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midday01-05-00's MIDDAY UPDATE

January 5, 2000

Market Data as of 1/5/00, 1:24 PM ET:

o Dow Jones Industrial Average: 11,124.12 up 126.19, 1.15%

o Nasdaq Composite Index: 3,814.57 down 87.12, -2.23%

o S&P 500: 1,398.73 down 0.69, -0.05%

o TSC Internet: 1,081.00 down 54.58, -4.81%

o Russell 2000: 473.37 down 5.01, -1.05%

o 30-Year Treasury: 93 15/32 down 1 05/32, yield 6.618%

In Today's Bulletin:

o Midday Musings: Blodget Comments Help to Batter Net Stocks; Dow Keeps Steaming Higher
o Herb on TheStreet: Some Analysts Have Started Hedging Their Bets on Tyco

"" on

Fox News Channel

What kind of market are we in for this year? Which way is this rocket heading in 2000? That's the trick ... and we'll talk about it with special guest

Joe Battipaglia

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. Gary and Adam look at a big Nasdaq winner and a big loser from 1999 and debate if it will be more of the same for these two in 2000 or a reversal of fortune for both. Plus, Cramer has a prediction you can't afford to miss.

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Also on

Wrong! Dispatches from the Front: No Insiders Here

Cramer says the stuff that is working is also the stuff with no insider selling going on.

Internet: Commerce One Looks to Buy Its Way Out of New Year's Tech Blues

The stock had fallen sharply in the last week, but Tuesday's Mergent buy sparks a contrarian rally.

Brokerages/Wall Street: Chase Poaches Wireless Analyst From Salomon Smith Barney

The big bank builds its research effort by hiring Thomas Lee, a top-ranked talent.

Dear Dagen: Dear Dagen: No Stay-Invested Bromides, Just Some Hard Facts

Also: The difference between QQQs and closed-end mutual funds.

Midday Musings: Blodget Comments Help to Batter Net Stocks; Dow Keeps Steaming Higher


Eileen Kinsella

Staff Reporter

1/5/00 1:34 PM ET

Something bordering on a sigh of relief swept across Wall Street as investors readily grabbed onto the notion that it's not time for the Big One ... yet.


Dow Jones Industrial Average

broke ranks with the tech-laden

Nasdaq Composite Index

and hightailed it out of the red, lately climbing 126, or 1.2%, to 11,124, just off its intraday high of 11,130.41. The Comp was left behind to answer to less-than-pleased investors, who continued to punish the entire tech sector, lately sending the index down 87, or 2.2%, to 3814. It did bounce off an intraday low of 3734.87.

Any tech investor worried about whether tech, and Internet stocks in particular, have gotten too far ahead of themselves, effectively got the nod from

(AMZN) - Get Inc. Report

today when it previewed its fourth-quarter results by saying a sharp jump in sales wouldn't translate into lower net losses. The online behemoth said sales jumped to $650 million from $253 million a year ago, but warned it sees higher-than-expected fourth-quarter inventory charges and write-downs.


Merrill Lynch

analyst Henry Blodget helped to slam Amazon and the whole Net sector this morning with negative comments on the e-commerce giant's report. Blodget said:

We think this is a strong quarter but not spectacular and the market is likely to be disappointed based on some very aggressive expectations. ... We think this announcement could create negative sentiment for the rest of the group.

And so it did. Amazon lately was down 10 3/8, or 12.7%, to 71 5/8, with Internet Sector

index tumbling 56, or 4.9%, to 1080 and E-Commerce Index

down 5, or 4.2%, to 109.

Robertson Stephens

joined the Amazon pile-on as well, lowering the stock to buy from strong buy.



was also helping to lead the charge down as it sank 7.1%.

Still, some on the Street see hopeful signs amid the slash and burn.

"The downward momentum feels like it has slowed and some of the selling has worn itself out. It feels a lot less anxious," said Bill Schneider, head of U.S. equity block trading at

Warburg Dillon Read

. "Bottom-fishers are even doing a little nibbling." Schneider said it was not surprising that the Dow and

S&P 500

are breaking away from the Nasdaq given the Comp's breathless run-up. After breaking the

3000 barrier in early November, the Comp shot up past

4000 in less than two months.

"I think we are in a period of increased vulnerability," said Schneider as he looked ahead at the next few weeks. "The market probably needs to get some earnings announcements under its belt. It has not fully come to grips with the prospect of a rate increase yet. The expectation that is creeping in now, is what has already beaten the bonds."

The few stocks managing to escape the tech trampling today included

Red Hat


, rising 2.7% on news that it is buying an e-commerce firm, and


(IBM) - Get International Business Machines Corporation Report

, up 3.3% after it received an upgrade.

Wireless stocks were getting slapped and pulling the telecommunication sector lower. The normally invincible


(QCOM) - Get QUALCOMM Incorporated Report

was sliding 6.4%, while


(NOK) - Get Nokia Corporation Sponsored American Depositary Shares Report

was off 4.3% and



was down 4.9%.

Meanwhile, old-fashioned phone stocks like

Bell Atlantic




(GTE) - Get Gran Tierra Energy Inc. Report

were trying to muster up some enthusiasm after a bullish call from

Credit Suisse First Boston

analyst Dan Reingold, who slapped strong buy and buy recommendations on a total of 14 stocks. (Reingold was initiating coverage after jumping to First Boston from Merrill in November.) But the negative seemed to be winning out, judging from a glance at the

Nasdaq Telecommunications Index

, down 2.3%.

