TheStreet.com's WEEKEND BULLETIN
October 30, 1999
Market Data as of Close, 10/29/99:
o Dow Jones Industrial Average: 10,729.86 up 107.33, 1.01%; up 2.5 % for the week
o Nasdaq Composite Index: 2,966.43 up 91.21, 3.17%; up 5.3% for the week
o S&P 500: 1,362.93 up 20.49, 1.53%; up 4.7% for the week
o TSC Internet: 750.79 up 30.97, 4.30%; up 4.8% for the week
o Russell 2000: 428.64 up 5.83, 1.38%; up 2.4% for the week
o 30-Year Treasury: 99 15/32 up 1 06/32, yield 6.149%
Companies in Today's Bulletin:
Abbott Laboratories (ABT:NYSE)
In Today's Bulletin:
o The Coming Week: Spirits Soar as Fed Clouds Clear
o Wrong! Dispatches from the Front: Thank God for That Friday
o Evening Update: Citrix to Replace Mobil in S&P 500
o Bond Focus: Big Rally Carries Long Bond Yield to Three-Week Low
TheStreet.com on Fox News Channel
Charles Carlson, co-manager of the Strong Dow 30 Value fund and author of best sellers "Buying Stocks Without a Broker," "No-Load Stocks" and "The Individual Investor Revolution" will be joining this week's "Word on TheStreet" panel as it tackles the reconstitution of the Dow and how it will affect the individual investor.
Plus, Carlson will do the "Drill" with Herb and Cramer and Adam's back to butt heads with "Chartman" Gary B. Smith.
"TheStreet.com" on Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET.
FNC is Fox's 24-hour cable news channel. To find Fox News Channel in your area, call your local cable operator or see our "TSC on Fox" page at www.thestreet.com/tv (look for the yellow box in the upper right hand corner).
Also on TheStreet.com:
Semiconductors: As Intel Pursues Internet Growth, Analysts Question Debilitating Effect on Profitability
As the chip giant moves into the Internet industry, Intel will likely face increased profitability concerns among investors.
Europe: The Anglo File: Framlington's Global Internet Fund Revolves Mostly Around U.S. Holdings
The Framlington NetNet fund has a wide definition for Internet firms, but an infantile British market still has few pickings.
Mutual Funds: Internet Investors Look Increasingly Overseas
Some say the U.S. market is too mature for the kind of explosive growth we've seen in the past few years.
The Risk Arb: Abbott and Alza in a Family Feud
Abbott Labs' intended merger partner Alza is siding with a plaintiff against none other than Abbott Labs.
The Coming Week: Spirits Soar as Fed Clouds Clear
David A. Gaffen
10/29/99 8:00 PM ET
The stock market brings out a lot of extreme emotions in people. A few strong sessions can rejuvenate one's spirits after weeks of slogging through the mud. Some try to convince themselves that a three-day rally means the frustrating, up-and-down range-trading may be over for a while.
This time, they ain't whistling Dixie.
Coming Week: Join the discussion on
Stocks may have bottomed out a few weeks ago, but there wasn't much confidence that the market would head higher -- until the bond futures price bounced off its yearly low a few days ago. Technicians, believing the Treasury market was oversold, started buying, and that was supported by several friendly economic releases. While the threat of
hikes still looms, and many are predicting a blowout
next Friday, analysts still see blue skies on the horizon.
"This has been an on-again, off-again market, so no one should be surprised if we have a down week
next week," said Hugh Johnson, chief investment officer at
. "The one thing that does seem to have turned the corner is the bond market -- which means the stock market might have turned the corner."
Greg Nie, chief technical strategist at
First Union Securities
, is also optimistic. A pullback next week below 10,500 on the
would signal a technical failure to him. But saving that, he said, "We've gone far enough to say we've reversed the downtrend."
