daily10-24-99 - TheStreet


Publish date:

TheStreet.com's DAILY BULLETIN

October 25, 1999


Market Data as of Close, 10/22/99:

o Dow Jones Industrial Average: 10,470.25 up 172.56, 1.68%

o Nasdaq Composite Index: 2,816.52 up 14.57, 0.52%

o S&P 500: 1,301.65 up 18.04, 1.41%

o TSC Internet: 716.11 down 2.85, -0.40%

o Russell 2000: 418.69 up 4.42, 1.07%

o 30-Year Treasury: 97 00/32 up 2/32, yield 6.350%

In Today's Bulletin:

o Editor's Letter: The Coming Week on TSC
o Market Update: Weekend Report: Columbia Energy Again Snubs NiSource
o The Coming Week: The Coming Week: Ignoring the Market's Demon Heart
o Europe: The Coming Week in Europe: Telecom Companies Jockey for Position

Also on TheStreet.com:

Wrong! Rear Echelon Revelations: State of the Web: Cerent Gains Stature in the Shade of the Sycamore IPO

Where Cisco's purchase of Cerent at first seemed ill-advised, it now appears to have been inspired.


Jim Griffin: Guessing What the Other Beauty Contest Judges Are Thinking

The common wisdom of late 1999 is different from that of 1998 ... and the future. But through osmosis, it is now on the way there.


Behind the Screen: Small Companies Top Japanese Prime Minister's Fall Agenda

After focusing for months on corporate restructuring, Obuchi is finally turning his attention to smaller and more entrepreneurial companies.


Europe: The Anglo File: Consumer Watchdog Carjacks London Motor Show

Protesting artificially high prices in the U.K., the group is pushing auto buyers to take their money elsewhere.


Editor's Letter: The Coming Week on



Dave Kansas


10/24/99 6:29 PM ET

By now many of you have had a chance to look at our recently modified home-page design. We know this will spark a lot of chatter, but we won't let that distract us from digging up what matters most: quality news and information.

The markets, for starters, have been on a wild tear these past few weeks -- up and down, with October-laced fears haunting every gyration. We're intent on tracking these movements with acute precision, because we know that this time of year requires that kind of attention. The

Briefing Room

and the


team is hustling to make sure that no nuance is lost as we scramble toward November.

Away from the hurly-burly of the market, we've also been working on developing more analytical features, stories aimed at giving you more investment information and perspective. Last week, for instance, our

Cracking the Books series illustrated some of the vagaries of modern-era accounting. Not only useful on a company-specific basis, the series also helps those seeking education in this very important facet of investing.

This week we take you in deep to have a hard look at



. We focus on its revenue potential, advertising strength, corporate culture and future beyond the desktop. We've got exclusive interviews with CEO

Tim Koogle

and other top executives. The series of stories will offer insight into why Yahoo! has achieved so much, and what it will need to do in order to keep on gaining.

So with November a scant week away, we'll be with you every step of the way, with everything from markets coverage to more in-depth analysis. And, of course, our new look. Have a gander and, as ever, let me know if there's a problem that we can help with. For basic stuff, send a note to

members@thestreet.com, and our excellent customer service group will take care of you. If it's something more mysterious, you can try me at

dkansas@thestreet.com and I'll do my best to get your issue addressed. Meantime, buckle in and get ready for another exciting week on



L'Etoile du Nord

Dave Kansas


Market Update: Weekend Report: Columbia Energy Again Snubs NiSource


David Rheingold

Special to TheStreet.com

10/24/99 8:11 PM ET

'Twas a weekend of repeats.

For the second time this year,

Columbia Energy Group

(CG) - Get Report

rejected a takeover bid from utility


(NI) - Get Report

as inadequate.




list of the top 10 Web sites for a third straight year. And, as this goes to print, we hope the

New York Yankees

are on their way to a 10th consecutive

World Series

win. (If not, we're sure they'll capture the series for a second year in a row.)

When turning down the $6.1 billion offer from NiSource, Columbia also cited regulatory hurdles to the proposed buyout. But don't rule out a merger yet -- the company says it will explore its alternatives.


Nasdaq Stock Market

late Friday

announced it will expand its trade-reporting hours to 6:30 p.m. EDT from 5:15 p.m., starting tomorrow. This isn't an official expansion of Nasdaq's own hours of operation, but it means investors will have a better sense of the prices available on electronic trading networks after regular market hours.

