Skip to main content's MIDDAY UPDATE

January 20, 2000

Market Data as of 1/20/00, 1:23 PM ET:

o Dow Jones Industrial Average: 11,313.92 down 175.44, -1.53%

o Nasdaq Composite Index: 4,154.01 up 2.72, 0.07%

o S&P 500: 1,442.86 down 13.04, -0.90%

o TSC Internet: 1,124.48 down 7.71, -0.68%

o Russell 2000: 522.16 up 2.14, 0.41%

o 30-Year Treasury: 92 26/32 up 15/32, yield 6.690%

In Today's Bulletin:

o Midday Musings: Rotation Swinging Back Toward Tech as Dow, Cyclicals Get Slammed
o Wrong! Tactics and Strategies: Waiting Out the Net Potential Community

Get personal with as Personal Finance writers

Dagen McDowell


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Tracy Byrnes

answer your fund and tax questions on today's boards. Look for the Dear Dagen and


Tax Forum boards in the community section. And make sure to check out the rest of the busy boards at

"" on

Fox News Channel

Tech is where you need to be in this stock market, but there's so much tech out there, where's the best place for your investment dollar? We'll talk about that and more on this week's "Word on TheStreet" with our very special guest

Max Ansbacher

, president of

Ansbacher Investment Management



Philip Orlando


Value Line Asset Management

joins us with his stock picks and Adam takes Gary to task on

America Online

. And, as usual, predictions you can't afford to miss.

"" on

Fox News Channel

airs Saturdays at 10 a.m. and 6 p.m. EST and Sundays at 10 a.m. EST. FNC is Fox's 24-hour cable newschannel. To find

Fox News Channel

in your area, call your local cable operator or see our "TSC on Fox TV" page at

Also on Critics of the Nasdaq, Unite!

Jack Bogle and the


take shots at the Nasdaq and tech valuations -- but how true is their aim?

Internet: AOL Says It Won't Hang SportsLine Out to Dry

Branding opportunities won't blind the media behemoth to consumers' desire for content choices, Case says.

Wrong! Tactics and Strategies: Disappointed in the Action

Maybe expiration is wreaking havoc on Cramer's trading screens.

Dear Dagen: Dear Dagen: Go-Anywhere Funds Can Wander Onto the Wrong Path

And they're hard to fit into a carefully allocated portfolio.

Midday Musings: Rotation Swinging Back Toward Tech as Dow, Cyclicals Get Slammed


Tara Murphy

Staff Reporter

1/20/00 1:20 PM ET

This week, earnings season has gotten off to a strong start with tech giants


(IBM) - Get International Business Machines Corporation Report



(AAPL) - Get Apple Inc. Report

energizing the sector after posting better-than-expected results. But are robust earnings the answer to keeping investors' attention on those tech darlings of 1999? Where is that Y2K correction, anyway?

By midday, last night's earnings reports were driving the market. "Tech is the leading story of the morning," said Robert Harrington, co-head of block trading at


, referring to the IBM's strong results. "Tech has had good news but it's not as 'up, up, and away' as it used to be, especially in the Internet stocks. The activity is probably news-specific at this point."

Lately, the

Nasdaq Composite Index

was up 4 to 4155, clinging to positive territory on strong gains from Apple, which was bouncing, 13 1/2, or 13%, to 117 7/16.



was losing 14 1/4, or 31.4%, to 31 1/8 after posting soft fourth-quarter revenue. Internet Sector

index was slipping 4 to 1128.



was dragging 13 1/8, or 3.6%, to 350 7/8, while

America Online


was off 1 1/16, or 1.6%, to 63 13/16, despite a solid earnings report.

Although earnings maybe the force behind today's trading, some Wall Street insiders continue to wonder if there's any reason not to stay tech-happy after experiencing a hitch-less millennium date change. "The big surprise for the tech sector will be if the slowdown in spending doesn't occur," said Brian Gilmartin, portfolio manager for

Trinity Asset Management

. "That's where you'll get continued upside in technology."

And with investors pumping cash into the equity market as companies continue to beat the consensus numbers, there doesn't look to be an end to the tech boom, at least anytime soon. "The indications from the conference calls are that the first quarter will continue to be strong because the normal seasonal downturn that we usually see in the first quarter, already occurred in the fourth quarter," said Gilmartin.

For now, it seems as if the brief rotation out of tech and into more cyclical sectors has stalled out. But Gilmartin said he has seen a rotation within the tech sector itself. "You've seen a shift. The typical momentum stocks, such as


(ORCL) - Get Oracle Corporation Report


Sun Microsystems

(SUNW) - Get Sunworks Inc. Report

, are continuing to do well but you're seeing some of the beaten-down names, like IBM,






, come back."

In Nasdaq trading,

i2 Technologies


was soaring 30 5/8, or 14.3%, to 245 1/2 after reporting stellar fourth-quarter earnings and a 2-for-1 stock split.

With another


meeting only a little more than two weeks away and a likely rate hike looming, investors seem to be shrugging off their usual fears. "I think interest rates are being ignored because there is no inflation," said Gilmartin. "Probably, if we get to 7% on the 30-year, we'll see equity prices and market valuations taking note of that."

