May 13, 2000

Market Data as of Close, 5/12/00:

o Dow Jones Industrial Average: 10,609.37 up 63.40, 0.60%

o Nasdaq Composite Index: 3,529.06 up 29.48, 0.84%

o S&P 500: 1,420.96 up 13.15, 0.93%

o TSC Internet: 843.56 up 9.51, 1.14%

o Russell 2000: 490.94 up 1.55, 0.32%

o 30-Year Treasury: 100 22/32 down 22/32, yield 6.199%

For the week:

o Dow Jones Industrial Average: up 0.3%

o Nasdaq Composite Index: down 7.5%

o S&P 500: down 0.8%

o TSC Internet: down 6%

o Russell 2000: down 4.3%

Companies in Today's Bulletin:

Cisco Systems (CSCO:Nasdaq)

International Paper (IP:NYSE)

News Corp. (NWS:NYSE ADR)

Warner-Lambert (WLA:NYSE)

In Today's Bulletin:

o Aaron L. Task: What a Week: A Numbers Game on Wall Street -- Mostly Low Numbers
o Wrong! Rear Echelon Revelations: Spring Fever vs. the Rally
o Evening Update: Evening Update: International Paper to Acquire Champion for $75 a Share
o Bond Focus: Yields Resume Rise as Rally Peters Out

Andrew Cupps, manager of the $1.1 billion Strong Enterprise fund, will be our guest on "TheStreet" TV show on Fox News Channel May 13, 14.

Also on

Networking: Cisco Acquires Qeyton Systems in $800 Million Stock Deal

The deal marks the 11th acquisition for the tech giant this year.

Media/Entertainment: News Corp. Goes Digital

After the proposed AOL/Time Warner merger, News Corp. also tries to marry new media with old.

Retail: Specialty E-Tailers Aren't Dead Yet

The stocks have been hammered, but the stronger companies should endure. What to look for.

Mutual Funds: Munder To Launch Closed-End Fund Run by NetNet Team

The fund will put a large portion of its assets into private Internet companies.

Aaron L. Task: What a Week: A Numbers Game on Wall Street -- Mostly Low Numbers


Aaron L. Task

Senior Writer

5/12/00 7:02 PM ET

SAN FRANCISCO -- Life on Wall Street is always a number's game, but never more so than the week just passed.


Monday, folks were trying to calculate what kind of multiple makes sense for


(CSCO) - Get Report



criticized the networking giant's valuation. As the numbers were crunched, sellers took a 7.2% bite out of Cisco, sending the

Nasdaq Composite

down 3.8%, while blue-chip proxies ended mixed.

The Comp shed another 2.3%

Tuesday, but its 5.6% decline on

Wednesday, accompanied by sizable drops for blue-chip gauges, had investors sweating over their abacuses (or abaci, if you prefer).

Outsized declines by tech bellwethers such as Cisco,


(IBM) - Get Report






(INTC) - Get Report

, and

Applied Materials

(AMAT) - Get Report

(among many others) had traders making uncomfortable allusions to

April 14.

In fact, the Nasdaq traded as low as 3367.06 Wednesday, just above its April closing low of 3321.29. The Comp's ability to hold above that level took on added significance

Thursday, when the numbers finally started working in the bulls' favor. A weaker-than-expected

retail sales report sparked a solid advance for all proxies, with the Comp up 3.4%.

The good tidings carried over into Friday's session, when a benign

producer price index report contributed to the growing hope that the

Federal Reserve

will not embark on an open-ended series of hikes, as has previously been the concern. But major averages were unable to sustain their initial highs, closing with modest gains.

For the week, the Comp declined 7.5% and the

S&P 500

declined 0.8% while the

Dow Jones Industrial Average

rose 0.3%.

The problem with making any broad-sweeping analysis of the week's action is the numbers that were missing -- namely, trading volume figures. Monday was the lowest trading volume day of the year; Friday was the third lowest.

During no session this week did volume on the

New York Stock Exchange

top 1 billion shares. Similarly, over-the-counter action peaked with Wednesday's 1.5 billion shares, which still fell shy of the average daily volume this year of 1.67 billion. The absence of better-than-average volume, much less abnormally high activity, had market players skeptical that the action Wednesday represented any kind of meaningful "washout" the big declines might otherwise indicate.

But the relative paucity of volume did not stop market players from trying to analyze it.

