TheStreet.com's MIDDAY UPDATE

January 14, 2000

http://www.thestreet.com

Market Data as of 1/14/00, 1:09 PM ET:

o Dow Jones Industrial Average: 11,719.25 up 136.82, 1.18%

o Nasdaq Composite Index: 4,075.63 up 118.42, 2.99%

o S&P 500: 1,466.36 up 16.68, 1.15%

o TSC Internet: 1,112.41 up 14.46, 1.32%

o Russell 2000: 506.60 up 5.41, 1.08%

o 30-Year Treasury: 92 25/32 down 12/32, yield 6.688%

In Today's Bulletin:

o Midday Musings: Intel Powers Tech-Led Rally as Market Shrugs Off Greenspan
o Herb on TheStreet: Reality Check: Why the Intel Bears Really Got It Right

"TheStreet.com" on

Fox News Channel

For 50 years,

Vanguard's

Jack Bogle

has been a hero to everyone tired of being ripped off by Wall Street. He's the father of the low-cost, no-load index mutual fund, and he's our very special guest for "Word on TheStreet" this week.

Plus,

Peter Canelo

of

Morgan Stanley

joins us with his stock picks, and Gary B. Smith and Adam Lashinsky look to see if you can spot a takeover about to happen. And, as usual, predictions you can't afford to miss.

"TheStreet.com" on

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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 TV" page at http://www.thestreet.com/tv.

Also on TheStreet.com:

Smarter Money: Knowing the Rules of the Shorting Game

The trader clears up some mystery shrouding this sometimes complex process.

http://www.thestreet.com/funds/smarter/862233.html

SiliconStreet.com: Shhh. Please Do Not Disturb the Quiet Period

What's so great about quiet periods? Plenty, say the lawyers, bankers and companies they serve.

http://www.thestreet.com/comment/siliconstreet/861652.html

Options Buzz: Compaq Call Traffic Jumps on Stock's Comeback

Compaq is finally looking good again, and options traders are changing their positions.

http://www.thestreet.com/stocks/optionsbuzz/862214.html

Fixed-Income Forum: Notable Exceptions to a Bad Year for Bond Funds

They include emerging-market, high-yield and taxable muni funds.

http://www.thestreet.com/funds/bondforum/862197.html

Midday Musings: Intel Powers Tech-Led Rally as Market Shrugs Off Greenspan

By

Brian Louis

Staff Reporter

1/14/00 1:12 PM ET

It sure looks like Wall Street's betting that in 2010, when it looks back on the economy at the turn of the century, it will fondly remember the period we're in now as one where "the American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity, output, corporate profits, and stock prices at a pace not seen in generations, if ever."

That partial quote comes from

Fed

Chairman

Alan Greenspan's

speech

last night in New York, where he used the 2010 retrospective view of the current state of the economy and how one day we might look back on today.

Considering where major stock proxies are now, they're sure not looking at the converse perspective from 2010 that the Fed chief offered up in his address to the

Economic Club of New York

: He said we "might well conclude that a good deal of what we are currently experiencing was just one of the many euphoric speculative bubbles that have dotted human history."

The market: Join the discussion on

TSC

Message Boards.

Traders are already expecting Greenspan and his cohorts on the

Federal Open Market Committee

to raise the target fed funds rate Feb. 2, but there was some question of how much. There had been fears that Greenspan & Co. would hike by 50 basis points. Now market players seem to be taking away from the speech last night, and some market-warming inflation data from this morning, that a 50-basis-point hike isn't on the way and the FOMC will only raise rates by 25 basis points next month, as expected.

Peter Coolidge, managing director of equity trading at

Brean Murray Foster Securities

, said that fears of a 50-basis-point rate hike now appear exaggerated, and the market was breathing a sigh of relief.

Coolidge said the action in the market today reminded him of what it was like a month ago. Traders and investors have had a love-hate relationship with the market in the last couple of weeks, he said, and today they're loving it.

The inflation data in question were in the form of the

Consumer Price Index

, which came in a bit below expectations. The overall CPI rose 0.2%, while the core rose 0.1%. Economists polled by

Reuters

projected overall CPI to rise 0.3%, while those polled expected the core CPI to rise 0.2%.

