TheStreet.com's WEEKEND BULLETIN
March 25, 2000
Market Data as of Close, 3/24/00:
o Dow Jones Industrial Average: 11,112.72 down 7.14, -0.06%; up 5.5% for the week
o Nasdaq Composite Index: 4,963.03 up 22.42, 0.45%; up 8.3% for the week
o S&P 500: 1,527.46 up 0.11, 0.01%; up 4.3% for the week
o TSC Internet: 1,272.53 up 19.26, 1.54%; down fractionally for the week
o Russell 2000: 574.01 up 0.22, 0.04%; down 0.1% for the week
o 30-Year Treasury: 103 19/32 down 1 04/32, yield 5.984%
Companies in Today's Bulletin:
Morgan Stanley Dean Witter
In Today's Bulletin:
o The Coming Week: Putting the Best Face on Bad News
o Wrong! Tactics and Strategies: Welcome to His World
o Evening Update: Cisco Edges Out Microsoft as King of the World
o Bond Focus: A Bloody End to a Two-Week Treasury Rally
Ask Cramer on "TheStreet.com"
Jim Cramer takes your calls this week on "TheStreet.com" on Fox News Channel. If you want to ask Cramer about your stock, you have to call this Friday, March 24, at 6:45 p.m. EST during our taping. Here's the number: 1-888-TELL-FOX (1-888-835-5369).
Don't miss this week's "TheStreet.com" as guest Graham Tanaka, president of Tanaka Capital Management, joins our panel of writers on the show."TheStreet.com" can be seen on Fox News Channel at 10 a.m. and 6 p.m. EST Saturday and at 10 a.m. EST Sunday.
Also on TheStreet.com:
Market Features: Gary Gensler, the Chicago Board of Trade Could Kiss You
The Treasury official's remarks on Wednesday closed the volume gap between competing agency futures contracts.
Moscow Journal: Waiting for Putin to Say
to Reform and
Will the new president of Russia act to improve the tattered economy and build market confidence?
Mutual Funds: Marsico Capital to Launch International Fund
Who will actually run the fund remains a mystery.
Wing Tips: An Upscale Legend Is Born
New Dallas carrier shakes off American Airlines' attempt to keep it grounded.
The Coming Week: Putting the Best Face on Bad News
3/24/00 7:56 PM ET
The last week of the quarter is often a frightening one for investors.
It is the preannouncment season, the time when companies whose earnings are not up to snuff confess. Invariably, it is not their fault. The dollar is too weak or too strong against the
, or there was a problem in the widget pipeline, or some part of the country was too wet and cold while the other part was too hot and dry. No bones about, this problem must have hurt just about everybody in the business. Really. And so a whole sector gets tarred.
"The sooner we get out of it," said
strategist Art Hogan of the warning period, "the better off we're going to be."
Procter & Gamble
, which cited pulp costs as a core problem. Never mind that pulp prices, though up well off their lows, were severely depressed by the crises of 1997 and 1998.
"The upshot is that the plunge in materials costs during 1997-98 probably helped mask deteriorating results at companies who weren't minding their efficiency," wrote
Morgan Stanley Dean Witter
chief U.S. economist Richard Berner in a recent note. "The jump in such costs over the past year likely revealed their more fundamental problems."
Procter fell 32% on its warning, and its peers got caught in the downdraft. The
Morgan Stanley Consumer Cyclical Index
fell 5.3% on the day, and companies like
were quick to issue statements saying that they were comfortable with analysts' estimates. It took the group two weeks to recover.
The good news is that it looks as if the first quarter has been a good one for U.S. companies, and though there will undoubtedly be high-profile warnings over the next couple of weeks, there will probably be fewer than usual. Joseph Kalinowski, equity strategist at earnings tracker
, notes that fewer than usual of the companies preannouncing results are saying that they will not meet analysts' estimates.
"What we normally see is that 80% of preannouncements are negative," he said. "Going into this season, only 60% are negative. We're also seeing a significantly larger number of analysts increasing their estimates overall." Typically, analysts are trimming numbers heading into reporting season.
aren't the only worry in the coming week.
will meet Monday in Vienna to determine new quota levels. Recent talk in the market is that it will increase production 1 million to 2 million barrels a day over the current quota of about 23 million barrels. Considering that, because of cheating, actual output is around 24 million barrels, that doesn't represent much of an increase. If the increase is not in the upper range of what the market is talking about, oil prices could head higher again. It could well happen -- though there has been heavy pressure from the U.S. and other oil importers for increased production, the OPEC ministers have other concerns.
