It's a strange confluence of events. The
Dow Jones Industrial Average
lurks just below 10,000, a level that has come to bear more and more psychological weight on the market. And then it is triple-witching, the quarterly expiration of stock and index options and index futures, a recipe for volatility.
Each one in itself exerts a force in the market that is next to impossible to understand. Together, they create cross-currents that nobody can predict. If you have been watching
this morning, you have seen a string of talking heads -- strategists, Dow theorists, futures traders, what have you -- talking about what's going to happen today. Your broker, if you've called, has offered an opinion. You yourself may have made a side bet in the elevator.
Some people, no doubt, will accurately guess what stocks will do today. And go on to profess their skill at predicting the market. Before clapping that person on the back, though, consider the following.
Some years ago
Alan Marcus looked at the success of
Magellan under the management of Peter Lynch. The fund beat the
11 out of 13 years in the period from 1977 to 1989, an amazing feat: If Lynch was tossing coins, there would be only a 5% chance that he would get heads 11 times. Yet Marcus showed that if there was a pool of 500 mutual fund managers flipping coins, there is a 99.7% chance that one of them would match Lynch's record.
Lynch, most would argue, was more than just an inevitable statistic -- look at all that time he spent in the mall. But when it comes to figuring out what stocks are going to do today, don't look at the people who get it right as uncommonly clever. Look at them as uncommonly lucky.
For the opening, at least, it looks like stocks will move higher. At 9 a.m., the June S&P 500 futures contract was up 6.8, nearly 9 above fair value, indicating an open that will almost certainly carry the Dow over the milestone. More telling, the March contract, which closes at the open, got bid higher. That's a bet that stocks are going higher that you cannot go back on.
Whether the move is sustainable is another thing. Sellers have come into the market the last two times the Dow reached 10,000. But traders are hopeful that the market will get up and stay up today.
"It looks like it's just going to open on the high side of the five digit mark and from there we should chug along," said Doug Myers, vice president of equity trading at
Bill Meehan, chief market analyst at
, agreed the market will keep ahead of the lofty level today.
"We're going to put the media out of its misery," said Meehan. "I expected as long as we had strength in the financial stocks and a resurgence in tech, we'd make it."
Meehan thinks that the decamillennial mark will bring new optimism into the market that will bring the S&P 500 up to the 1350-to-1360 range. If the market doesn't broaden in that advance, however, he sees trouble. "If we don't see breadth improve, I'd short the new Nifty Fifty."
The 30-year Treasury market was up 5/32 to 96 21/32, dropping the yield to 5.48%.
Japanese stocks took back all of yesterday's losses and then some, spurred higher by Wall Street's gains and anticipation that, for the first time in three years, the
will end the fiscal year in the black. The index added 660.86, or 4.2%, to 16,378.78.
Hong Kong stocks rallied, too, and again the reason was Wall Street. The
added 423.6, or 4%, to 11,082.92.
Europe's major markets were all higher (three guesses why). In Frankfurt, the
was up 129.32, or 2.6%, to 5142.94. In Paris, the
was up 84.14, or 2%, to 4236.51. In London, the
was up 91.7, or 1.5%, to 6206.
Friday's Wake-Up Watchlist
- First Union (FTU) set plans to cut 5,850 jobs, or 7% of its workforce, in a restructuring. The bank also reaffirmed its 1999 earnings estimate of $4 a share, excluding items, which is in line with the current
First Call 26-analyst estimate.
The restructuring is expected to produce pretax cost savings of about $400 million for 1999, First Union said. The bank said it doesn't expect the revamping to slow revenue growth.
Excluding gains and charges, first-quarter earnings are expected to be in the range of 87 cents to 89 cents a share and earnings for subsequent quarters this year are anticipated to be better than the first quarter's results, First Union said. The First Call 21-analyst estimate calls for earnings of 92 cents a share in the first quarter.
Pinault-Printemps-Redoute Group has bought a nearly $3 billion stake in
Gucci (GUC) . Under terms of the pact, Gucci is issuing 39 million shares, equal to 40% of its outstanding capital, not including the shares issued to its employee trust at $75 a share.
Meanwhile, make-nice talks in Amsterdam between
LVMH Moet Hennessy Louis Vuitton (LVMHY) and Gucci broke down,
Reuters reported. Hours before the talks began, Gucci made the Pinault-Printemps investment announcement, the news agency reported. James Lieber, an adviser to LVMH Chairman Bernard Arnault, said the firm's next step would be to take Gucci to back to a commercial court in Amsterdam on the grounds that Gucci's tie-up with Pinault-Printemps was a "violation" of a ruling by the court last month, the news agency reported.
Lehman Brothers (LEH) posted first-quarter earnings of $1.57 a share, smashing the First Call 10-analyst estimate of $1.45 a share and up from the year-ago $1.44.
In other news:
British Telecom (BTY) and
AT&T (T) - Get Report have begun talks with
Japan Telecom to purchase a 30% stake in the company, the Japanese newspaper
Nihon Keizai Shimbun reported.
Dollar Rent A Car, a unit of
Dollar Thrifty Automotive (DTG) , and
Europcar said they're killing their reservation transfer deal, effective February 2000.
Elf Aquitaine (ELF) - Get Report is launching a major restructuring that seeks to double the company's net income within five years through job cuts and other cost reductions and via acquisitions,
The Wall Street Journal reported.
Ford (F) - Get Report named Wolfgang Reitzle group vice president of its newly created luxury car division, the so-called
Premier Automotive Group. Reitzle used to be an exec at
The Inside Wall Street column in
Business Week says
Duff & Phelps Credit Rating (DCR) might be a takeover target. The column says there is talk that Duff & Phelps has held informal talks with at least one of the following two companies:
Thomson BankWatch, a unit of Canadian publishing giant
A.M. Best, which rates insurance companies' claims-paying ability.
The column said Duff & Phelps didn't comment and that A.M. Best President didn't return calls. Thomson BankWatch President Greg Root is quoted in the column as saying his company is "exploring all opportunities in the business that are best for us."
Digital Lava (DGV) bulls think alliances and contracts for the company's video-publishing software will boost the stock, the column says. The column quotes Brian Hathaway of
Hathaway Investment Advisers -- which owns more than 230,000 shares -- as saying that "Digital is a very undervalued play on the future of video applications on computer networks."
The column also says Jeff Hershey of
Awad Asset Management, which is part of
Raymond James Financial (RJF) - Get Report, thinks the recent slump in
Cooper's (COO) - Get Report stock price makes it vulnerable to a takeover by a larger lensmaker, such as
Johnson & Johnson (JNJ) - Get Report or
Bausch & Lomb (BOL) . Awad Asset Management owns 5% of the stock. The column says top Cooper officials were traveling and couldn't be reached for comment.