TheStreet.com's WEEKEND BULLETIN
August 9, 1999
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Market Data as of Close, 8/6/99:
o Dow Jones Industrial Average: 10,714.03 down 79.79, -0.74%
o Nasdaq Composite Index: 2,547.97 down 17.86, -0.70%
o S&P 500: 1,300.29 down 13.42, -1.02%
o TSC Internet: 498.39 down 15.16, -2.95%
o Russell 2000: 428.04 down 1.71, -0.40%
o 30-Year Treasury: 87 18/32 down 1 17/32, yield 6.147%
In Today's Bulletin:
o Editor's Letter: Life in the Fast and Slow Lane
o Market Update: Cisco Puts $1 Billion Into KPMG to Build Net Services
o The Coming Week: Specter of Fed Is Raising Cain
o Coming Week in Europe: London's Date With Deutsche Telekom
Also on TheStreet.com:
Wrong! Rear Echelon Revelations: Making a List, Checking It Twice
The market may be naughty and it may be nice. The trader reviews the signs that can help us judge.
Asia/Pacific: The Coming Week in Asia: Strong Yen, Possibly Devalued Yuan and a Holiday
Also, keep an eye on South Korea, where Daewoo is set to announce a restructuring.
James K. Galbraith: In Politics, the Summer of Reruns
Must every good policy idea this year be a rehash of an old one? Not at all, and here's a few to get the debate going.
Jim Griffin: The 1998 Market Deja Vu
Does 1999 seem like a replay to anyone else?
Marc Chandler: Global Briefing: Marching Out of Step
The Fed tightening is pretty much a done deal but can the U.K. and Japan take it?
Today's Polls: You Said It: A
Weekly Poll: What's Next for Net Stocks?
There's been carnage in the Internet sector. Will we see healing, or more bleeding?
Editor's Letter: Life in the Fast and Slow Lane
loves to pepper readers with news, scoops and analysis during the investing week. But what about the weekends? We know that many of you like to do other things on the weekend -- spend time with the family, fix the car, mow the lawn, golf, run errands. But we also know that maybe there's a little something different we can provide when you want to take a few moments to cruise
on a weekend.
Beginning this past weekend, as some astute readers have noticed, we've made changes to our coverage. We have a new
Weekender piece that has all kinds of interesting tidbits, including a recap of biggest events during the past week. There are interesting reporter tales, some question-and-answer sections and other informational areas. In addition, we continue to provide you with a peek into the future with features on the
coming week in U.S. markets, the
coming week in Europe and the
coming week in Asia. And Ben Holmes does an excellent job setting up the coming week in IPOs.
We've got the offbeat -- a
column by humorist Eugene Finerman. And we've got the informative --
Investors' Bookshelf and
technical questions answered by Chartman
Gary B. Smith
. It's a good mix of information and entertainment. If you've got comments about the new weekend coverage, or anything else, please feel free to email me at
This past week gave everyone in the Net and tech sector a bit of white-knuckle ride. It's times like these when talking with a real ace can help.
will be chatting on Yahoo! this Tuesday, Aug. 10 at 5 p.m. EDT. Seymour writes the Tech Savvy column, and his insights during the past several months have been nothing short of outstanding. The chat is free. Register at
Readers in the Seattle area will get a chance to see a
writer up close.
, who oversees our options coverage and helps keep track of things on Wall Street, will appear at
The Money Show
Washington State Convention & Trade Center
in Seattle on Thursday, Aug. 12. For more information, call 1-800-226-0323. If you see Dan, I'm sure he'll have some goodies for you!
So get ready for another exciting week on
We're chasing the volatility, seeking to give you the latest and best information and analysis. It's times like these that make you appreciate a staff that is searching for the latest clues that will help you make sense of all the mayhem in the marketplace.
L'Etoile du Nord,
Market Update: Cisco Puts $1 Billion Into KPMG to Build Net Services
Not counting sports, big news was scarce this weekend, although there are a few tidbits to pass along.
said it was making a $1 billion investment in
, the accounting and consulting firm,
The New York Times
reported. Under terms of the deal, KPMG, part of
, will use the money to hire 4,000 engineers and service professionals over the next 18 months to deliver Net-based data, voice and video services to its business and consulting clients, the
reported. Cisco, in return for its investment, will own a stake of less than 20% in KPMG's U.S. unit, according to the newspaper.
