TheStreet.com's DAILY BULLETIN
December 30, 1999
Market Data as of Close, 12/29/99:
o Dow Jones Industrial Average: 11,484.66 up 7.95, 0.07%
o Nasdaq Composite Index: 4,041.46 up 69.35, 1.75%
o S&P 500: 1,463.46 up 5.80, 0.40%
o TSC Internet: 1,162.22 up 40.25, 3.59%
o Russell 2000: 497.01 up 8.53, 1.75%
o 30-Year Treasury: 95 26/32 up 12/32, yield 6.440%
Companies in Today's Bulletin:
Charles Schwab (SCH:NYSE)
Commerce One (CMRC:Nasdaq)
In Today's Bulletin:
o Online Brokers: Online Brokers Glide Onto the Dance Floor
o Wrong! Dispatches from the Front: Closing-Price Whiplash
o Evening Update: CompUSA Reports Disappointing Sales; Young & Rubicam to Join S&P 500
o Bond Focus: Bonds Up for a Change as Year Runs Off
Fox News Channel
"THESTREET.COM" MILLENNIUM EDITION:
Jan. 1 at 6 p.m. ET and Jan. 2 at 11 a.m. ET
A special edition of "TheStreet.com" looks at investing in the new millennium. Special guests include
, CIO of the
Jacob Internet Fund
, author of
The 100 Best Stocks to Own in America
Also on TheStreet.com:
Internet: As Commerce One Cools Off, Some Grumble About Target Price Mania
Net newcomer David Garrity's call is the talk of Wall Street.
Brokerages/Wall Street: Nasdaq 4000: Piecyk Qualcomm Call Puts Analyst on High-Wireless Act
But his Qualcomm price target also renews some observers' questions about how the game is played.
Mutual Funds: Financial Planners Face Great Expectations
Clients count on seeing their returns soar along with the Nasdaq.
Telecom: Nasdaq 4000: Qualcomm Soars Even as 'Aggressive' Price-Target Math Turns Heads
Echoes of Henry Blodget ring throughout the land.
Online Brokers: Online Brokers Glide Onto the Dance Floor
12/29/99 8:54 PM ET
Wallflowers no more.
Online brokerage stocks, which sat out most of the
recent rally, stopped hugging the sidelines Wednesday after industry giant
estimated that fourth-quarter earnings would soar beyond analysts' wildest dreams.
With Schwab back on investors' minds -- the stock gained 7 11/16, or 22%, to 42 -- the other online brokerages suddenly found their dance cards full as well.
, as well as laggards like
National Discount Brokers
, moved by double digits.
The reason, according to some money managers, is that these brokerages have been largely oversold during the past month as names such as
attracted investors who had been so active in driving these tech-oriented brokerage stocks earlier this year.
"Money has been diverted from the
stocks and the financials. The whole area has been ignored for the last two months. We've seen the online brokers -- which truly are going to have one of the best quarters they are going to have -- be oversold," says
Titan Financial Services'
portfolio manager Gilbert Giordano. (Giordano is long all the online brokerage stocks mentioned.)
But now that Schwab and the other online brokers are back in the mix, can it last? John Dale, portfolio manager for
Peregrine Capital Markets'
growth equity funds, says he's seen this type of reversal 20 times before. For all anyone knows, today's rally might just have the staying power of
Britney Spears' rare genius.
But with a slew of online brokerage and brokerage earnings due out in only a few weeks, that could be a driving force for a sustained rally. Scott Appleby, an analyst at
, a unit of
, says it will last. "I think it's more than sustainable. These stocks have been vast underperformers and today is a proxy for what's going to happen," Appleby says. That's because at companies such as Ameritrade and E*Trade where revenue is even more commission-based, the banner quarter will affect the bottom line even more. (Robbie Stephens has done underwriting for E*Trade in the last three years, but not for Ameritrade or Schwab.)
analyst Greg Smith wrote in a research note today, even if trading drops off next month, there will be new money coming into the market that can only build on Schwab's asset base of more than $700 billion. The firm hasn't done any underwriting for Schwab but has a research distribution agreement.
