of 59 cents a share, in line with the 13-analyst estimate and up from the year-ago 52 cents a share.
reported first-quarter earnings of 17 cents a share, beating both the 10-analyst estimate of 14 cents and the year-ago 9 cents.
reported third-quarter earnings of 6 cents a share, above the three-analyst estimate of 3 cents and the year-ago 1-cent profit.
reported first-quarter earnings of 36 cents a share, beating the 20-analyst estimate by a penny and up from the year-ago 28-cent profit.
reported first-quarter earnings of 7 cents a share, above the 12-analyst estimate of a 7-cent loss but down from the year-ago 19-cent profit.
Tricon Global Resturants
posted third-quarter earnings of 70 cents a share, greatly missing the 11-analyst estimate of 99 cents but above the year-ago 58 cents a share.
posted third-quarter earnings of $1.40 a share, beating the nine-analyst estimate of $1.34 and the year-ago $1.02. The company's Chairman and CEO David Whitwam said in an interview with
, that he is comfortable with the fourth-quarter nine-analyst estimate of $1.38 and said that he expects momentum to remain strong into 2000.
Offerings and stock actions
set a 2-for-1 stock split and upped its authorized common shares to 120 million from 20 million.
refiled its IPO documents with the
Securities and Exchange Commission
, days after
broke the news that Webvan had disclosed information in its roadshow that wasn't in its S-1 registration statement. Lashinsky followed up on the story
A spokesman for the
International Monetary Fund
said it is concerned about the coup in Pakistan and said it is monitoring how the upheaval effects loans and economics plans. William Murray said the IMF plans to evaluate how the coup effects Pakistan's 1997 IMF $1.5 billion loan. Repayment of the loan has been postponed due economic circumstances and disagreement over the role independent power producers.
Bond Focus: Bonds Pare Losses as Stocks Reel
10/12/99 5:00 PM ET
Treasuries pared their losses as the stock market tanked and an apparent military coup toppled the government of Pakistan, but yields still rose on the day, tracking commodity prices higher.
There were no market-moving economic releases, and the benchmark 30-year Treasury bond ended a low-volume session 15/32 lower at 98 18/32, lifting its yield 3 basis points to 6.23%. Earlier it traded down as much as 23/32.
Bond traders have little to do this week but await the release on Friday of the September
Producer Price Index
, the leading measure of inflation at the wholesale level. A stronger-than-expected reading on the core PPI in particular, which excludes volatile food and energy prices, will be marked Exhibit B in the case for another interest-rate hike by the
at its next meeting on Nov. 16. (Exhibit A was the
average hourly earnings
component of the September
, released Friday. It rose 0.5%, two tenths more than expected.)
The PPI is expected to rise strongly due to an 18-cent-a-pack cigarette price hike that took effect last month. The question,
senior money market economist John Youngdahl said, is whether September wholesale price increases are largely confined to tobacco, "or are other numbers going to make the report sticky?"
Henry Willmore, senior economist at
, predicted that tobacco will account for 0.3 percentage points of the overall PPI's September increase, and 0.4 percentage points of the core's increase. "You have to just take that out," he said. "We'll be looking to see if there are some significant price increases outside of tobacco in the core numbers."
In the meantime, bond traders are fretting over whether the long Treasury and the more actively traded 10-year note will make new lows for the year. The long bond's highest close in yield terms was 6.26% on Aug. 12, while the 10-year note's was 6.16% on Aug. 10.
"In the big picture," Youngdahl said, "the price action of the last several days suggests eroding confidence that the yield levels that have served as a ceiling up till this point will stay a ceiling for very much longer." That depends, he said, "on whether we get any negative surprises in the statistics coming up, specifically those on inflation and wages."
The fact that average hourly earnings rose sharply in the September jobs report was one such negative surprise.
On the other hand, Barbara Kenworthy, portfolio manager at
in Newark, notes that "even though the market is having problems moving higher, it's having problems moving lower too."
Bond investors are clearly more disposed to sell than to buy, she said. "Everybody we talk to wants to sell a bounce. Nobody wants to buy a bottom." The buyers are waiting for a clear indication that the Fed won't hike rates again this year, and that the economy is slowing. "But till we get some data we can sink our teeth into," Kenworthy said, "the market is likely to trade in a range."
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
Ben Holmes will chat on Yahoo! Thursday, Oct. 14, at 5 p.m. EDT. He will discuss the "ins and outs" of IPOs and help you decide if you should try to get in or safely stay out.
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