TheStreet.com's DAILY BULLETIN
October 27, 1999
Market Data as of Close, 10/26/99:
o Dow Jones Industrial Average: 10,302.13 down 47.80, -0.46%
o Nasdaq Composite Index: 2,811.47 down 4.48, -0.16%
o S&P 500: 1,281.91 down 11.72, -0.91%
o TSC Internet: 723.15 down 8.79, -1.20%
o Russell 2000: 415.79 down 1.97, -0.47%
o 30-Year Treasury: 96 19/32 down 13/32, yield 6.371%
Companies in Today's Bulletin:
Telefonos de Mexico (TMX:NYSE ADR)
Sunrise Technologies (SNRS:Nasdaq)
In Today's Bulletin:
o Banking: Citigroup Goes for Gold Standard With Rubin Hire
o Wrong! Dispatches from the Front: Standing By the Drug Stocks
o Evening Update: eBay Plummets After Hours; GTE Sells Oklahoma Properties
o Bond Focus: Treasuries Fall Again -- This Time Fed Speakers Are to Blame
Also on TheStreet.com:
Market Features: New Dow Faces Old Problem: Wall Street Could Care Less About It
The addition of four new companies to the venerable Dow will get some attention, but the blue-chips most likely won't supplant the S&P 500 as the Street's performance benchmark.
Latin America: Mex Telecoms Set to Boom, and Several Upstarts Look to Challenge Telmex's Dominance
Challengers, backed by some heavy-hitting partners, still face a web of political and economic barriers.
Telecom: Lucent's Strong Fourth-Quarter Results Point Toward Healthier Balance Sheet
But even the chairman says the company has a ways to go.
Biotech/Pharmaceuticals: Suddenly, Sunrise Appears Glorious Again -- to the Longs and the Shorts
Investors on both sides of the fence rejoice as the stock rallies. But is the news of the company's meetings with the FDA really so good?
Banking: Citigroup Goes for Gold Standard With Rubin Hire
10/26/99 8:10 PM ET
, a former Wall Street star and a much-feted
secretary, to its highest echelons,
pulled off the brashest corporate appointment the financial industry has seen in years.
But while generally enthusiastic about Rubin's arrival, observers are struggling to understand exactly what the 61-year-old's role will be at the financial-services giant.
Citigroup Tuesday named Rubin chairman of its executive committee and appointed him to work alongside co-chairmen Sandy Weill and John Reed in a new three-person office of the chairmen.
Rubin, however, won't have control over, or responsibility for, a single business. During a press conference Tuesday, Rubin, Weill and Reed declined to specify on what areas in the firm Rubin would concentrate.
All of this raises the question: Will he act more like a constitutional monarch, sporting a lofty title but little in the way of real power? That arrangement could easily end up complicating the sometimes difficult relations between Weill and Reed, who serve as co-chief executives, observers say.
Or will he turn out to be the ace strategist, who will play an invaluable role in efforts to make Citi a pre-eminent financial-services supermarket? That, of course, is Rubin's intention. "I wanted to be part of an institution that I felt proud of. ... John and Sandy have extraordinary vision," Rubin said Tuesday.
Most observers agree that Rubin, who resigned from the Treasury in July, will be an extremely valuable representative for Citi, using his strong reputation, high-level contacts and agreeable manner to attract new business.
"He clearly gives the company insights into international strategy and economic events as well as a bunch of fresh connections," says Mike Mayo, banking analyst at
Credit Suisse First Boston
, which hasn't done any recent investment banking work for Citi.
"But this could be mitigated by having too many cooks in the kitchen," adds Mayo, who has been advising clients to sell Citigroup shares. "And if times become difficult, it's a question of who will be accountable."
In extremely heavy volume, Citi traded up 11/16, or 1.4%, Tuesday to close at 48 1/2, which is 3 bucks shy of its 52-week high.
It's important not to underestimate how important a name like Rubin's could be in gaining new business. "Rubin is a strong relationship builder," says Joan Solotar, an analyst at
Donaldson Lufkin & Jenrette
. (DLJ doesn't have an underwriting relationship with Citi and has a buy rating on the stock.)
Rubin probably will be able to help Citigroup, and especially its investment bank
Salomon Smith Barney
, become the powerful global investment bank it had originally envisioned at the time of the 1998 merger between
, Solotar explains.
Despite a strong trading presence overseas, Salomon's other businesses generally don't rank highly in Europe and Japan, she adds. For example, Salomon ranked fourth in eurobond underwriting and seventh in euromarket equity underwriting in the third quarter, according to the firm.
In a report released Tuesday, Judah Kraushaar, banking analyst at
, says Rubin will smooth relations between Weill and Reed and could even help facilitate a transition from the dual-CEO arrangement, which unnerves many investors. Rubin, who had a successful 25-year career at
, stressed Tuesday that he has no desire for the CEO position. (Merrill has no underwriting relationship with Citigroup and rates its shares buy.)
When asked during the press conference what challenges face the financial-services industry, Rubin named a number of areas, which may give some indication of what he'll concentrate on at Citi. He mentioned risk management, e-commerce and the benefits and problems of establishing market-based economies around the world.