And with a strong global economy comes financial strength for companies. "Basically, a lot of companies are being able to raise their prices on their products, which they haven't been able to do since 1994 and 1995," Gilmartin said. "




Boise Cascade

(BCC) - Get Boise Cascade L.L.C. Report

have made announcements that they would raise prices on some of their product lines."

In midday trading activity, cyclical stocks were struggling, with the

Morgan Stanley Cyclical Index

falling 2.9%.

Lately, the

Dow Jones Industrial Average

was sinking 190, or 1.7%, to 11,299, with

Procter & Gamble

(PG) - Get Procter & Gamble Company (The) Report



(AA) - Get Alcoa Corporation Report

holding the index down.

The broad

S&P 500

index was declining 15, or 1%, to 1441, while the smaller-cap

Russell 2000

was moving up 2 to 522.

Market Internals

Breadth was negative on moderate volume.

New York Stock Exchange:

1,069 advancers, 1,868 decliners, 667 million shares. 74 new 52-week highs, 87 new lows.

Nasdaq Stock Market:

1,875 advancers, 2,087 decliners, 1.15 billion shares. 340 new highs, 47 new lows.

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

Wrong! Tactics and Strategies: Waiting Out the Net Potential


James J. Cramer

1/20/00 7:03 AM ET

America Online's


quarter puts tremendous pressure on the rest of the Net companies, save



, because it is, in many ways, a profit machine. You can snicker along with

Tish Williams

in her

critique of the postgame (and I like snickering with Tish, so I don't blame you) but I do hold this truth to be self-evident: AOL's just plain kicking butt.

It has figured out how to make money on the Net, and people like that. We like it because it is more than everybody else -- again, save Yahoo! -- has, and it looks like we are getting late in the patience game for those who haven't.

Join the discussion on


Message Boards. Let's contrast AOL and Yahoo! with two other Net situations, one which I am long because of the potential, and the other, which I have given up on because of the losses. I am talking about







(Disclosure, Inc.


has a relationship with E*Trade, so you can figure me as bought and paid for. I really don't care if you do. I certainly wouldn't own a stock out of loyalty to anybody. I own a stock because I think it is going to make me money.)

When I sit back and analyze E*Trade's

quarter, I see many, many positive things: market-share gains, lowered acquisition costs, constant volumes, great name recognition, fabulous marketing. Others, though, just see the losses. They don't see the potential gains. In fact, they see the gains pushed out further.

I understand that. That's how I feel about Amazon. The bulls on Amazon see the market-share gains, the profitability in the core book business, unbelievable name recognition and marketing, and they figure, "Give it time." I think, on the other hand, it has had plenty of time and it hasn't done it yet.

This juncture is where AOL and Yahoo! come in. People are selling Amazon and E*Trade because they are saying, "Wait a second. I don't need all of this potential and red ink. I can have potential and black ink with AOL and Yahoo!. I don't need the aggravation."

And after watching the way E*Trade traded yesterday, I have had some of the same thoughts. So why am I patient with E*Trade? Why do I not blow out of it lock, stock and barrel? Because, unlike Amazon, I think these guys are capitalists at heart. I think they want badly to make money and dominate, and they are smart and they will figure it out. I keep thinking this story is down 5, up 50 when they get it right, with down 5 being a cost worth swallowing.

Sometimes the best stories can be the ones no one loves.

Fortunately, as a portfolio manager, I can afford the luxury of waiting. And I have other winners that can subsidize those stocks that aren't doing anything.

But don't get me wrong. I understand those who don't have that luxury or patience -- because I was long Amazon for a long time. And I finally decided that the All Potential Team wasn't worth waiting for.

Random musings:

Speaking of all potential, I salute


(AMD) - Get Advanced Micro Devices Inc. Report

for getting it

right and finally making shareholders some bucks. ...


(IBM) - Get International Business Machines Corporation Report

was simply

not bad enough to please the bears, even though there was plenty there that was bad. ... How many times am I going to miss this


(AAPL) - Get Apple Inc. Report

in this century? Probably as many times as I did last century. ... Couple of must-reads on the site, the

Transmeta piece by

Jim Seymour


G.B. Smith's

dialogue. Can't believe how good some of the stuff on this site is. ... Still a lot of futures-selling weighing down on the market these past few days, perhaps giant institutions doing some sort of a hedge that stops them out on gains? Always hard to pin that stuff down. ... The


(CSCO) - Get Cisco Systems Inc. Report

raiders, you know, the ones who were trying to do a number on it like


(LU) - Get Lufax Holding Ltd American Depositary Shares two of which representing one Report

, got their heads handed to them and I couldn't be happier. ... It will be interesting to see how the journalists at

Time Warner


get along with their new bosses at AOL. In some ways, the Web is a brutal taskmaster because you find out very fast who reads what and who doesn't. Those pieces without a lot of page views tend not to be subsidized for too long by those that have them. And those writers without a lot of page views, they will wish that page views couldn't be counted. But those who have the page views? They will want more money. And if someone doesn't pay them, they will go elsewhere because they have the numbers. Oh brutal world, how much more gentle was

The Harvard Crimson

than Web capitalism?

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long America Online, Yahoo!, E*Trade, Cisco, Advanced Micro Devices and, and Cramer was long 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

Copyright 2000,