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February 2, 2000

Market Data as of 2/2/00, 1:25 PM ET:

o Dow Jones Industrial Average: 11,046.64 up 5.59, 0.05%

o Nasdaq Composite Index: 4,085.92 up 33.94, 0.84%

o S&P 500: 1,411.61 up 2.33, 0.17%

o TSC Internet: 1,103.09 up 29.87, 2.78%

o Russell 2000: 508.64 up 4.89, 0.97%

o 30-Year Treasury: 97 11/32 up 1 10/32, yield 6.334%

In Today's Bulletin:

o Midday Musings: Dow Weakens but Positive Tone Persists as Fed Decision Nears
o Herb on TheStreet: Hunting for Value in Down-and-Out Retail and Apparel

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Midday Musings: Dow Weakens but Positive Tone Persists as Fed Decision Nears


Eileen Kinsella

Staff Reporter

2/2/00 1:17 PM ET

Things were pretty quiet at high noon on Wall Street, as investors waited for yet another interest-rate hike to ride into town. The

Dow Jones Industrial Average

and the

Nasdaq Composite Index

were trotting in positive territory ahead of the news.


Federal Open Market Committee

will announce at 2:15 p.m. EST its decision on the fate of the short-term federal funds rate, and at this point, its pretty tough to find anyone not expecting a 25-basis-point increase to 5.75%. After taking back all of the three rate cuts it made in 1998, this widely anticipated move could be the start of a series of hikes as the Fed tries to act pre-emptively to keep a lid on inflation.

The general consensus seems to be that once the news is out, a relief rally -- justified or not -- will kick in. "Don't look for anything exciting to happen before 2:15," said Alfred Goldman, chief market strategist at

A.G. Edwards & Sons

in St. Louis. "The market will probably rally. It's the dropping-of-the-other-shoe syndrome," he said.

Beyond what ever action the Fed takes, Goldman said, it will be important to hear where the committee thinks the risks lie in the economic equation. "How they verbalize that will probably control" activity going forward, he said. The Fed no longer will announce a so-called policy bias, but instead will offer a statement on risks to its policy goals.

Bill Schneider, head of U.S. equity block trading at

Warburg Dillon Read

, also said he was anticipating a rally of sorts even if these types of short-term moves tend to be exaggerated. Schneider said he initially thought the market upswings yesterday and Monday might be some premature enthusiasm but decided "we were just running the tape backwards" to counteract some of Friday's selloff, when the Dow shed 288 points and the Nasdaq gave up 152 points.

Lately the Dow was down 3 to 11,038, giving back all of its already modest earlier gain.

General Motors

(GM) - Get General Motors Company (GM) Report

was driving the Dow lower, sliding 5.1% after announcing Chairman and CEO Jack Smith is turning the CEO reins over to President and COO G. Richard Wagoner.

Tech stocks looked like they might be getting ready to run, with the Nasdaq Comp rising 16, or 0.4%, to 4068. Internet Sector

index was up 27, or 2.5%, to 1100, helped by



which was popping 2.9% after it announced content agreement with German mobile phone maker



America Online's


was also doing its share with a 6% gain.

Aside from interest-rate land, earnings reports were the other discernible newsmaker in mostly scattered trading action. Strong earnings from

Time Warner


were lifting the stock 6.5% and helping out fellow entertainment behemoth


(DIS) - Get Walt Disney Company Report

, which was up 3.3%.


S&P 500

was up a fraction to 1410, while the small-cap

Russell 2000

was up 4, or 0.8%, to 508.

The benchmark 30-year Treasury was up 1 2/32 to 97 2/32, its yield easing to 6.35%. (For more on the fixed-income market, see today's

Bond Focus.)

Market Internals

Breadth was positive, particularly on the Nasdaq, on moderately heavy volume.

New York Stock Exchange:

1,567 advancers, 1,300 decliners, 579 million shares. 31 new 52-week highs, 82 new lows.

Nasdaq Stock Market:

2,178 advancers, 1,684 decliners, 852 million shares. 112 new highs, 54 new lows.

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

Herb on TheStreet: Hunting for Value in Down-and-Out Retail and Apparel


Herb Greenberg

Senior Columnist

2/2/00 6:30 AM ET

Now for something completely different: I was talking to a longtime hedge fund manager/source who goes long and short stocks (and who never goes on the record). He was one of my sources last year for the case against

Select Comfort


, the air-bed company whose stock has since deflated. His specialty is retail: He was once a retail analyst for a well-known brokerage firm.

Called him the other day checking in. As usual, asked what he didn't like. (The guy had a fabulous call on



that I failed to mentioned months ago.) I also asked him what he liked, because he has had his share of winner longs.

Herb's Latest: Join the discussion on

TSC Message Boards .

Turns out he's been buying a laundry list of apparel and retail stocks that nobody could give a hoot about (in part because none of them has a dot-com strategy). Most are down because the entire retail group has been trashed over economic concerns. "There are plenty of cheap stocks around," he says, "but these are unusually cheap in terms of price-to-earnings multiples relative to their growth rates, and all of them traded at 15 to 20 times earnings in the past year and a half. They're now all under 10. All have world-class brands and great franchises. And they've never sold at these multiples in the past 10 years."

The catalyst for a reversal? "There is none," he says. (Will the last daytrader please shut the door on the way out?) "At nine times earnings," he adds, "you just sit on them. They'll just continue to grow earnings per share."

They include:

Jones Apparel Group


, which has about $3 billion in revenue, several hundred million bucks in free cash flow, nine years of 20%-plus sales and earnings growth, "and it has never missed an estimate." Yet the stock is down to 22 5/16 from 35 7/8, "and they probably have the best management in the apparel industry."

Polo Ralph Lauren

(RL) - Get Ralph Lauren Corporation Class A Report

, which has a little under $2 billion in revenue, "but it's probably the cheapest brand in the world because you could buy the whole company for $1.4 billion." Yet the stock is down by almost half to 14 5/8.



, whose sin was a slowing earnings and sales growth rate. Its growth has slowed to the 20% to 25% range, from 40% in 1998. Our source's thought: still good growth, albeit not what the Street wants to see. But with the stock trading at roughly one-third its 52-week high, if it simply makes its number and the group regains favor, he doesn't believe it would take much to jump-start the stock.

McNaughton Apparel Group


, a maker of women's apparel that is turning around. Two weeks ago the company reported annual earnings of $1.11 per share vs. original estimates of 91 cents per share. "I've never seen a stock that beat the Street by 20-plus cents per share and went down," he says.

AnnTaylor Stores


, which has been slammed by a slowdown in comparable-store sales and a soft Christmas. Yet at 21 15/16, down from 48 as recently as November, he believes the downside is limited.


(TJX) - Get TJX Companies Inc Report

, which operates



TJ Maxx

and other discount stores. Again, hurt because of weaker-than-expected comp-store sales. But despite the stock's drop, earnings estimates haven't fallen. (Usually it's the other way for stocks mentioned in this column, especially those that are heavily shorted. Estimates are cut, and the stocks rise. It's that kinda market.)

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. Community

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