"I am worried about the recent light volume," Byron Wien, chief U.S. investment strategist at

Morgan Stanley Dean Witter

, wrote in a mid-week report. "If the bull market is to resume, I would have expected buyers to step in with enthusiasm."

Wien speculated the lack of volume could be attributed to continued nervousness among investors about the retest scenario, the large backlog of locked-up stock related to recent IPOs, and a fear that better market conditions could unleash another round of initial public offerings.

Surprisingly, the strategist did not address what seemed to be the most obvious inhibitor to trading activity: the

Federal Reserve Open Market Committee's

meeting on May 16, with the

consumer price index

for April set for release the same day.

The idea that traders are waiting for the Fed is a "knee-jerk explanation" and an "excuse," he said in an interview late Friday.

Rather than a hesitation before the FOMC, Wien chalked up the lackluster trading to the supply/demand issues cited above, as well as a lack of conviction among institutional investors and a drying up of mutual fund inflows.

Finally, he said the sagging activity reflects a changed environment on Wall Street.

"Momentum investors had controlled the course of the market" until the selloff in April, the veteran strategist explained. Now, "the market is in the hands of the fundamentalists and they don't see prices yet where they're compelled to buy."

Wien balked when asked what specific levels would entice fundamental buyers, saying only "those are probably lower than where we are today" and predicting major stock proxies will break their April lows.

But Jeffery Warantz, equity strategist at

Salomon Smith Barney

, expressed the more bullish view of the M.I.A. volume.

"People aren't going to buy tech or interest-rate-sensitive stocks in front of the Fed meeting," Warantz said. "I don't know how much more you can read into" the lackluster volume.

Salomon Brothers remains bullish on the outlook for stocks six to 12 months out and retains its faith in established tech leaders such as Cisco, Intel, and

Sun Microsystems

(SUNW) - Get Report

, the strategist said.

The good news for those looking for a resurgence in trading activity is there's only one trading day left before the FOMC meeting. The bad news is the debate over what the Fed will do at its June meeting and beyond will re-emerge about 10 minutes thereafter, suggesting the slow and sluggish trading activity could be with us for some time.

That's something most investors just haven't counted on.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at .

Wrong! Rear Echelon Revelations: Spring Fever vs. the Rally


James J. Cramer

TheStreet Recommends

5/12/00 4:37 PM ET

Hard to sustain these Friday rallies now that the spring is here. Too much profit-taking. Too much worry. We had a midsession rotation out of tech into drugs, which was very strange because these vicious rotations usually last at least a day!

But those looking for positive signs have to be impressed with


(VSH) - Get Report

. We just had a secondary for Vishay and -- if you bought it -- you MADE MONEY!!

Holy cow. When was the last time that happened? Keep that up and we might begin to see some deals again. Ten points of profit. Business is so strong there that it reacted positively. I am not being facetious: That's a helpful sign.

Random musings:

Rumors swept through the Street that the




Time Warner


deal was breaking down this afternoon. Could it be because people got the mock

direct mail and it featured "Breakdown of the Deal?" If so, that would be a dump spec! ... Also, happy birthday to my partner, Jeff Berkowitz!

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long AOL. 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: Evening Update: International Paper to Acquire Champion for $75 a Share


Eileen Kinsella

Staff Reporter

5/12/00 8:24 PM ET

International Paper

(IP) - Get Report

said it reached a definitive agreement to acquire

Champion International

(CHA) - Get Report

for $75 a share, with $50 in cash and $25 in International Paper stock.

The agreement came on the heels of an earlier announcement from Finnish paper maker


that it would not counter International Paper's rival bid and was withdrawing from the bidding war.



CEO, Lodewijk de Vink, told a group of shareholders today that the company's $105 billion merger with


(PFE) - Get Report

would likely lead to the reduction of as much as 10% of the combined company's workforce.

In other postclose news (

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.


Offerings and stock actions

Online recruiting service

Cruel World

asked the

Securities and Exchange Commission

to withdraw its proposed $57.5 million initial public offering.

Pharmacia & Upjohn


said its agriculture unit Monsanto, filed for a $100 million IPO.




founder and chairman Ted Waitt hired former

Goldman Sachs

PC hardware analyst Rick Scutte to handle his personal investments. A Gateway spokesman said Scutte is not being hired to work for Gateway.

