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February 8, 2000

Market Data as of 2/8/00, 1:04 PM ET:

o Dow Jones Industrial Average: 10,974.04 up 68.25, 0.63%

o Nasdaq Composite Index: 4,389.61 up 67.84, 1.57%

o S&P 500: 1,436.26 up 13.26, 0.93%

o TSC Internet: 1,150.29 up 13.10, 1.15%

o Russell 2000: 535.53 up 3.14, 0.59%

o 30-Year Treasury: 98 09/32 up 1 06/32, yield 6.263%

In Today's Bulletin:

o Midday Musings: Strong Productivity, Signs of Broad Strength Cheering Wall Street
o Herb on TheStreet: So Much for Consumer Products' Earnings Consistency

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Midday Musings: Strong Productivity, Signs of Broad Strength Cheering Wall Street


Thomas Lepri

Staff Reporter

2/8/00 1:16 PM ET

Stocks were rallying hard at midday amid the latest evidence that the U.S. workforce is still gettin' it done, and at very affordable rates.

Chalk the strength up to today's report on


, which the

Labor Department

said grew a whopping 5% in the fourth quarter, well above the expected 4.2% clip and matching the previous quarter's revised increase. Meanwhile, unit labor costs dropped by a full percentage point, confounding expectations for an increase of 0.8% and extending the revised 0.3% drop in the third quarter.

An economy growing well above the

Federal Reserve's

comfort level needs productivity gains like that to keep wage pressures in check. But declining labor costs? That's gravy.

"That's huge," said Tony Dwyer, chief market strategist at

Kirlin Holdings

, of the data. "When you get a number like that, it's good for the whole market, because it suggests that valuations can remain high."

Because it erodes the present value of future earnings, inflation is the natural enemy of high price-earnings multiples. So today's numbers have done as much as any bull could have hoped to quell fears raised by recent spikes in the implicit price deflator and

Employment Cost Index

, though it won't likely change the near-term direction of the Fed, which the market is widely betting has yet to finish tightening.

Nonetheless, Dwyer sees brighter days ahead for the broader market. "The broad market has been in a bear market for the last year and a half," he said. "That's obviously the result of rates. The broad market has been trading on interest rates, and tech stocks have been trading on earnings and revenue growth. If you fix the interest rates, you put in a bottom in the broad market. I think that's what's going to happen."

Near midday, multiples were expanding in a fairly wide range of sectors, including drugs, biotechs, banks, brokers, utilities and paper products. But out in the vanguard was Old Familiar, the already far-stretched technology sector. The

Nasdaq Composite Index

was pushing further into record territory, up 68, or 1.6%, to 4390, and getting serious participation from big-cap monsters


(MSFT) - Get Microsoft Corporation Report



(INTC) - Get Intel Corporation Report


MCI WorldCom



The other big-cap proxies also were solidly positive. Propelled by financial components

American Express

(AXP) - Get American Express Company Report


J.P. Morgan


, the

Dow Jones Industrial Average

was up 68 to 10,974. The S&P 500 was 12 higher to 1436.

Investors would do well to keep the market's broadening in perspective: Breadth was narrowly positive among both three-letter and four-letter issues. That's far from great. Still, it's not bad, especially considering how much money investors have made in the face of less-than-stellar market internals. "The last couple thousand points on the Dow have been in this type of environment," said Brian Belski, chief investment strategist at

George K. Baum

in St. Louis, Mo. "So you need to look at other trends as well."

And those trends look somewhat encouraging. "We have more groups within the S&P 500 showing good relative strength numbers than we've seen in a long time," Belski said. "More than are showing decreasing relative strength. A lot of groups are starting to participate or improve." Internet Sector

index was up 14, or 1.2%, to 1151, while the small-cap

Russell 2000

was 3 higher to 535.

The bond market was holding up well despite the unseemly strength in equities, with the 30-year Treasury up 1 1/32 to 98 4/32, putting its yield at 6.27%. The 10-year note, meanwhile, was up 4/32 to 95 20/32 and yielding 6.63%. (For more on the fixed-income market, see today's

Bond Focus.)