But outside of investment banking, ambassadorial tours and arbitrating between Weill and Reed, some wonder where else Rubin can contribute. "There wasn't a big hole in management. Weill and Reed are two of the best financial CEOs around," says Scott Edgar, manager on the
SIFE Trust fund, which holds shares of Citi. "Rubin's appointment doesn't seem to add what the company was lacking, and it doesn't solve the problem of who will succeed Reed or Weill."
Edgar would like to see Citi increase the size and geographical reach of its domestic retail banking business. "I don't know that he necessarily brings any retail experience with him," he adds.
Carolyn Koo and
Gregg Wirth contributed to this story.
Wrong! Dispatches from the Front: Standing By the Drug Stocks
James J. Cramer
10/26/99 3:06 PM ET
blockbuster drug gets killed on top of
blockbuster drug bust. Suddenly the drugs have pipeline problems, and the market is selling them all.
Cramer's Latest: Join the discussion on
I am not selling. I bought some of these last week, and I feel good that these are a great place to be between now and year-end. The "guilt by association" that is running through the drugs today seems wrong-headed to me. Elan is not
. SmithKline is not
I am simply sticking bids in below. I am not getting aggressive because the bond market, which correlates well with drugs, still is not giving you the signal that the drugs are safe to be in.
This is a tough tape. What has momentum one week quickly loses it the next. Last week the drugs and the banks had the momentum. Now both are losing it.
I am taking advantage of it with the drug stocks. I think the banks still have further to fall after the takeover run-up Friday. But those remain of solid interest to me at lower levels.
Bunch of readers complaining that I
wasn't nice to
. All I can say is that Rubin would have made the same judgment when he was running stocks at
. ... Another reader suggests that we do a poll on who is the most-hated
governor. Lot of competition for that title. ... Some people still giving me a hard time for saying I would look at
recommendation. Excuse me, but Bob is a superior performer in a business where I think, if you have been a serious performer, it matters. I like to buy things that good managers say are good. But good managers make mistakes, too, and I am willing to cut Olstein slack because he has beaten the market more years than most managers have been alive!
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Goldman Sachs and Merck. 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: eBay Plummets After Hours; GTE Sells Oklahoma Properties
10/26/99 9:39 PM ET
plummeted in postclose trading (see below) after posting third-quarter earnings, excluding certain noncash charges, of 2 cents a share. That beat the 19-analyst
First Call/Thomson Financial
estimate by a penny but missed Wall Street's so-called whisper numbers.
wrote about eBay's earnings in a
The market: Join the discussion on
posted third-quarter operating earnings of 7 cents a share, 2 cents ahead of the 31-analyst estimate and unchanged from the year-ago period.
wrote about Compaq's earnings in a
said it has forged an agreement to sell 27 of its telephone exchanges and 120,092 customer access lines in Oklahoma to
, following through with its plan to divest its phone line business. Although the terms were not disclosed, GTE said dba's latest purchase brought the total value of its GTE purchases to $1.7 billion, a figure that includes deals in New Mexico and Texas. GTE, which is selling the exchanges and lines to concentrate on its main telecommunications and data operations, expects the deals to be completed by mid-2000.
eBay was tonight's consensus most-active. It was No. 2 on
and No. 1 on
Outside of eBay's popularity,
extended today's gains with a little more after the bell, finishing up as Island's heaviest traded.
rounded out Island's top three. Together the trio easily dominated tonight's action.
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 to 8 p.m. Need more information on the ins and outs of after-hours trading? Click here to see how the rules change when the sun goes down.
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 it accepted
improved $14 a share, $511 million bid, snubbing
. Ace upped its offer to rival XL Capital's all-cash $14 a share bid after a Delaware court rejected an injunction that would prevent talks between Capital Re and XL.
A group headed by
inked a $644 million seven-year deal to develop a virtual government for the County of San Diego, said the company. Other members of the partnership include
Science Applications International
. The deal calls for the group to provide information and telecommunications services, which include applications, networks, data center operations, telephones and pagers.
announced its plans to acquire
, in a deal valued at $72 million. The transaction calls for a Tyco division to pay $5.50 for each outstanding share of Praegitzer, practically a 25% premium over today's closing price of 4 13/32. Separately, Praegitzer reported a first-quarter loss (see earnings/revenue reports and previews).