That and

Intel's

(INTC) - Get Report

blowout earnings report late

yesterday helped fuel a sharp rally in tech stocks. The market's advance has cooled somewhat, however, as the morning has dragged on, in part as the bond market has tumbled sharply.

The 30-year Treasury was off 21/32 to 92 17/32, its yield swelling to 6.71%. (For more on the fixed-income market, see today's early

Bond Focus.)

Steinberg Sees Tame Inflation but More Tightening

Bruce Steinberg, chief economist at

Merrill Lynch

, in a commentary after the CPI was released said he expects inflation to slip in 2000 and that both the overall CPI and core CPI will rise less than 2% on a fourth-quarter-over-fourth-quarter basis this year.

"In his speech last night, Alan Greenspan made clear that more tightening was coming down the pike," wrote Steinberg. "Not because of current inflation, but because wealth-induced demand is growing faster than productivity-enhanced supply. We expect at least two more 25 basis point tightening moves from the Fed, on Feb. 2 and March 21."

The

Nasdaq Composite Index

was pacing the market's major gauges higher. The Comp was up 106, or 2.7%, to 4063. Semiconductor, and semiconductor equipment makers, and computer makers were boosting the Comp. Also lending a hand were index heavyweights

Microsoft

(MSFT) - Get Report

, Intel,

Cisco

(CSCO) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

and

Dell

(DELL) - Get Report

.

The

Philadelphia Stock Exchange Semiconductor Index

was up 7.2% in the wake of Intel's earnings and on a positive outlook for chip equipment makers.

Meanwhile, the

Dow Jones Industrial Average

was up 114, or 1%, to 11,696, powered by Intel, which was accounting for 59.26 points of positive influence on the Dow. Financials

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

, along with Microsoft, were juicing up the blue-chip gauge.

The

S&P 500

was up 14, or 1%, to 1464. The small-cap

Russell 2000

was up 5, or 1%, to 506.

Internet stocks have gained, but the advances haven't been staggering.

TheStreet.com Internet Sector

was up 9, or 0.8%, to 1107, powered by

Check Point Software Technologies

(CHKP) - Get Report

which was flying after it set a 2-for-1 stock split.

Breadth was decidedly positive, although off its best levels, and volume was heavy (see below).

Perception of Fed Predictability Helps Stocks

Paul Cherney, market analyst at

S&P MarketScope

, sees good things ahead for the market for a number of reasons over the short term.

Cherney pointed out that on a fundamental basis, the earnings confessional period for companies is drawing to a close, and that "sort of bodes well" for earnings reports going forward. Also, in the wake of Greenspan's speech last night, the market has embraced the notion that a 25-basis-point hike in rates in February is on the way, and probably another 25 basis points in March, he said.

"What the market knows doesn't hurt. Right now, there's no uncertainty with the Fed," Cherney said.

As for the bond market, he said he thinks the bond market has discounted interest rate hikes totaling 50 basis points, subject to new economic data.

"I would say we're going to have net gains over the next three to five trade days," Cherney said. He said the market could probably see prints in the S&P 500 of 1500 to 1520 within the next two weeks.

As for the Nasdaq Comp, the analyst has resistance on the Comp at 4140 to 4192.

Also encouraging to the analyst is the fact that the market's enjoying better breadth, which is usually a good sign and shows a greater confidence in the overall market.

Among other indices, the

Dow Jones Utility Average

was up 0.5%, the

Dow Jones Transportation Average

was up 0.9% and the

American Stock Exchange Composite Index

was up 0.4%.

Market Internals

New York Stock Exchange:

1,593 advancers, 1,270 decliners, 655 million shares. 98 new 52-week highs, 38 new lows.

Nasdaq Stock Market:

2,301 advancers, 1,606 decliners, 998 million shares. 212 new highs, 31 new lows.

