TheStreet.com's DAILY BULLETIN
December 31, 1999
Market Data as of Close, 12/30/99:
o Dow Jones Industrial Average: 11,452.86 down 31.80, -0.28%
o Nasdaq Composite Index: 4,036.87 down 4.59, -0.11%
o S&P 500: 1,464.47 up 1.01, 0.07%
o TSC Internet: 1,160.44 down 1.78, -0.15%
o Russell 2000: 496.59 down 0.42, -0.08%
o 30-Year Treasury: 96 04/32 up 10/32, yield 6.426%
Companies in Today's Bulletin:
Prison Realty Trust (PZN:NYSE)
In Today's Bulletin:
o Telecom: Retail Investors Have Their Day Amid Qualcomm Froth
o Wrong! Rear Echelon Revelations: Qualcomm Queasiness
o Evening Update: Halliburton Completes Sale of Venture Stake; Lockheed Gets Contract
o Bond Focus: Treasuries Pare Gains as Financing Rates Rebound
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"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 Ryan Jacob, CIO of the Jacob Internet Fund, Gene Walden, author of The 100 Best Stocks to Own in America, and Ken Schapiro from Condor Capital Management.
Also on TheStreet.com:
Building Blocks: The REIT Dubious Achievement Awards of 1999
Time for a reprise of the contest where the winners are the losers.
Retail: After Grueling Woes, CompUSA's Revival Efforts Fail to Spark Faith
The computer retailer is cutting costs and improving service, but still struggles to return to dominance.
Options Buzz: Qualcomm Volatility Has Options Traders Staying Away
One observer says recent stock action makes options volatility impossible to forecast.
Brokerages/Wall Street: Y2K: This New Year's Eve, Tech Types Won't Be Partying Like It's 1999
Y2K planning has thrown a wet blanket on Wall Street celebrations this year.
Telecom: Retail Investors Have Their Day Amid Qualcomm Froth
12/30/99 5:24 PM ET
There are a lot of things you could have bought at 9:30 this morning for $75,000.
Dodge Viper GTS
. A modest beach house in Ocean Grove, N.J. Or 100 shares of
Consider that investors who placed market-open orders today on the hottest stock of the market's hottest sector had to pay $73,600 for that privilege. After exploding in after-hours trading in the continuing fulfillment of
analyst Walt Piecyk's 1,000
price target, Qualcomm opened at 736, 77 1/16 higher than yesterday's close. It immediately traded up to an intraday high of 740 1/8 -- and then it hit the skids. Before 9:50 a.m., Qualcomm had shed more than 100 points, on volume of nearly 1.8 million shares.
Retail's Greatest Hits
That's $179 million in losses inside of 20 minutes. Those who hit the panic button probably took a bigger bath than the least-fortunate investors in
now-infamous initial public offering. And it looks like most of the bathers were retail players.
"It's all retail," says Emmanuel "Buzzy" Geduld, president and CEO of Nasdaq market making firm
Herzog Heine Geduld
. "It's all 100s, 200s, 300s," he says.
Geduld was referring to the small, round lots crossing the tape all day on the stock, usually a telltale sign of retail investors who can't afford to work in larger increments. Usually, though, a round lot of stock doesn't cost $73,600, so it's likely that hedge funds and trading boutiques played more than a small part in today's action. And not all trades were retail-sized. "The last trade I saw on my screen was for 42,000 shares," says a market participant. "Nobody I know has that much money in the bank."
Nonetheless, today witnessed some of the broadest retail participation yet seen in that stock, much of whose meteoric rise has been hitherto fueled by money managers functioning as closet indexers, performance chasers or forward-looking investors. Despite the Y2K/holiday lull pushing many institutional players to the sidelines, trading in Qualcomm remains heavy, thanks to a lot of individual investors with surprisingly deep pockets, or at least surprisingly little reserve about going heavily on margin.
Spreads Like Butter
The lack of institutional money in today's session made for some unwieldy spreads. On the floor of the
American Stock Exchange
, those in the trenches couldn't believe today's action. "There were times this morning when I couldn't tell what Qualcomm was trading at within a $5 range, making the pricing of options next to impossible," says one options pro. "I'm glad I don't trade it -- it's awe-inspiring." (The Options Buzz took a
peek at Qualcomm options earlier today.)
Spreads that wide -- and the extreme volatility they imply -- can put retail investors in rather dangerous conditions. "In general, the market makers price the merchandise," another trader says. "But they're afraid to price
Qualcomm today because of the lack of liquidity, so retail is making the spread, and the market makers are jumping on top of the retail market."
Guess which of those two groups was buying Qualcomm at its intraday low of 638? The stock closed the session down 11 15/16, or 1.8%, to 647.
Eric Moskowitz contributed to this report.
Wrong! Rear Echelon Revelations: Qualcomm Queasiness
James J. Cramer
12/30/99 7:20 PM ET
Did I get the top tick for
this century? Right now, with fewer than 24 hours of trading left, I am looking darned good with 200 shares sold at 746. It was pure happenstance, just total instinct.
I walked in this morning thinking, what a moron, what was I doing holding on to some Qualcomm after this huge run? Bulls, bears and pigs.