Schwab's news surprised investors who were expecting a quiet pre-year 2000 sort of trading day. The firm, a spokesman says, was less interested in an ambush than it was in satisfying its disclosure obligations, an issue that has become a crusade for the
Securities and Exchange Commission
Schwab said Wednesday that it expects fourth-quarter earnings to come in at 19 cents to 20 cents per share compared with 12 cents per share in the year-ago quarter. Analysts polled by First Call/Thomson Financial predicted earnings of 17 cents per share. Trading activity -- which translates to more commission revenue -- was higher in December than even November, rising to 236,000 a day.
That would have been hard to believe before Wednesday's lovefest. Schwab's stock was down 11% in December after having hit a 52-week high of 75 1/4 on April 13. And it's not the only online brokerage stock that has suffered; Ameritrade is off 60% from its high of 57 3/4 that same day.
It's not that there hasn't been the kind of good news that has spurred these stocks to new highs during the past year. Nasdaq volumes have been at record levels, and
, a Nasdaq market maker and benchmark for online brokerages, has been racing ahead.
Still, the online brokerage stocks hung back. And there hasn't been any of the seemingly bad news that has punished the online brokers in the past, as the declines in trading volumes did during July and August. The only possible explanation are concerns that newcomers to the online business -- namely traditional brokerage
-- will gain market share.
It's an old story for Schwab, says Dale, who's owned the stock for more than 10 years. "We've seen momentum investors going from dumping on them to paying attention to them again."
Wrong! Dispatches from the Front: Closing-Price Whiplash
James J. Cramer
12/29/99 5:03 PM ET
What got into
in those last few minutes? Bank error in all of our favor? Gift from the Finnish gods of profit? Someone seeking to be up 500% in one year? More name-your-own-closing-price?
This year, which has seen the sanctity of just about everything else in this business go up in a bullish cloud of smoke, also took apart the holiness of the closing price. Nobody was ever supposed to manipulate that. Sure, it happened. A point or two got tacked on by some manager trying to make up some performance. A crime, but not one easily prosecuted.
Join the discussion on
Now closing prices get thrown around like buses in a Godzilla movie. It is crazy. They don't mean jack. Nokia went up 10 points in the time it takes to go from downtown to midtown, without a gridlock alert.
I saw it happen in a whole bunch of stocks I own. The only people it hurts, of course, are the short-sellers, and they have no standing, so I guess nothing will ever happen to the kind souls (law enforcement authorities, read "outlaws").
But it has put a whole new element of phoniness into the equation. Is nothing in this market going to be the same after 1999 as before?
You know where I stand.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Nokia. 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: CompUSA Reports Disappointing Sales; Young & Rubicam to Join S&P 500
12/29/99 8:13 PM ET
said second-quarter net sales fell 21% to $1.38 billion from $1.75 billion, while same-store sales fell 1.8% from a year ago. The company said a less promotional approach to selling computers hurt sales for the quarter ended Dec. 25, though profit margins set a new high of 16% as the company broadened its product assortment beyond personal computers. CompUSA said it plans to announce second-quarter operating results Feb. 2.
Standard & Poor's
said it will add
Young & Rubicam
after the close of trading next Wednesday. S&P said the advertising agency will take the place of
, which is being acquired by
T J International
S&P SmallCap 600
is buying T J in a transaction expected to close next Wednesday.
Nasdaq 4000. Try
Super Q continued its heroic flight, tacking on huge gains in after-hours trading to the mammoth day-session gain of 156, or 31%, to 659. Today,
analyst Walter Piecyk initiated coverage of Qualcomm and set a 12-month price target of 1,000 on the stock. The analyst also started coverage with a buy rating. Qualcomm closed amid huge strength, hitting a 52-week high of 662 1/16 just before the bell tolled.
lowdown on Qualcomm options and a revealing
look at Piecyk's call.
In other postclose news (
earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified
Earnings/revenue reports and previews
warned it sees 1999 earnings-per-share falling 8 cents to 11 cents below year-ago earnings of 36 cents. The current two-analyst estimate for 1999 calls for earnings of 38 cents a share. The company said
Olsten Health Services
, the distributor of its drug Oxandrin, bought less of the drug than expected.
posted a fourth-quarter loss of $1.61 a share including charges, wider than the year-ago loss of 37 cents, also on charges. The two-analyst expectation was for a loss of 24 cents. No per-share figures from operating income were released.