Why the outpouring of free love in the market? For the first time since early this year, the Fed outlook is beginning to clear up. The majority is still betting on another interest-rate hike come Nov. 16, when the Fed next meets. Following that, though, the Fed could be out of the picture until at least next spring. It took only a few releases to generate that sentiment -- a strong
gross domestic product
report, coupled with a weaker-than-expected 0.8% increase in the
employment cost index
, an important measure of wage inflation, and the 12% drop in the September
new home sales
"My feeling is that it's 51 to 49 the Fed will hike, but when they do,
stocks will rally," says Al Goldman, chief market strategist at
in St. Louis. "It's the 'dropping the other shoe' syndrome -- people will conclude the Fed is out of our face."
There's still a full complement of economic reports on the schedule before the Fed meeting, including third-quarter
figures, employment figures and the
indices. But those reports will now be informing a bond market seeking to do better, rather than worse.
All this is good news for the stock market: Lower interest rates support higher valuations and decrease companies' cost of capital.
It's noteworthy that the
Philadelphia Stock Exchange/KBW Bank Index
was up 9.2% this week. Stocks of lending institutions react strongly to changes in interest rates (banks hold large portfolios of bonds, and as rates fall, their return on investment improves).
Obviously, people still feel the need to
be careful out there.
Attempting to go long during the last six months has only gotten one burned.
In a bear market, investors are always looking for that "real bottom," be it a 20% decline, a
cover declaring stocks dead or a panicked day of selling that ends with you collapsed in a heap of paper, deciding which of the cars (or children) to put on the auction block.
Some technicians believe it didn't exactly happen in either stocks or bonds. Manager surveys haven't shown fixed-income investors aggressively short the market, so they believe this could be the beginning of a brief leg up -- that's a prelude to a leg down.
"We never got the capitulation expected in the market, but we've hit new lows, and that should be enough to send us back toward the highs," said Michael Krauss, fixed-income market strategist at
Both markets are likely to freak out temporarily when October's employment figures are released Friday. Seasonal adjustments and an expected turnaround after the 8,000 decline in payrolls due to Hurricane Floyd has economists predicting a 313,000 rise in payrolls for October. Chase Securities goes further, expecting a 400,000 rise, while
Salomon Smith Barney
is looking for a whopping 525,000 increase.
Wrong! Dispatches from the Front: Thank God for That Friday
James J. Cramer
10/29/99 4:18 PM ET
Two weeks and 700 points ago, I didn't blink. Sometimes that's all it comes down to. As much as I was willing to admit that I blew October of 1998 -- hey, no kidding, if you read the boards, there is a special place in hell for my work last year -- I feel good that the Friday two weeks ago marked the bottom to this tape for the foreseeable future.
Cramer's Latest: Join the discussion on
As you mull over what to do with your investments this weekend, remember that while the bottom may have been reached, there is still plenty of opportunity in the market even at these levels.
Right now, I am taking advantage of a body slam to
, a crash in
and a selloff in
Because they are still down a great deal
. I even bought more
Just because you listened to some know-it-all on TV who told you that markets never bottom on Fridays, or when bonds are going down, or during the second week of October, or in months beginning with O, doesn't mean you have missed it all.
But remember, next time, when the talking heads come out and tell you the world is about to end, that, usually, the sun comes up in the East each morning and that those who would tell you it won't, are people you want to bet against, not with.
TV show this weekend. See you on
Fox News Channel
. And to you cable operators who haven't picked the show up yet, I ask the question that my dad asked me: "What's with these cable operators who don't want us to make money? Why do they want to stop us from making money?"
Good question. I knew that a lot of them had crummy service. I just didn't know that a lot of them were against you making money.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Qwest Communications, E*Trade, Tyco and Goldman Sachs. 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: Citrix to Replace Mobil in S&P 500
10/29/99 8:37 PM ET
Standard & Poor's
index. Mobil is being acquired by fellow S&P 500 component
will replace Mobil in the
will replace Citrix in the
S&P MidCap 400
Island ECN, owned by Datek Online, offers trading, mainly in Nasdaq-listed stocks, from 8 a.m. to 8 p.m. EDT. Prior to Sept. 15 Island offered trading from 8 a.m. to 5:15 p.m. EDT. Need more information on the ins and outs of after-hours trading? Click here to see how the rules change when the sun goes down.