, owned by
, said today it signed a deal to market products from Web telephony provider
on NBC Web sites, according to a
report. In exchange, Snap.com, NBC and
will acquire equity stakes in Net2Phone. NBC and GE Capital are units of
The automaking unit of South Korea's
plans to raise $3.5 billion via a strategic alliance with
, lead creditor
Korea First Bank
said yesterday, according to
. On Friday, Daewoo Motor's president said Daewoo was willing to surrender managerial rights to GM in an effort to reach an alliance, the report said.
said today it would acquire the rights to 2,100 communications towers from
, a unit of
Brewery workers at
12 U.S. breweries approved a new five-year national contract. The workers are represented by the
International Brotherhood of Teamsters
CNet also said that until Aug. 31 it is waiving normal fees for a standard listing on its online auction site, offering sellers a basic listing for free.
As for some of the sports news from over the weekend, on Friday night, the
San Diego Padres'
smacked his 3,000th hit, while on Saturday
Tampa Bay Devil Rays
became the first player to hit a home run to mark his 3,000th hit.
In the Papers
Money management and research firm
Sanford C. Bernstein
plans to issue stock to the public for the first time, according to
reports that the firm's plans call for a stake of 23% to be sold for about $1.25 billion.
is the subject of this week's cover story in
. The weekly says that despite all of CEO C. Michael Armstrong's Net and cable TV acquisitions, the company still is dependent on the long-distance telephone business, an area where competition is rising sharply and Ma Bell's returns are sure to be pressured.
Elsewhere, after reporting generally disappointing second-quarter numbers, property/casualty companies are trading near their 52-week lows, giving birth to some bargains according to some,
reported. Archie MacAllaster of
MacAllaster Pitfield Mackay
Old Republic International
; Peter Russ, an analyst at
; Weston Hicks, insurance analyst at
; and John Keefe of
Ferris Baker Watts
also has an interview with hedge fund manager Tim Curro of
, who likes
and thinks the company would make a nice leveraged buyout.
Portfolio manager Stuart T. Weisbrod of New York-based health-care hedge fund
is also featured in
. His stock picks:
Johnson & Johnson
. He's short
The Coming Week: Specter of Fed Is Raising Cain
going to raise rates Aug. 24. Now what?
You want the coming week in a nutshell? That was it. For most on Wall Street, the July
put a nail in it.
& His Friends are going hiking at the end of the month.
No, it's not a 100% thing. It is possible that recent problems in the swap market will stay the Fed's hand at its next meeting. Or maybe the Fed feels that the bond market is doing its job for it, that higher yields will sufficiently slow the economy down to mitigate any action.
There are some people who are making these arguments. Not many. "I guess nothing's done until it's done, but it sure seems like the Fed is going to raise rates," said Charles Crane, chief market strategist at
Key Asset Management
It is pretty clear that an August tightening of 25 basis points has been priced into the bond market. It's less clear that it's been priced into the stock market -- the naysayers on a rate move seem to be concentrated on the equity side of things. That's too bad. It suggests that there's more downside in stocks.
And even if a hike is fully priced into both markets, they may decline as jittery investors take out insurance for something worse. The doomsayers are out in force. "People are saying, 'Will they go 50 basis points? Will they go between meetings?' The same guys who were saying inflation was dead six months ago are now saying the Fed is behind the curve," grumbled Bob Diclemente, co-head of U.S. economic research at
A market that begins to price in a worse scenario than likely is a market asking for a rally. Things may be setting themselves up for a scenario similar to what happened late June, when the market took off like a shot on the rate hike. With a tightening out of the way, after all, many investors would bet that the Fed was done. And there would be a steady drone of talking heads saying there's no way Greenspan would hike rates at the Oct. 5 meeting, for fear of what might happen with
. Add to that the perception that this quarter is even better than last for corporate America, and you've got a nice little move to the upside.