National Equipment Services
said it sees fourth-quarter earnings 15% to 25% below year-ago earnings of 20 cents a share, citing weakness in the Gulf Coast market. The five-analyst estimate calls for earnings of 25 cents. The company said it still expects to report record sales and net income for 1999 and also said it approved a 1.5-million share increase to its previously announced repurchase plan.
said it restated its third quarter and 1999 results to include a $1.5 million charge from the redemption of preferred stock . Diluted earnings-per-share for the quarter fell to 18 cents from 28 cents, while earnings for the year fell to 65 cents from 75 cents.
said it expects its fourth-quarter loss to be lower than expected due to smaller telecommunication and operating costs. The three-analyst estimate calls for a loss of 34 cents.
Offerings and stock actions
said it was reactivating its previously approved 3-million share stock buyback plan which was suspended during a merger with
unit said it filed a registration statement with the
Securities and Exchange Commission
for a proposed public stock offering. The company said
Credit Suisse First Boston
Donaldson Lufkin & Jenrette
will manage the offering.
Fruit of the Loom
filed for Chapter 11 bankruptcy protection. The company, which makes BVD, Fruit of the Loom and Gitano, has struggled with manufacturing and inventory problems. In the first half of the year, sales and profits were hurt by shipping difficulties.
said it plans to cut 32 jobs as part of a restructuring. ISB said the restructuring will result in a fourth-quarter pretax charge of $1.3 million which will cut earnings-per-share by 14 cents. The company also said a provisional expense would cut fourth-quarter EPS by an additional 17 cents, bringing the net effect on shares to a total of about 28 cents.
West Coast Bancorp
said it named Robert Sznewajs as president and CEO. Sznewajs was previously vice chairman of
Bond Focus: Bonds Up for a Change as Year Runs Off
12/29/99 5:10 PM ET
Treasury prices rose today for the first time in a week, but on very light volume outside the two-year note sector, and for no apparent reason apart from increased appetite for safety and liquidity with the approach of year-end.
The benchmark 30-year Treasury bond finished the day up 12/32 at 95 25/32, trimming its yield 3 basis points to 6.445%. Shorter-maturity note yields were unchanged to 3 basis points lower on the day.
The market: Join the discussion on
No major economic indicators were released, but the
leading economic indicators index rose 0.3%, a tenth more than expected, and its largest gain since July. The index of indicators that predict economic activity six to nine months in the future rose, thanks mainly to increases in stock prices, consumer goods orders and the
The larger-than-expected rise is negative for a market that wants growth to slow of its own accord in order to keep the
Fed from hiking the
fed funds rate.
"You really have to stretch to find a rationale
for bond-market price action at year-end, when the markets are very thin," said Jim Glassman, U.S. economist at
. Obliging, he continued: "For a while, everyone thought there would be a rush to liquidity and safety at the end of the year. When that didn't happen, rates started to rise. Now maybe we're seeing a little bit of last-minute 'Let's get to home base!'"
"It was a technically traded day within narrow ranges," added John Canavan, Treasury market analyst at
Stone & McCarthy Research Associates
in Princeton. "There was a bit of short-covering, a bit of bottom-fishing, but the market was so thin outside of the two-year note that it was meaningless." The two-year note, Canavan said, "has seen moderate to light activity all week long, but that's impressive compared to the rest of the
Treasury curve, which has seen absolutely nothing."
The only real fireworks in the Treasury market today happened in the bill sector, where the three-month bill's yield shed a whopping 17 basis points as the Fed continued to flood the banking system with reserves in order to meet the extraordinary demand for liquidity created by the Y2K date change.
With the Fed's latest
repurchase agreement, in which securities are purchased from dealers with an agreement to sell them back after a certain number of days, the actual fed funds rate (as opposed to the target rate) dropped to 3.5%. As the benchmark funding rate dropped, so did the three-month bill yield, from 5.38% to 5.21%.
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