Cruise the information superhighway while you cruise the highway.

General Motors

(GM) - Get Report

plans to offer Internet access in its cars -- hands-free, of course -- within a year, the

Detroit News

reported Sunday. The key is voice technology, which would let the driver verbally surf the Web.

Deutsche Telekom

(DT) - Get Report

, which is eyeing potential acquisitions in the U.S., may have found a target:

RSL Communications


. German magazine

Der Spiegel

said in an article released Saturday that DT's chief exec, Ron Sommer, was interested in the telecommunications company.

Equator Technologies

is $27 million richer, following its third round of investor hunting. The privately held Campbell, Calif., company, which makes media processors, secured major funding from

Nomura International


Sojecci Ltee

. Domestic partners include

General Instrument



Liberty Media

, which is owned by


(T) - Get Report



went on strike Sunday at the nation's sixth-largest trucking company,

Overnite Transportation

, a Richmond, Va.-based subsidiary of

Union Pacific

(UNP) - Get Report

. The union's complaints include harassment, intimidation and an unlawful discharge,



You no doubt already know the Yankees trounced the

Atlanta Braves

4-1 in the opening game of the World Series. The game kept a lot of people away from the cinema box office, but most of those who did go caught the new

Taye Diggs


The Best Man

, which debuted in first place with $9.1 million.

In the Papers

Speaking of rankings...


released its annual ranking of the top 10 best Web sites for investors.


(MSFT) - Get Report


once again led the pack, with



Personal Finance Channel

making its debut at No. 2. It was followed by


(INTU) - Get Report






was listed eighth, and along with



CBS MarketWatch


Yahoo! Finance

, drew a score of 23 and a ranking of three and a half stars.

Elsewhere in


, analysts predict that



could see its stock rise if the furniture-maker's new sales tactics work. The company is bypassing online sales for now and shifting from furniture showrooms to its own retail outlets and to upscale specialty retailers.

The Sunday

New York Times

features an article examining the influence of Mexico's energy minister, Luis K. Tellez, on the global oil market. The article credits Tellez as the driving force behind oil exporters' solidarity as oil prices surge.

Meanwhile, London's Arabic-language newspaper


reported Sunday that


President Abdullah al-Attiyah did not expect the cartel to raise its production levels at its next meeting in March.

David Rheingold is a New York-based freelance writer. At the time of publication he had no positions in any securities mentioned, though positions can change at any time.

The Coming Week: The Coming Week: Ignoring the Market's Demon Heart


Justin Lahart

Senior Writer

10/22/99 8:02 PM ET

There was a raucousness on Wall Street going into the weekend, a feeling that the week's solid rally -- backed by a steady gain in breadth -- had sunk a stake into October's demon heart. And while there was some worry that the demon might be a bit like Jason in

Friday the 13th

-- you know, like, dead, but not


dead -- most were comfortable with getting up, giving the monster a poke with a stick and blithely turning their backs.

Coming Week: Join the discussion on


Message Boards.

"I think we're heading immediately for a retest of the October high," said Peter Canelo, the

Morgan Stanley Dean Witter

investment strategist who has been so accurate in calling the markets ups and downs this year. "Break that, and you have to think we're going to attempt to go back to the highs."

Whether the market reaches toward its highs of the year or peters out -- shifting back into that up-and-down pattern that's gotten so familiar -- will greatly depend on investors getting a little clarity on some of the issues that have been bugging them lately.

The big worry remains the


. "I think they'll raise rates," said Canelo, who thinks the market's discounted a 25 basis-point hike. "But there's some concern that they'll go twice

or that they'll hike by 50 basis points. Or that they won't go at all. Figure that out."

All right, we're game.

The problem with a Fed that ends up hiking by 50 bps is that that's at least twice as much as the market expects right now. Bonds get knocked down another peg, that nice bottom that formed in financial stocks gets taken out.

Et cetera.

The problem with a Fed that doesn't move at all -- for some people at least -- is that that's a Fed that may end up way behind the curve on inflation. It's the kind of thing Steve Roach, the chief economist at Canelo's firm, worries a lot about. If the Fed has to play catch-up with inflation, it has to tighten a lot more than if it had it acted preemptively. And if that happens, the economy could decelerate too quickly -- sending the U.S. into its first recession in nine years.

The inflation worry isn't idle.