Market Internals

Breadth was narrowly positive amid booming volume.

New York Stock Exchange:

1,460 advancers, 1,426 decliners, 623 million shares. 110 new 52-week highs, 87 new lows.

Nasdaq Stock Market:

2,209 advancers, 1,787 decliners, 1.2 billion shares. 324 new highs, 51 new lows.

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

Herb on TheStreet: So Much for Consumer Products' Earnings Consistency


Herb Greenberg

Senior Columnist

2/8/00 6:30 AM ET

Tuesday Thwack:

Colgate calamity?

Actually, you could say the whole consumer products group has just gone through the month from hell, with almost every major company, other than


(KMB) - Get Kimberly-Clark Corporation Report

, disclosing earnings that weren't quite up to par. (Does

Newell Rubbermaid

(NWL) - Get Newell Brands Inc. Report

ring a bell?)

So, why shine the light on


(CL) - Get Colgate-Palmolive Company Report

? Because an item

here back in October suggested that the company's fundamentals were showing signs of stress. (The company, of course, disputed that notion, but I digress.) Then, late Thursday, Colgate announced what, on the surface, appeared to be blockbuster fourth-quarter earnings. According to


headline I read, the company either "beat estimates," "exceeded expectations" or "topped consensus estimates."

Ah, but did it really? Not quite, which is why, despite supposedly beating estimates, Colgate's stock skidded 6% on Friday, and barely budged Monday. Seems that after taking a closer look at the numbers, analysts realized the tax rate and interest expenses were also lower than expected, which means -- all things being equal -- the company really just met estimates. Put another way, the quality of those earnings wasn't quite up to quantity. And when you're a highflier (in its world) like Colgate, quality is as important as quantity.

So, a group known for earnings consistency is now showing earnings inconsistency. Why? Any number of reasons, but this much is certain: Earnings consistency has helped the group trade at a pretty big premium to the

Standard & Poor's 500

. As of the fourth quarter, however, that earnings-consistency theme may be out the window.

Herb's Latest: Join the discussion on

TSC Message Boards .

Lernahooligan alert:


Lernout & Hauspie


is up 18 9/16, or nearly 31%, on

no news

. (The company's press-release machine does seem to be working overtime these days.) Based on my email, the Lernahooligans are chuckling unmercifully at anybody who dared question the company.

And the shorts? They're singing the same old song: Lernout keeps missing earnings estimates, analysts keep cutting numbers and yet the stock keeps going higher -- a case where two plus two is supposed to equal four, but it really doesn't.

Amazon antics:

No need to go on and on about the company's announcement Monday that it will issue $600 million in euro-denominated converts. (Plenty already written everywhere about it.)

Morgan Stanley Dean Witter

is the underwriter -- yep, the same Morgan Stanley whose very own

Mary Meeker

on Friday wrote: "Call us melodramatic? Go ahead. But we continue to maintain that

(AMZN) - Get Inc. Report

may be on its way to becoming one of the greatest companies of our day ... no doubt, there's still a chance that they screw the whole thing up ... but after the CQ4 financial results and C2000 outlook, we are more calmed about's business outlook than we ever have been. Happy New Year!"

Happy New Year, indeed, especially with


underwriting fees!

Speaking of which, reader

Joe Beattie

writes: "Two weeks ago it was


(DELL) - Get Dell Technologies Inc. Class C Report

, last week it was Amazon." He's referring to comments

here questioning the legitimacy of some analyst recommendations. Specifically, he cited short-seller Jim Chanos' comment, the one in which he said, "Some sell-side analysts are selling their credibility down the river to see one more investment banking fee."

"Are you saying," Joe wonders, "that all these people/firms are liars?"

Let's just say that when it comes to underwriting fees vs. telling it the way it is, Wall Street analysts have been known to look the other way when it comes to bad news.

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.


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