First Boston also released a portfolio strategy update in which it advised investors to let this drop get "some room to work out the kinks" rather than jump in to buy the dip, calling the Nasdaq's correction an "indication of a rapidly deteriorating consensus on the level of fair value for equities." The firm advised investors to focus on areas including consumer cyclicals, health care services and selected commodity cyclicals.

Indeed cyclicals were taking a noticeable turn for the better today, with the

Dow Jones Utility Average

rising 3.4%, the

Philadelphia Stock Exchange Forest & Paper Product Index

, up 2.8%, and the

American Stock Exchange Pharmaceutical Index

, rising 2.1%.

The benchmark 30-year Treasury was down 1 8/32 to 93 12/32, its yield rising to 6.64%. (For more on the fixed-income market, see today's early

Bond Focus.)

Market Internals

Breadth was decent on the Big Board but negative on the Nasdaq, both on fairly heavy volume.

New York Stock Exchange:

1,596 advancers, 1,397 decliners, 648 million shares. 19 new 52-week highs, 86 new lows.

Nasdaq Stock Market:

1,709 advancers, 2,191 decliners, 1.065 billion shares. 42 new highs, 64 new lows.

For a look at stocks in the midsession news, see Midday Movers, now published separately.

Herb on TheStreet: Some Analysts Have Started Hedging Their Bets on Tyco


Herb Greenberg

Senior Columnist

1/5/00 6:30 AM ET

Yep, yesterday was nasty -- unless, of course, you were short whatever went down. But this column looks micro, not macro, because in the end fundamentals


count. (That's important to remember in a market like this, which is as likely to boomerang as it is to continue bursting.)

With that in mind...

Tyco talk:

Whenever analysts veer, ever so slightly, in their support of a company under fire it's worthwhile to pay attention. The veering, in this case, has to do with



, which is under fire for alleged accounting irregularities.

The Tyco story, as we know it today, started in October, when its then-highflying stock took a hit after short-seller

David Tice's

Behind the Numbers

newsletter questioned acquisitive Tyco's merger accounting. Tyco responded by saying that it had done nothing wrong, that Tice's report was flawed, that all of its accounting was in accordance with generally accepted accounting principles and that its auditors would give it a clean bill of health. Similar comments were regurgitated by Wall Street.

Herb's Latest: Join the discussion on

TSC Message Boards

Tyco .

Then came a story in

The New York Times

by Floyd Norris that questioned how the companies in the process of being acquired by Tyco took large charges just prior to the acquisitions. Again, Tyco and its supporters said nothing was wrong.

Then, in early December, Tyco disclosed that the


had launched an informal "nonpublic" investigation into its merger accounting. Again, the company and its chorus of supporters said everything was fine and, finally, this would put the accounting issues to rest.

That was followed, in recent days, by analyst reports suggesting the company's first quarter ended Dec. 31 will exceed Wall Street estimates.

But (and here's the good part) reports by at least two analysts suggested there actually may be some kind of penalty. "We do not expect any meaningful restatements from the inquiry," wrote Harriet Baldwin of

Deutsche Banc Alex. Brown

. And James Samuels of

Banc of America Securities

told his clients that "ultimately, we do not believe Tyco will be meaningfully penalized."

Where did they come up with such similarly worded conclusions? A Tyco spokesman says that the company has said nothing. "We cannot speculate at all what the SEC will find or not find," the spokesman said.

Baldwin, meanwhile, told me the company didn't tell her she was completely crazy when she raised the issue. She figures that after several months of investigating, she "wouldn't be shocked if they had to change a couple of figures."

And Samuels says that he figures the SEC wouldn't want to be accused of "mild oversight" by coming away empty-handed after involving itself in such a high-profile case.

Whatever happens, the party line is changing (if ever so slightly) from nothing will happen to something is likely to happen. Sure, it's just a subtlety, but subtle changes are worth watching because a subtle change here, a subtle change there and pretty soon you can have something significant.

Lernahooligan alert:

Who woulda thunk? The market has its worst day in recent memory and what stock is up?

Lernout & Hauspie


, which has been rising for the past month, rose yesterday after an analyst from

Dresdner Kleinwort Benson

in London, who had not previously published on the stock, recommended Lernout with a price target of around 73. Among his reasons was Lernout's "impressive recent financial performance."

Are we talking the same Lernout? According to

First Call/Thomson Financial

, analysts have steadily chopped away at earnings estimates for the Belgian speech-recognition company -- for this year and last -- since last April. Now they're expecting the company to earn 67 cents per share in the just-completed year, down from $1.07 per share. And while the estimates have been cut by 37%, Lernout's stock has more than doubled. It rose 11% yesterday to close at a new 52-week high of 56 1/16.




Finally, it's baaccck!

Of all stocks,



was also among those bucking yesterday's trend. (Credit a positive TV mention from an analyst who apparently figured that, of the thousands of publicly traded stocks, Iomega is



Which reminds me (even though Iomega isn't on the list): What has been the performance of the

Greenberg Garbage Index of stocks that, in the most recent frenzy, was trying to regain its lost luster? Thought you'd never ask. Down 2.6% yesterday and flat since the index was launched Dec. 10.

This just in (surprise, surprise)

: Sputtering

Action Performance


withdrew the pending public offering of its

unit. The company offered no explanation.

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

Copyright 2000,