Merrill Lynch

chief quantitative strategist Rich Bernstein's

Inflation Composite Index

is an equal-weighted average of year-to-year change in eight common inflation barometers (the

Consumer Price Index

, gold, average hourly earnings, etc.) It troughed in August of last year and last month it turned positive for the first time since 1996.

The index can be used as a measure of where inflation is headed, but maybe more importantly it is a good measure of inflation


. Most investors look at least a couple of the index components when they try to get a read on whether things are heating up. The index's turn positive suggests that more investors might begin worrying about a behind-the-curve Fed.

For Bernstein, the important thing about the inflation index going positive is that it suggests companies will have better pricing power. Better pricing power tends to benefit the stock of companies that are tied to the earnings cycle -- rather than growth companies, whose big draw is that they grow steadily through the entire cycle. The Nifty Fifty is out, in Bernstein's book, and value stocks are in. With a rebound in global growth, Bernstein reckons that the best place to look for returns is cyclical stocks with heavy overseas exposure.

Besides a little clarity on the Fed, Morgan Stanley's Canelo thinks that investors will need to get a better sense of what's going on with Y2K.


(IBM) - Get Report

disappointing earnings -- blamed in part on slower purchases ahead of the millennium change, has stirred worries that other techs may suffer. It's gotten a little confusing --


(MSFT) - Get Report



(ORCL) - Get Report

say they haven't seen a Y2K slowing; IBM and



say they have. Canelo says that as more results get released next week -- and more companies testify on what sort of Y2K impact they're seeing -- the issue will see some sort of resolution.

Interestingly, Y2K issues may play a part in the big economic reports getting released in the coming week, according to Jim Glassman, U.S. economist at

Chase Securities

. The big reports will be third-quarter

gross domestic product

and the third-quarter

Employement Cost Index

, both out on Thursday. Both reports are expected to come in strong.

"People are going to be nervous about these numbers, but I don't think it's going to be as much of a clear-cut case for tightening as you might otherwise," he said. He believes that a lot of the strength in the third quarter has come from inventory building by companies who worry that Y2K glitches could make their just-in-time operations anything-but.

Said Glassman: "The market is betting that the Fed is going in November. I personally think that they're uncertain about how much of the strength in the economy is being driven by stock-piling."

Europe: The Coming Week in Europe: Telecom Companies Jockey for Position


Marc Young

German Correspondent

10/23/99 12:30 AM ET

BERLIN -- The European telecommunications sector has become much like a well-financed game of musical chairs, with many of the industry's players racing to make the next big deal before the melody stops.

The problem these days is instead of finding an empty chair, some companies end up sitting on somebody else's lap once it's gone quiet. Such is the case of the U.K.'s

Vodafone Airtouch

(VOD) - Get Report

, which is reportedly preparing a $67-billion bid for



, in response to that German firm's bid last week for British wireless operator




Other big kids such as

Deutsche Telekom

(DT) - Get Report

appear to have decided they can't hang with the hustle and bustle in Western Europe and have started to look for new friends to play with elsewhere. Coming only weeks after buying into

Telecom Croatia

, Deutsche Telekom said Friday it would buy Colorado-based



wireless holdings in Poland, Hungary and Russia for $2 billion.

Such deals won't make DT the global player it so desperately wants to be, but all of the telecom action likely means even if investors have had their fill of sky-high valuations, the sector will still hold much allure in the coming week. The bold continue to bet further growth prospects will offset the nosebleed share price levels and -- considering the growing number of Europeans who appear to be mumbling insanely to themselves but are actually speaking into mobile phone mikes -- such investors may not be so crazy.

Away from the equity markets, the continent's economists will be waiting for the September report on eurozone M3 money supply growth due to be released sometime next week.

European Central Bank

officials have been paying particular attention to M3 figures, which track the broadest measure of money, in their public statements recently. ECB watchers fear that if the September report is particularly strong, monetary authorities will be more inclined to hike interest rates the next time they meet Nov. 4.

The surging money supply could provide a "possible peg for the ECB to justify a less accommodative (monetary) policy," says Nigel Anderson, an economist for

Greenwich NatWest

in London. "Private credit growth is (also) still uncomfortably high and there's no slowdown evident."

Comments from ECB Vice President Christian Noyer will be the first to be scrutinized for rate-hike clues next week when he speaks at a conference in Luxembourg on Monday. But his boss, ECB President Wim Duisenberg, will recapture the attention of those fixated on interest-rate worries on Tuesday as he presents the central bank's annual report to the

European Parliament


No word on what mobile phone network he prefers.

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