"Once we get beyond Aug. 24, investor attention will return to earnings," said Crane. "The third-quarter numbers are going to be pretty good. Comparisons to 1998 will be easy and global economic growth is positive." Industry analysts are predicting earnings growth in the
of 21.4%, according to
. Although that will probably be revised down, growth in the 20% range is definitely doable.
The immediate concern of investors who believe this rally-on-a-rate-hike scenario is: When will the bottom come? Or, to put it another way, when will the number of people who believe in this scenario overcome the number of people who are nervous about the market going lower?
The next concern is whether any move up in September will be anything more than a trading rally. Much of that will depend on whether the Fed thinks the economy threatens overheating.
"The real question going ahead is if additional rate hikes are necessary," said Bill Sullivan, chief money-market economist at
Morgan Stanley Dean Witter
. "Will they have a dossier of evidence by early October that warrants another increase in the fed-funds target? If evidence builds that suggests that they're going to go to 5.5%, then there will be further downward movement in pricing."
There are a couple of big economic reports in the coming week, and they'll be used to try and get an early read on what's going to happen in October. July
comes out on Thursday, and the July
Producer Price Index
hits on Friday. They will be the first figures on demand for a period after the June hike and will help scope out "how resilient demand is going to be," said Diclemente.
In all, it could be an interesting week for the Treasury market. There's the quarterly Treasury auction, which will move the market around a bit as it tries to digest new supply. There are the widening spreads between government and corporate debt, which may continue to shake things up.
Stocks could rock and roll a bit too. Besides keeping an eye on that jumpy bond market, any declines in the Internets could prompt more worries about margin calls -- and more talk about how the pain in the dot-coms will inevitably spill over to other areas.
"I think the one ingredient we can count on," said Crane, "is continued volatility."
Better stock up on that Dramamine.
Coming Week in Europe: London's Date With Deutsche Telekom
While much of Europe will be plunged into darkness during a total solar eclipse next week,
shareholders hope CEO Ron Sommer will finally shed some light on the company's international strategy.
The former German telephone monopoly will hold a press conference in London on Monday to discuss its plans to acquire the U.K.'s fourth-largest mobile telecommunications provider,
Cable & Wireless
. Telekom said on Friday it would pay $11.2 billion for One2One -- effectively depleting the funds it raised in a June capital increase.
Although the deal still has to pass regulatory scrutiny, market reaction to the takeover was generally positive, as it gives Telekom desperately needed momentum after its failed merger attempt with
in May. Friday, Deutsche Telekom ADRs dropped 11/16, or 1.7%, to close at 40 1/16.
The move raises speculation of greater consolidation in the telecom industry, which will help to keep equity market participants focused on the sector in the coming week. That's because even as the purchase of One2One has been lauded as a step in the right direction, a truly global strategy -- in particular access to the U.S. market -- remains elusive for Deutsche Telekom.
Recent speculation has raised the possibility of a union between DT and Spain's
, which would offer inroads into Latin America. Some analysts, however, think the Germans would be better off setting their sights on their joint venture partner, U.S. long-distance carrier
"I think they've got to be having intensive discussions with Sprint right now," says Holger Grawe, an analyst for
in Dusseldorf. "Buying One2One certainly hasn't solved the problem" of lacking a major international partner.
The amount of cash paid for One2One also raises the question of how Telekom would finance further large acquisitions now that its war chest has been depleted. One possibility involves a floatation of DT's Internet operations,
. Another calls for Telekom to use the funds raised from selling off its cable TV network.
The Corona of Inflation
As the sun disappears behind the moon on Wednesday, the
Bank of England
will release its quarterly inflation report, forcing economists to don tinted spectacles and stare directly at any possible pricing pressures in the U.K.
Also on the economic front next week, France and Spain will release figures for July consumer prices on Wednesday and Friday, respectively. Inflation is expected to remain tame in both countries, even as energy prices roll higher.
On Tuesday, Germany will report trade-balance figures for June. The trade surplus for Europe's largest economy is expected to grow to just under 10 billion marks, as exports increased amid the euro's weakness.
Another factor for the markets next week could be a prediction by medieval French astrologer and oracle Nostradamus, who is said to have predicted that a comet hurtling toward Earth would become visible during next week's eclipse. Nostradamus, however, did not address how that may affect long positions in
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