Earnings/revenue reports and previews
posted a third-quarter pro forma loss of 12 cents a share, wider than the three-analyst estimate of a 4-cent loss but narrower than the year-ago 16-cent pro forma loss.
posted third-quarter earnings of 21 cents a share, beating the eight-analyst estimate of 18 cents a share, and the year-ago 17 cents a share.
posted third-quarter earnings, excluding items, of 25 cents a share, two cents ahead of the 23-analyst estimate and up from the year-ago 21 cents.
reported third-quarter earnings of 11 cents a share, beating the four-analyst estimate of 10 cents and the year-ago 4 cents a share.
reported third-quarter earnings of 22 cents a share, well above the four-analyst estimate and up from a year-ago 17 cents.
posted second-quarter earnings of 1-cent a share, which included a pre-tax charge of depreciation and amortization of goodwill . The report was a penny below the three-analyst estimate of 2 cents and the year-ago 27 cents, which included a pre-tax charge for depreciation and amortization of goodwill.
posted third-quarter funds from operations of 84 cents a share, beating both the seven-analyst estimate of 82 cents and the year-ago 74 cents.
reported third-quarter earnings of 35 cents a share, beating the eight-analyst estimate of 31 cents and the year-ago 20 cents a share.
reported a third-quarter pro forma loss of 31 cents, narrower than the five-analyst estimate of 39 cents but wider than the year-ago pro forma 20-cent loss.
posted third-quarter earnings before items of 28 cents a share, 2 cents ahead of the 22-analyst estimate and up from the year-ago 21 cents, which excludes items.
wrote about Nortel's earnings in a
reported first-quarter earnings of 31 cents a share, ahead of the 17-analyst estimate of 28 cents and up from the year-ago 3 cents, before one-time gains.
reported third-quarter earnings of 26 cents a share, missing the four-analyst estimate by a penny but up from the year-ago 18 cents.
posted fourth-quarter earnings of 72 cents a share, a penny better than the 11-analyst estimate and up from a year-ago pro forma 53 cents.
reported third-quarter earnings of 23 cents a share, beating the five analyst estimate of 22 cents and up from a year-ago loss of $1.58 a share.
In other earnings news:
Offerings and stock actions
Credit Suisse First Boston
priced a 6.5 million-share IPO for
above its $15-to-$17 range at $18 a share.
said it set a 3-for-2 stock split, effective Nov. 29 for shareholders of record Nov. 8.
officials said its long-awaited Window 2000 operating system for corporate and network computers is set to hit the shelves Feb. 17.
Bond Focus: Treasuries Fall Again -- This Time Fed Speakers Are to Blame
David A. Gaffen
10/26/99 5:03 PM ET
Without any economic data to kick the bond market in the head, a couple of
presidents rose to the occasion instead. Analysts said none of the concerns voiced by any of the officials represented new, alarmist points of view, but the speeches were enough to knock down the gloomy bond market in the afternoon of a thinly traded session.
"These seem to be more generic speeches addressing specific topics such as productivity," said William Sullivan, money-market economist at
Morgan Stanley Dean Witter
. "I don't get the impression they're trying to
tell investors that they're moving interest rates."
Until these speeches hit the newswires, the bond market was conducting an air raid drill: hunker down, and wait and see what kind of bomb the
Employment Cost Index
drops on Thursday. Lately the 30-year Treasury bond was off 11/32 to 96 20/32. The yield rose 3 basis points to 6.38%.
"We're in this tight range until ECI, and until then we're not going much further," said Roseanne Briggen, market strategist at
The market: Join the discussion on
Sullivan blamed the selling on the endemic weakness that currently exists in the bond market. The market began to tail off in the early afternoon, before the Fed speeches took bond prices down by a few more ticks. Treasuries are in a defensive mode until the important third-quarter ECI figure, as well as the third-quarter GDP release. If the last few weeks of trading are any indication, the market may remain on edge until the Fed's next meeting, Nov. 16.
After today's speeches, the November fed funds futures contract listed on the
Chicago Board of Trade
was pricing in a 72.9% probability of a
rate hike, from 5.25% to 5.5%, at its next meeting on Nov. 16. Yesterday, the November contract was pricing in a 68.6% chance of a rate hike.
The most hawkish speaker was Richmond Fed President
, not a voting member of the
Federal Open Market Committee
this year. He reiterated the belief of many that the current pace of demand is "not sustainable," adding that an overheating in the economy is "a material risk in the outlook that needs to be taken seriously."
San Francisco Fed President
spoke in the state of Washington today, playing the on-the-one-hand, on-the-other-hand act. "We face the risk of building inflationary pressures," he said, but he added that a continuation of fast productivity growth could "mitigate" those pressures.
"Ideally, the Fed would tend toward the more preemptive end of the spectrum, because of the long lags between policy actions and their effects on the economy," added Parry, also not a voting member.
"We haven't gotten a definitive bias in this public commentary," Sullivan said. "It doesn't seem as if these Fed officials in unison are trying to steer the markets' thinking."
Tomorrow's only monthly economic release is September's
report. Economists polled by Reuters expect a 0.4% decrease in durables orders, following a 1.2% increase in August. The
will auction $15 billion of two-year notes in the afternoon.
Separately, economists are already gunning for a huge increase in October nonfarm payrolls when the
is released Nov. 5.
Salomon Smith Barney
today said it is estimating payrolls will increase by 525,000. Brian Jones, economist at Salomon Smith Barney, said seasonal adjustment factors and a payback for unexpected job losses due to Hurricane Floyd are the chief reasons for the bold estimate. Nonfarm payrolls fell 8,000 in September.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
Gary B. Smith will chat on AOL's MarketTalk, hosted by Sage, Wednesday, Oct. 27 at 4:30 p.m. EDT. (Keyword: AOL Live)
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