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midday02-01-00's MIDDAY UPDATE

February 1, 2000

Market Data as of 2/1/00, 1:06 PM ET:

o Dow Jones Industrial Average: 11,009.33 up 68.80, 0.63%

o Nasdaq Composite Index: 4,006.43 up 66.08, 1.68%

o S&P 500: 1,401.69 up 7.23, 0.52%

o TSC Internet: 1,071.34 up 19.20, 1.82%

o Russell 2000: 500.06 up 3.83, 0.77%

o 30-Year Treasury: 95 28/32 up 18/32, yield 6.434%

In Today's Bulletin:

o Midday Musings: Stocks Gleam on Plus Side as Fed Inspires Little Worry
o Herb on TheStreet: An Ailing HMO's Impact (or Lack Thereof) on CVS

Also on

Wrong! Rear Echelon Revelations: Little Room for Error

In this market, the penalty for being wrong is high, but the need to make fast judgments is great.

TheStreet Recommends The Linux Lineup Gets Longer

Will the second crop of companies affiliated with open-source software be as hot as the first?

Retail: Rate, Margin Worries Set Backdrop for Retail Firms' Earnings

The next two months typically play out well in the sector, but investors have been finicky recently.

Dear Dagen: Be Wary of Money Managers' Favorite Picks

Also, two new Merrill HOLDRs begin trading today.

Midday Musings: Stocks Gleam on Plus Side as Fed Inspires Little Worry


Thomas Lepri

Staff Reporter

2/1/00 1:11 PM ET

You can already hear the screws tightening at the corner of 20th and C streets, where the

Federal Open Market Committee

will soon convene inside the Marriner S. Eccles Building to start its two-day discussion of the future on interest rates.

But things were relatively loose at Broad and Wall, where stocks were sloshing through a positive if tentative session.

The FOMC won't announce any changes in interest rates until tomorrow afternoon, but there's little argument over what the meeting will yield. Everyone expects the Fed to hike by at least 25 basis points, and nearly no one thinks that will be the last. That leaves the market in an old familiar place, the same hostile interest-rate environment that has kept the financial-heavy

Dow Jones Industrial Average

flat for the last nine, count 'em, nine months.

Still, stocks are managing to stay the course set during the market's broad rally late yesterday.

"It looks fairly decent here," said Barry Hyman, chief market strategist at

Ehrenkrantz King Nussbaum

. "They don't seem to have any desire to really sell off today. The market has handled the NAPM numbers very well -- we're getting a nice rally in the bonds."

The bond market was moving higher despite a very mixed report from the

National Association of Purchasing Management

, which said today that its Purchasing Managers' Index fell to 56.3 in January from a revised 56.8 reading in December. But the NAPM's prices-paid component surged to 72.6 in January from 68.3 in the previous month, marking the fifth straight that index has come in over 60. (NAPM's indices indicate expansion when above 50 and contraction when below 50.)

The 10-year Treasury was up 9/32 to 95 20/32, putting its yield at 6.63%. The 30-year Treasury, meanwhile, was 19/32 higher to 95 27/32 and yielding 6.44%. (For more on the fixed-income market, see today's

Bond Focus.)

As is its custom, technology stocks already have some big swings under their belt. After opening higher, the

Nasdaq Composite Index

fell to as low as 3911 in morning action before picking up steam to the upside. It was lately up 63, or 1.6%, to 4003, goosed largely by big gains in supercomponents


(MSFT) - Get Microsoft Corporation (MSFT) Report



(CSCO) - Get Cisco Systems, Inc. Report



(QCOM) - Get QUALCOMM Incorporated Report


"The market is having a tough time finding its identity today," said Charles Crane, chief market strategist at

Key Asset Management

. "On the one hand, investors are anxious about what the Fed will say when it breaks its meeting tomorrow. On the other hand, we continue to get great evidence of a very strong economy, which should support decent earnings growth going forward. Hence we're getting that push/pull environment."

At midday, the pushers were winning the battle among the trading in the large three-letter issues, with the Dow Jones Industrial Average up 66 to 11,007. The

S&P 500

, meanwhile, was 6 higher to 1400.