After my workout, I greeted
Matt "Cellular" Jacobs
, who sauntered in at about 6:14 a.m. I immediately launched into what a greedy son of a gun I had been about this Qualcomm.
He suggested we play voice mail to see if any other analyst raised his price target for the stock. When we did and no one raised targets -- how unfortunate -- I grew furious at myself for not blowing the stock out.
Join the discussion on
And at that moment, Mark Kantor, my trader, said, "There's a 746 bid for 200 shares in
." Matt did a double take. I did a spit take. "That's up another hundo," I rejoiced.
Just like that, I switched from chilly fear to dreamy greed. "What if it gets to 800?" I thought to myself. "What if it goes to the price target? Does
raise its price target today?"
Matt asked, "Aren't you going to sell some?"
I snapped out of the 1,000 Qualcomm reverie and said, "Hit the bid."
And at 6:43 a.m., the deed was done.
Qualcomm never traded a penny higher. In a year where
every single sale was a bad sale
, I had finally made a good one. Fitting that it happened with one day to go.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Qualcomm. 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: Halliburton Completes Sale of Venture Stake; Lockheed Gets Contract
12/30/99 8:22 PM ET
unit completed the $515 million sale of its stake in
Ingersoll Dresser Pump
to its joint venture partner,
. Halliburton said the sale of its 49% stake in Ingersoll Dresser Pump would result in a fourth-quarter after-tax gain of about $165 million, or 37 cents a share.
has been awarded contracts totaling $1.6 billion to produce six test models of the F-22 fighter jet and begin initial work on 10 planned production jets, the
That HISSing sound you hear is the high-volume ascent of
Healthcare Integrated Services
, which leads after-hours action on
. There's no immediately discernible news behind the extremely tiny micro-cap's move.
Among larger stocks,
is active yet again. After declining in the day session, the mighty stock was up on both Island and thinly traded
, a little more strongly on the latter.
Elsewhere on Island,
TheStreet.com Internet Sector
had been building on the day-session advance that followed news of its high traffic ranking among e-commerce sites, but it faltered in the late going.
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
said it expects to take a fourth-quarter charge related to the sale of its
unit to closely held
Platinum Equity Holdings
. IDD is an electronic financial database provider of end-of-day historical stock market quotes and fundamental company data.
Mergers, acquisitions and joint ventures
said it was named in a shareholder lawsuit seeking to block the company's proposed $111 million merger with
. The proposed class-action suit alleges that the company did not meet its fiduciary obligations in considering the proposed transaction.
Offerings and stock actions
said it will buy back up to 500,000 shares.
Bond Focus: Treasuries Pare Gains as Financing Rates Rebound
12/30/99 5:00 PM ET
Treasury prices rose again today, but closed off their highs after short-term financing rates -- which had declined to super-low levels during the first half of the trading session -- returned to more normal levels. Still, yields improved to their best levels in a week or more.
Financing rates are the rates at which professional traders borrow the money that they then invest in Treasury and other debt securities. The
fed funds rate
is the benchmark financing rate.
The market: Join the discussion on
Financing rates have declined to very low levels, at least on an intraday basis, in the past few trading sessions as the
has taken measures to ensure that anyone who wants to withdraw a fat wad of cash from the bank for the Y2K weekend can do so. Specifically, the Fed has conducted ordinary
open market operations
to an extraordinary degree.
In open market operations, the Fed keeps the fed funds rate on target by supplying as much bank reserves as there is demand for at that price, by buying government securities from dealers on either a permanent or temporary basis.
Most of the Fed's recent operations have been temporary. This kind of operation is called a repurchase agreement: The Fed buys securities from dealers, with an agreement that the dealers will repurchase them on a certain date.
With its latest, $7.6 billion repurchase agreement this morning, the Fed brought the total amount of repurchase agreements it has outstanding over the turn of the year into the neighborhood of $125 billion.
For at least the third time this week, the Fed oversupplied the banking system with liquidity. With more bank reserves available for lending than there was demand, the fed funds rate went significantly below the Fed's 5.5% target for it, trading as low as 3.5%.
The drop in the fed funds rate pulled repo rates lower as well. Repo rates are the rates at which professional traders and investors borrow from dealers to finance purchases of securities, and they generally hover 5 to 10 basis points below the fed funds rate, because a repo loan is collateralized by the securities the funds are used to purchase. (A fed funds loan, by contrast, is uncollateralized.) Overnight Treasury repo (a repo loan used to finance the purchase of a Treasury security) traded at a low in the neighborhood of 2%.
The drop in financing rates boosted purchases of Treasuries early in the session, helping the benchmark 30-year Treasury bond gain as much as 11/32 at one point.
"People got excited about that early on," said Tom Connor, head government bond trader at
. "There was some early buying and everything traded better."
But then financing rates corrected over the course of the session. Overcorrected, actually. The fed funds rate finished the day over the Fed's target at 6.50%, and overnight repo ended at 5.40%. Treasuries pared their gains, the long bond ending up 7/32 at 96 1/32, trimming its yield 1.7 basis points to 6.426%.
There was no other driving force in Treasuries today. The day's
economic releases afforded no big surprises, and volume was characteristically low for one of the last trading days of the year. Tracker
logged $29.5 billion, the vast majority in bills or two-year notes, 15.7% less than average for a Thursday over the past month.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
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