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

Herb on TheStreet: Reality Check: Why the Intel Bears Really Got It Right

By

Herb Greenberg

Senior Columnist

1/14/00 6:30 AM ET

Boy, I must really be a glutton for punishment for what I'm about to write, but if you break down the numbers, it's not really clear that

Intel

(INTC) - Get Report

had the blowout quarter -- or even beat the number -- that Wall Street believes it did. At least that's the interpretation of money manager

Bill Fleckenstein

, who was quoted

here earlier this week saying that Intel would not make the number. (Believe me, after I saw that number, I was ready to give him and his newsletter-writing pal

Fred Hickey

failing marks for their call here; no need to wait till the

semiannual report card.)

However, some postrelease number-crunching tells a somewhat different story.

On the surface, Intel earned 69 cents per share, after subtracting out acquisition-related charges. However, based on

Merrill Lynch's

prior forecast, at least 3 cents of that 8-cent charge is believed to be

higher

than expected. More important, the company itself said in its earnings release that interest and other income was $508 million in the fourth quarter, or $228 million

higher

than the company's own guidance. That $228 million breaks down to around 5 cents a share after tax.

Herb's Latest: Join the discussion on

TSC Message Boards .

That makes the final tally for earnings from the chipmaker more like 61 cents per share, or

below

expectations. (And earnings from operations -- like it or not -- are the name of this game. It's the quality of the earnings, not the quantity.)

Revenue, however, did beat expectations, and the company's guidance was positive, so Fleckenstein's analysis is likely to be dismissed as irrelevant. But the numbers are the numbers -- do with them as you wish. (Oh, and by the way, this isn't saying that Intel isn't a great company and won't be even greater in the future. It's just that its earnings over the past two years are up 20% and its stock is up 150%. That's why folks like Fleckenstein don't give up.)

P.S.: If you're planning to spam me with hostile reactions today, don't. I'll be in New York all day visiting sources, and I'll be there well into the evening doing our

Fox

TV show.

CVS, continued:

Heard from a

CVS

(CVS) - Get Report

spokeswoman yesterday who emphatically insisted CVS had done nothing tricky, as this column

suggested yesterday, to make its December sales numbers look better by adding an extra week to its sales.

To recap, the company ends its fiscal year and December monthly sales calendar on the Saturday closest to the end of the month. As a result, most analysts figured the quarter would've ended on Dec. 25; it ended Dec. 26 and Dec. 27 in the two prior years. But when the company reported December sales, the cutoff had been extended to Saturday, Jan. 1. A spokeswoman says CVS, like some other retailers, sets up its quarters with two four-week periods and one five-week period, with the last quarter of the year ending on the last Saturday in December. Every five years, she adds, that means a sixth week is added to, in a sense, reset the company's calendar, "and there's nothing unusual about this" among some retailers.

Maybe not, but CVS, which until a few years ago was part of the old

Melville Corp.

, hasn't been a standalone company for five years. How can

this

be its fifth year for this schedule? The spokeswoman would only say that the extra week has been on CVS' calendar "forever." Then, why didn't most analysts know about it? She says they should have. (But they didn't.)

She adds that the company decided that 1999 would be the year to switch because if it waited until 2000 -- based on its old schedule -- it would have had to end the year on Dec. 23, or a few days

before

Christmas. (That's what she said, and I'm still confused.) However (and this is where the story gets confusing), the company has always said that its year ends on the Saturday closest to Dec. 31. According to my calendar, that would've made the last day of fiscal 2000 Saturday, Dec. 30, no matter which schedule the company was using.

Maybe the company should change its name to SVC -- Simply Very Confusing.

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

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

TheStreet.com Community

The boards are buzzing with the latest Microsoft news. Weigh in on your thoughts on Bill Gates' decision to crown longtime exec Steve Ballmer chief executive of the software giant.

http://www.thestreet.com/bbs/Forum17/HTML/000004.html

And, make sure to catch the following Cramer appearances for even more insight into this week's market movements. He will be appearing tonight on the following shows on

Fox News Channel

:

5 p.m. ET -- "Your World with Neil Cavuto"

7 p.m. ET -- "Fox Report with Shepard Smith"

Then catch Cramer on this weekend's "Fox News Sunday" on the Fox Network beginning at 9 a.m. ET. Check the Community page for more information.

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