Wall Street Strikes Goldman: The Sequel

The IPO was priced last night, and today the stock begins trading.
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In normal times, one would expect to see Wall Street catch its breath after a day like yesterday, when a broad-based rally pushed shares well into the black. But then, today isn't really normal.

Today's the day

Goldman Sachs

(GS:NYSE) -- the 130-year-old investment bank that every reporter in the world feels obliged to call "venerable" -- goes public in the most highly anticipated offering the Street has seen in a long time. Priced last night at $53, the top of its range, the IPO was reportedly 10 times oversubscribed.

Once the stock starts trading (and it will not start trading until midmorning at the earliest), enthusiasm for Goldman may spill into the rest of the market. Goldman looks to open significantly higher than 53.

"I would imagine it will be received by a lot of online traders as robustly as if it had a .com attached to its name," said Bill Meehan, market analyst at

Cantor Fitzgerald

. The early strength may even force people to rethink the way they value other investment firms.

The downside is that there is very little cash on the sidelines, as illustrated by the way the recent rotation into cyclicals has damaged growth, and the money that goes into Goldman will have to come from somewhere. For today, that's probably not a huge concern -- there's always some hot money lying around, hoping to get put to work -- but it may put a little pressure on stocks later in the week.

To begin with, it looks like there will be slight pressure on the open. At 9 a.m. EDT, the

S&P 500

futures were off 0.5, about 2 points below fair value and indicating weakness at the bell. That will likely be short-lived, according to Meehan. "We'll probably try to unwind some program trading that happened at the end of the day yesterday, and then we'll try to rally them up," he said. "I don't think we'll see much of a dip and I don't think it will last long."

The 30-year Treasury bond was up 2/32 to 94 7/32, putting the yield at 5.65%.

The dollar continues to perform well against the yen, partly on the strength of U.S. markets yesterday and partly because Japan's prime minister,

Keizo Obuchi

, failed to announce any new rounds of stimulus during his meeting yesterday with

President Clinton

. But there's a good chance that stimulus

is

coming -- only just not right away.

Obuchi did, according to the

Nihon Keizai Shimbun

, tell Clinton that Japan has "an indomitable resolve to lay the groundwork for a recovery and achieve economic growth in fiscal 1999." Japan watchers are looking to this summer's

G7

meeting, around when the last stimulus package's effect on the economy will begin to wane, for a new round to get announced. The dollar was lately up 0.95 to 122.23 yen.

Hong Kong stocks gained ground, helped along by heady action in

Tricom Holdings

.

Pacific Century Group

said that it would take a 75% stake in the company. The

Hang Seng

added 222.62, or 1.7%, to 13,559.69.

The Tokyo markets were closed for a holiday.

European bourses were all in positive territory. In Frankfurt, the

Dax

was up 20.6 to 5398.16. In Paris, the

CAC

was up 5.36 to 4448.2. And in London, the

FTSE

was up 39.7 to 6608.4.

Tuesday's Wake-Up Watchlist

By

Brian Louis

Staff Reporter

  • Goldman Sachs will begin trading on the New York Stock Exchange today. Goldman's IPO was priced yesterday evening near the top of its range at $53 a share. An additional 9 million shares were added to the 60 million-share deal when Goldman exercised its overallotment option, bringing total proceeds to $3.7 billion. TheStreet.com wrote about the IPO in a story last night.
  • In the latest in the MediaOne (UMG) saga, it looks like MCI WorldCom (WCOM) is going to enter the scene, according to published reports. MCI WorldCom is considering joining Comcast (CMCSA) - Get Report in its multibillion-dollar battle with AT&T (T) - Get Report to buy MediaOne, The New York Times reported, citing executives close to the negotiations. Meanwhile, The Wall Street Journal reported that people close to the matter said MCI WorldCom is considering entering into a confidentiality pact with MediaOne, giving it access to the cable company's books. The Times, citing execs close to the negotiations, reported that MCI WorldCom was close to signing a confidentiality agreement on that issue. Meanwhile, Microsoft (MSFT) - Get Report is considering the creation of a tracking stock that would reflect the financial results of its Internet properties as well as any new cable operations it may acquire, the Journal reported, citing people familiar with the matter. People close to Microsoft's thinking stressed that the tracking-stock idea is only one of several possibilities that may emerge from the round-robin discussions among players in the MediaOne takeover battle, the newspaper said.
  • Johnson & Johnson (JNJ) - Get Report is in talks to buy biotechnology firm Centocor (CNTO) in an all-stock deal that could be valued well above $3 billion, the Journal reported, citing people familiar with the situation. If a handful of issues are resolved, the newspaper reported that a deal could be reached within a week. In other news (earnings estimates from First Call):
  • Getronics, a Dutch information technology company, is buying Wang Global (WANG) in a deal worth about $2 billion. Getronics will buy all 46 million outstanding Wang shares for $29.25 each, a 15% premium over Wang's closing price yesterday.
  • J.P. Morgan initiated coverage of iTurf (TURF) with a buy rating. J.P. Morgan was an underwriter on the firm's IPO last month.
  • Salomon Smith Barney upgraded Monsanto (MTC) - Get Report to buy from outperform.
  • Seagate Technology's (SEG) board approved an increase of up to 25 million shares in the company's stock buyback program.
  • Seagram's (VO) - Get ReportUniversal Music Group unit is planning to sell digital music online later this year, the Journal reported.
  • Sun International Hotels (SIH) posted first-quarter operating earnings of 90 cents a share, beating the nine-analyst estimate of 87 cents and up from the year-ago 87 cents.
  • Merrill Lynch named Superior Telecom (SUT) its Focus One stock pick of the week.
  • Credit Suisse First Boston initiated coverage of USinternetworking (USIX) with a buy rating and set a year-end price target of 60. CS First Boston was lead underwriter on the company's IPO last month. The stock closed yesterday at 43 3/4.
  • Warnaco (WAC) posted first-quarter earnings of 39 cents a share, in line with the 11-analyst estimate.