In other postclose news:
Mergers, acquisitions and joint ventures
agreed to extend its $9 a share tender offer for
until Nov. 5. The extension follows yesterday's announcement by the
that it would file a lawsuit to block the transaction on the grounds that the combined companies would increase the price of some mainframe software . The companies said they still remain committed to the completion of the merger.
said David Eppler will succeed Gregory Nesbitt as CEO after his planned retirement in May 2000. Eppler was named president and COO in January.
In a decision seen as a victory for
, a federal jury found that two microchip-related patents owned by
U.S. subsidiary are invalid. EMI's North American unit had charged Cypress with patent infringement and had sought $4.8 million in back royalties.
The award for nonevent of the week goes to the U.S. district court handling
antitrust trial, for its release of a statement that said there would be no announcement today of the "findings of fact" in the case. Last week, court officials said the judge's "factual findings" will be issued at 6:30 p.m. ET on an upcoming Friday in Washington, but didn't indicate which Friday.
Bond Focus: Big Rally Carries Long Bond Yield to Three-Week Low
10/29/99 4:59 PM ET
The long Treasury bond tacked on more than a full point for the second session in a row, after an economic report appeared to bolster
thesis in a speech last night that rising market interest rates may be working to slow economic growth to a sustainable pace.
The rally took the 30-year bond's yield to its lowest closing level in more than three weeks. The bond's price rose 1 5/32 to 99 14/32, trimming its yield 10 basis points to 6.16%, the lowest yield since Oct. 6.
The market: Join the discussion on
Shorter-maturity-note yields, more closely tied to the interest rate set by the Fed, also rallied as traders priced in a smaller likelihood of another rate hike at the Fed's next meeting on Nov. 16. At the
Chicago Board of Trade
, where futures on the fed funds rate are
listed, the odds of a Nov. 16 hike slipped to 60% from 73% yesterday.
speech to the
in Boca Raton, Greenspan warned that growth in consumer demand may be outpacing growth in the economy's productive potential, a condition that can lead to inflation.
But, he said, rising market interest rates may be taking care of the problem -- implying, bond-market participants say, that additional rate hikes by the Fed may not be necessary.
That thesis got a major boost this morning, when the September
new home sales
report showed a huge decline. Housing is the quintessential interest-rate-sensitive sector of the economy, and the sharp decline in new home sales confirmed that higher long-term interest rates are slowly but surely working to curb consumer spending. The pace of new home sales fell 12.8% to 811,000 from a revised 930,000 in August.
"There is mounting evidence that interest-rate-sensitive activity is beginning to decline in response to higher borrowing costs,"
Moody's Investors Service
chief economist John Lonski said.
"All the pieces fit together," said Matt Frymier, a note trader at
Banc of America Securities
in San Francisco. "Greenspan said, 'The market's tightening for me, and if it needs to happen again, it'll do it again.'"
The case against a November rate hike is bolstered,
Treasury market strategist Jerry Lucas pointed out, by the proximity of year-end. If Y2K dislocations are more widespread than expected, the Fed might regret having hiked, Lucas said. There's no pressing need for the Fed to tighten next month, so it might as well wait till next year.
But even if the Fed tightens next month, the bond market is nursing the hope that the hike will be the last one for the next few months at least.
Bond mavens are still reluctant to say the bear is dead, though. "I am cautiously optimistic," Lucas said. "But bull corrections do come in longer-term bear markets."
The bond market was also supported today by calendar-related buying. More often than not, bond prices rise on the last business day of the month. Indices that track the market are reconstituted on that day, which triggers buying by fund managers who model their portfolios after indices.
TO VIEW TSC'S ECONOMIC DATBANK, SEE:
Chat with John J. Edwards III Monday, Nov. 1 on AOL's MarketTalk at 3:30 p.m. EDT. MarketTalk is hosted by Sage Online. (Keyword: PF Live)
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