"I don't think they want to forego the improvement in finances they've seen, and they don't want to look like they're caving in to the
administration," said Bill Sullivan, chief money-market economist at
Morgan Stanley Dean Witter
. "We got as low as $27 a barrel, and I imagine that's the low. This sense that energy prices are rolling back may be over."
Wrong! Tactics and Strategies: Welcome to His World
James J. Cramer
3/24/00 1:05 PM ET
Step inside the world of an order imbalance. Step inside my world. You won't see this stuff anywhere else.
The stock is
. We bought 65,000 shares of Jabil yesterday into the weakness. It did nothing. We liked the stock for a trade. We liked it because it was going to have a postclose meeting that we figured would be positive. It was. But we didn't want to be in Jabil after today. Frankly, we buy a bunch of stocks for "Ts," or trades. We figure we can take some good capital gains to help subsidize our longer- term positions.
Sure enough, the meeting went well. But we didn't know how positively the market would react. Would it be a 2-point gain? A 1-point gain? A 4-point gain? Would the market hold up long enough to let us get out? We never know.
Right before the market opened we got the best insight of what we were about to make:
positively mentioned Jabil in her 9:27 a.m. break-in from the floor of the
New York Stock Exchange
. We did a couple of mild high-fives on that because when Maria B. speaks at that moment and she juices a stock, she has the power of ten
analysts all rolled up into one.
We weren't more boisterous because we are superstitious, and we don't count our chickens before they hatch. Our broker told us that the stock would now go to indication to the upside (meaning there are many more buyers than sellers -- the specialist lets everybody know that sellers are needed, and the indication serves as a call out to people, "Sellers needed, we will pay a premium."). But how much? And how much did we want to sell into the indication?
At 9:33 a.m. we got our first indication: 84-87, meaning that the stock could open anywhere between those prices, or lower if too many sellers materialized. "Try to sell 15,000 within those parameters," I barked to my trader, Clarke Longwell, who was handling the Jabil order.
He relayed the order. Seconds pass and then we hear back: "New indication, 86 and a half 88 and a half."
I counter: "Sell all 65,000 within those parameters, that's a great price."
That tipped it right back to 84-86.
The cat-and-mouse game continued.
"Cut me back to 15,000 on the hop, opening only," I scream. "Quick, quick, before we get burned." I could see the new indication coming -- just felt it, that's all.
As if on cue, Clarke yells out "New indication, 83-85."
Now I'm jumping up and down. I know that's too low. I know that if I can be sure I am cut back to 15,000 I will be able to scale out higher.
"You are in for 15, opening only," Clarke says calmly. Boom, the stock opens at 84 7/8. We sell 15,000 shares. Seconds later the stock gaps up to the 6-and-change level, where we pound out another 40,000 in increments of 5,000, feeding it to the market as it roars.
As I write, we are booking the last 10,000 shares. We will have a 6-and-change average (meaning 86.5 average roughly). A great trade. And we weren't faked out at the opening. Thanks Maria, thanks
-- the two who were most instrumental in making us money.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. 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: Cisco Edges Out Microsoft as King of the World
3/24/00 8:03 PM ET
, the biggest maker of the equipment that powers the Internet, closed with a higher stock-market value than
, making Cisco the most valuable company in the world. Cisco ended the day with a market capitalization of $579.2 billion, slightly ahead of Microsoft's $578.2 billion.
Shares of Cisco have continued to climb steadily through the year, gaining one-third in value. Shares of computer software giant Microsoft have languished amid concerns over the government's pending antitrust case, easing 10% from their peak.
Separately, Microsoft made a last-minute offer as mediation talks neared an end in the government's antitrust case against it. The offer would place new restrictions on the software company's conduct, according to published reports. Microsoft executives and
officials are expected to meet separately this weekend with Judge Richard Posner, the mediator appointed by U.S. District Judge Thomas Penfield Jackson.
Offerings and stock actions
said its board approved a 2-for-1 stock split.
said that an advisory panel to the U.S.
Food and Drug Administration
voted not to approve a marketing application for the company's device for testing blood to determine whether someone has congestive heart failure.
said it agreed to pay $1.8 million to
to settle a lawsuit over software licensing. Epicor said the payment will widen its 1999 loss. Accrual for the settlement will be reflected in its 1999 financial results, which will now show a net loss of $50.6 million, or $1.25 a share, compared with the previously reported net loss of $48.8 million, or $1.20 a share.