Drug stocks were consolidating from their recent runup. The

American Stock Exchange Pharmaceutical Index

was off 2.2%.

Eli Lilly

(LLY) - Get Eli Lilly and Company (LLY) Report

had lost 3.2%,

American Home Products


was 4.4% lower.

Financials were mixed despite the slight rally in bonds. Among Dow components,

American Express

(AXP) - Get American Express Company Report

was up 2.7%, and

General Electric

(GE) - Get General Electric Company (GE) Report

was up 1.8%.

But other financials, especially brokerages, were under pressure, with the

American Stock Exchange Broker/Dealer Index

down 1.8%. Dow member

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

was 0.7% lower.

Market Internals

Breadth was mixed on light-to-moderate volume.

New York Stock Exchange:

1,441 advancers, 1,401 decliners, 534 million shares. 21 new 52-week highs, 102 new lows.

Nasdaq Stock Market:

2,071 advancers, 1,828 decliners, 802 million shares. 61 new highs, 74 new lows.

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

Herb on TheStreet: An Ailing HMO's Impact (or Lack Thereof) on CVS


Herb Greenberg

Senior Columnist

2/1/00 6:30 AM ET

Tuesday thwack:

Prescription pitfalls:

Can't help but wonder about the impact on


(CVS) - Get CVS Health Corporation Report

, the drug store chain, from the recent financial debacle involving

Harvard Pilgrim Health Care

. Harvard Pilgrim, the largest HMO in Massachusetts, was placed into receivership several weeks ago. According to last year's 10-K, Massachusetts is CVS' third-largest market, and in the promotional text of its glossy 1997 annual report, its Harvard Pilgrim relationship was mentioned several times.

As part of being placed in receivership, Harvard Pilgrim will give priority to bills owed after it went into receivership rather those owed before going into receivership. The HMO also has launched a drive to control prescription-drug costs.

How much biz does CVS do with Harvard Pilgrim? Has it been stiffed by Harvard Pilgrim? Will its Harvard Pilgrim revenue go down as a result of Harvard Pilgrim's new cost-cutting drive?

A spokesman for CVS says, "We are current (with Harvard Pilgrim) and expect to stay current."

You can bet CVS short-sellers will be paying close attention to receivables when the company reports earnings Feb. 8.

CVS was most recently mentioned

here for extending its fiscal year by a week.


The darn

Hostile React-o-Meter

almost broke after spinning outta control after

last week's item on



. THQites emailed allegations of this, that and the usual garbage.

What really galled them, however, was the sentence that said: "Data from

NPD Group's

TRSTS report show that, as of the end of December, there were still large amounts of unsold THQ titles in the channel." However, as many THQites were quick to point out, the TRSTS reports don't show how much inventory is in the channel; they only show how much product was sold at retail. What I wrote, in other words, was "factually incorrect," says a very nonhostile Peter Dille, THQ's marketing chief.

Indeed, it was wrong to write that the TRSTS reports show that there was a large amount of inventory in the channel.

However (yep, here it comes; get those poison pens ready), we're talking about semantics. There's no excuse for a semantics error, and I clearly erred in the name of trying to keep it simple.

Had I not kept it simple, it would've gone something like this: "According to short-sellers, at the end of December there were still large amounts of unsold THQ titles in the channel. They reached that conclusion after reviewing the December TRSTS data and revenue from specific THQ titles, which were disclosed in the company's third-quarter 10-Q. They then compared that data with fourth-quarter forecasts from analysts, who presumably had received guidance by THQ. (It may not be official, but it's the closest anybody can get to the real picture.)"

THQ, it should be noted, did not dispute (at least not to me) any issues in the column other than the way I portrayed the TRSTS data. Asked about the inventory, Dille said that THQ is "comfortable with the rate of sale, where we are vis a vis industry trends and where we are with the rest of the world. We reserve accordingly."

Oh, and if you intend to send more hostile reactions my way, save them for my

message boards at

; otherwise the only response you'll get from me is the canned "boinnggg" that has greeted all of my emailers for the past two years.

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,