Industrial waste services company



, said three of its top executives resigned.

The company said CEO Kenneth Winger, COO Michael Bragagnolo and CFO Paul Humphreys had all quit the company.

The three executives were put on administrative leave in March when Safety-Kleen said it began a probe into possible accounting irregularities. Since the executive suspensions, day-to-day operations have been run by chairman David Thomas Jr., and vice-chairman Grover Wrenn. The company is 44% owned by Canadian transportation company




Bond Focus: Yields Resume Rise as Rally Peters Out


Elizabeth Roy Stanton

Senior Writer

5/12/00 5:49 PM ET

Treasury prices resumed their downward tack today, giving back the gains made in the previous three sessions. With the

Fed poised to hike interest rates at its meeting on Tuesday, it was something of a return to fundamentals.

The major economic news of the day -- the April

Producer Price Index -- was slightly better than expected, but that didn't seem to have much of an effect on the market. Perhaps because while lower oil prices in April held prices in check at the wholesale level, oil is back on the warpath, once again approaching the $30-a-barrel level.

Treasury prices were higher in the mid-morning, thanks chiefly to rumors that federal agency securities were in danger of losing their triple-A rating from one of the major rating agencies, as a consequence of changes Congress is considering, that would deprive the agencies (

Fannie Mae


Freddie Mac

) of some of the federal support they currently enjoy. In general, news that saps demand for agency securities benefits Treasuries as an alternative investment.

But, as those rumors died out, the rally unraveled. By midday, Treasuries were in negative territory, and they never looked back. The benchmark 10-year note ended down 24/32 at 99 26/32, lifting its yield 10.5 basis points to 6.525%. Shorter-maturity issues fared just as badly. The five-year note lost 14/32 to 99 29/32, lifting its yield 10.4 basis points to 6.772%. And the two-year note slid 6/32 to 98 31/23, lifting its yield 10.1 basis points to 6.936%, the highest since March 1995.

The 30-year bond tumbled 28/32 to 100 19/32, lifting its yield 6.1 basis points to 6.206%, the highest since Feb. 17.

At the

Chicago Board of Trade

, the June

Treasury futures contract shed 24/32 to 93 16/32.

"The rally of the last two days was all about short covering," said Mark Mahoney, Treasury market strategist at

UBS Warburg

. "The stock market dropped and everyone was short for the auction. Now we're just reversing that." On Tuesday and Wednesday, the Treasury Department auctioned new five- and 10-year notes. "Stocks and stronger and agency spreads are more well-behaved," Mahoney continued. "The rally off the lows was more counter-trend. Now the market's back to doing what it's supposed to be doing," given the uncertainty about how much the Fed will raise interest rates.


Federal Open Market Committee is widely expected to raise the

fed funds rate from 6% to 6.5% on Tuesday, but how far beyond that they will ultimately go is unclear. At the moment, many market participants agree, the consensus is that the funds rate will reach at least 6.75% by mid-year.

Economic Indicators

The PPI dropped 0.3% in April, falling for the first time since February 1999. Economists polled by


had forecast it would drop 0.2%, on average.

Energy prices accounted for the decline, dropping 4.1%. Excluding food and energy prices, the PPI rose 0.1%, in line with expectations.

The PPI's year-on-year growth rate dropped from 4.5% to 3.9%. The core PPI's pace inched up to 1.3% from 1.2%, still well below its February 1999 peak of 2.2%.

In other economic news, the

Consumer Sentiment Index rose to a preliminary 110.9 in May from 109.2 in April. It is still below its January peak of 112.


business inventories rose 0.3% in March, while sales surged 1.2%. The pace of sales growth -- 9.9% in March -- remains well ahead of the pace of inventory growth -- 5.3%, indicating that production will have to continue at a fast pace to meet demand.

Currency and Commodities

The dollar fell against the yen and the euro. It lately was worth 108.34 yen, down from 108.48. The euro was worth $0.9196, up from $0.9013. For more on currencies, please take a look at


Currencies column.

Crude oil for June delivery at the

New York Mercantile Exchange

traded as high as $30 a barrel and ended at $29.61, the highest since March 17, up from $29.11.


Bridge Commodity Research Bureau Index

rose to nearly a two-year high of 220.74 from 220.57.

Gold for June delivery at the


rose to $276.90 an ounce from $276.50.

Copyright 2000,