Bond Focus: A Bloody End to a Two-Week Treasury Rally
3/24/00 4:40 PM ET
Treasury yields spiked today, as bond and note prices dropped for the first time in the last 10 trading sessions. Market analysts said the action reflected an unwinding of yesterday's unusual rally, dismay over the contents of the
Federal Open Market Committee
minutes released late yesterday and the stock market's recent resilience.
The day's only economic release,
durable goods orders
for February, were significantly weaker than expected. That ought to have cheered the bond market, which wants economic growth to slow so that interest rates don't rise.
It didn't. The benchmark 10-year Treasury note ended down 26/32 at 102 7/32, lifting its yield 10.8 basis points to 6.195%, the highest since March 18. The 30-year bond fell 1 9/32 to 103 15/32, lifting its yield 8.9 basis points to 5.999%, the highest since Monday. And the two-year Treasury note, which is tied most closely to the interest rate set by the
, dropped 7/32 to 99 25/32, lifting its yield 12.3 basis points to 6.637%, the highest since Feb. 21.
The underperformance of the two-year note widened the yield differential between it and the 30-year bond to 63.8 basis points, the biggest since March 1989.
Chicago Board of Trade
, the June
Treasury futures contract fell 1 to 95 26/32.
Over the previous two weeks, the entire Treasury spectrum save the two-year note had rallied mightily, shedding anywhere from 20 to 30 basis points of yield to reach their lowest yield levels in months.
Bouts of weakness in the stock market helped drive bond prices higher, on the rationale that falling stock prices were forecasting slower economic growth ahead. "People were trying to rationalize the price action
in Treasuries by saying, 'There must be something wrong out there,'" said Mark Mahoney, Treasury market strategist at
Warburg Dillon Read
in Stamford, Conn.
The rally stalled, Mahoney said, because
yesterday's climactic trade was deemed overdone, because the stock market got adrenalized, and because the
minutes of the Feb. 1-2 FOMC meeting, released yesterday near the end of the trading day, revealed that some committee members favored hiking the
fed funds rate
by 50 basis points instead of just 25. "Other members acknowledged that the Committee might need to move more aggressively at a later meeting should imbalances continue to build and inflation and inflation expectations clearly begin to pick up," the minutes said.
Those factors set the stage for "a pretty good reversal" in Mahoney's judgment. He sees the 10-year note yield backing up to about 6.40% next week.
"The Fed continues to tighten and most market-determined interest rates now seem to be poised to resume their upward march," concurred Robert Barbera, chief economist at
Hoenig & Co.
in Rye Brook, N.Y. He figures that with two more 25-basis-point rate hikes likely, the two-year note yield could easily gain 30 basis points.
Hoenig doesn't dare forecast the 30-year bond's yield, which has been driven down in large measure by the
plans to reduce the supply of long-maturity issues. "It requires
Carnac rather than an economist to figure that out," he said. "It's so unhinged from anything you can put your arms around."
Eric Cheung, manager of fixed-income at
in Wilmington, Del., described today's action as a "coming back to reality," and predicted it will continue into next week, lifting yields by 20 to 25 basis points. "Though inflation is not a big concern at this point, growth still looks pretty brisk over the next three to six months," he said. "And with energy prices increasing, companies are eventually going to start passing their increased costs on to consumers."
Durable goods orders fell 2.3% in February, their biggest decline since a 2.4% drop in April 1999. Excluding the volatile transportation component, which fell 8.7%, orders for durables fell 0.2%. Economists polled by
had forecast a 0.2% drop overall and a 1.4% increase excluding transportation. But the year-on-year pace of durables orders quickened in February, to 7.3% from 5.4% in January.
Currency and Commodities
The dollar fell against the yen and the euro. It lately was worth 106.96 yen, down from 107.36 yesterday. The euro was worth $0.9768, up from $0.9716. For more on currencies, please take a look at
Currency Watch column.
Crude oil for May delivery at the
New York Mercantile Exchange
rose to $27.98 a barrel from $27.31.
Bridge Commodity Research Bureau Index
fell to 212.46 from 212.74.
Gold for April delivery at the
fell to $285.10 an ounce from $285.40.
TO VIEW TSC'S ECONOMIC DATABANK, SEE:
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