Skip to main content
Publish date:

midday02-17-00's MIDDAY UPDATE

February 17, 2000

Market Data as of 2/17/00, 1:39 PM ET:

o Dow Jones Industrial Average: 10,583.44 up 22.03, 0.21%

o Nasdaq Composite Index: 4,550.13 up 122.48, 2.77%

o S&P 500: 1,395.64 up 7.97, 0.57%

o TSC Internet: 1,146.09 up 19.58, 1.74%

o Russell 2000: 558.94 up 11.18, 2.04%

o 30-Year Treasury: 100 15/32 up 21/32, yield 6.205%

In Today's Bulletin:

o Midday Musings: Nasdaq Leaping as Tech Remains a Magnet for Money
o Herb on TheStreet: Why One Biotech Fund Is a Better Buy Than Its Almost Identical Sister Fund

Also on

Wrong! Tactics and Strategies: Bringing a New Prism to Light

Sometimes you need to adjust the way you look at the market to make money. It's just part of the business.

TheStreet Recommends

Internet: Silicon Investor Relegated to Message-Board Back Seat

More posts are appearing on the free message sites as retail investing grows more prevalent.

Under the Hood: A Sneak Peek at the Holdings of Bill Miller's New Fund

Bill Miller took a clean slate and is building a fund unlike his Legg Mason Value Trust.

Dear Dagen: What's the Best Bet for Your IRA?

Be aggressive. Plus, cheaper WEBS.

Midday Musings: Nasdaq Leaping as Tech Remains a Magnet for Money


Tara Murphy

Staff Reporter

2/17/00 1:12 PM ET

Wall Street investors were all ears this morning, tuned into to

Federal Reserve


Alan Greenspan's


testimony. But insiders weren't listening for the shock value. As usual, they were prepared for Greenspan to stick to the script, affirming low inflation and strong productivity, but expressing uneasiness about the rapid pace of economic growth.

Before the morning's long-awaited speech, the

Labor Department

brought good news to the market: The January

Producer Price Index

remained unchanged, weaker than the 0.2% increase that economists in a


poll had expected. The core rate, excluding food and energy, also upset the forecast 0.1 % gain, declining 0.2%.

"The PPI numbers look great," said Brian Gilmartin, portfolio manger at

Trinity Asset Management

. "I think Greenspan just feels responsible to say something so people aren't incredibly optimistic. There is no inflation. Oil is the only potentially inflationary component to the market, and that hasn't even impacted the indices much."

So how was the market faring in the midst of the PPI and the Fed?

"The market is very nervous ahead of the Fed's comments," said James Maguire Jr., managing director at

Henderson Brothers

, referring to early-morning trading. "Tomorrow's double-witching and Greenspan's comments are the two forces working to make for a choppy, volatile market."

It looked like it was returning to business as usual. Despite the Dow cyclicals' early-week stronghold, the index was continuing yesterday's selling, lately down 43, or 0.4%, to 10,518.

American Express

(AXP) - Get American Express Company Report

was the largest loser, down 7 11/32, or 4.8%, to 146 1/2.

But the buying spree continued on the

Nasdaq Stock Market

, as investors threw interest-rate worries out the window.

Lately, the

Nasdaq Composite Index

was climbing 71, or 1.6%, to 4499.

Elsewhere in techland, Internet Sector

index was bouncing 9, or 0.8%, to 1135, with





(EBAY) - Get eBay Inc. Report

leading the pack.

"It's still the Nasdaq holding up the market," said Steve Goldman, market strategist at


in Greenwich, Conn. "Last year, interest rates were inhibiting the market advances but as we ended the year, we had the

Nifty 50

stocks, biotechs and the over the counter stocks leading the market. This year, interest-rate conditions have worsened and Nifty 50 stocks like


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



(WMT) - Get Walmart Inc. Report

have been rolling over substantially. Almost 50% of the tech stocks in the Nasdaq are down for the year. Biotechs are still strong but they're not represented in the weightings of the

S&P 500

. Therefore, the market is becoming risky by the lack of leadership due to the backdrop of the monetary environment."

At the midday mark, the

Nasdaq Biotechnology Index

was booming, up 8.8%.

Human Genome Sciences


was flying 38 1/4, or 20.4%, to 226 1/4 one day after it was given a U.S. patent for a human gene that act as an entry point for AIDS.

The broad S&P 500 was down 5 to 1386, but the small-cap

Russell 2000

was surging 8, or 1.5%, to 556.

After today's positive report, many insiders are stumped as to why other sectors aren't performing better. "Retailers continue to get pounded," said Gilmartin. "Wal-Mart made cautious comments but it wasn't anything that wasn't anticipated. It might be the result of some sector rotation but this mornings numbers definitely made a compelling case to buy them."


S&P Retail Index

was sinking 4.5%, with Wal-Mart slipping 3 13/16, or 7.2%, to 48 15/16.

On the

New York Stock Exchange

, investors were selling tech heavyweight



, despite its strong first-quarter earnings report. The stock was off 4 3/4, or 3.6%, to 126 1/4.

In Nasdaq trading, genomics giant

Millennium Pharmaceuticals


was enjoying the sector's latest jump. It was up 36 1/2, or 14%, to 297.

Market Internals

Breadth was mixed on moderately heavy volume.

New York Stock Exchange: 1,360 advancers, 1,458 decliners, 597 million shares. 53 new 52-week highs, 119 new lows.

Nasdaq Stock Market: 2,206 advancers, 1,849 decliners, 1.1 billion shares. 312 new highs, 71 new lows.

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

Herb on TheStreet: Why One Biotech Fund Is a Better Buy Than Its Almost Identical Sister Fund


Herb Greenberg

Senior Columnist

2/17/00 6:30 AM ET

One of the constants in this column for the past dozen years has been David Tepper. He's a money manager in San Francisco (

Tepper Capital

) who specializes in closed-end funds. His comments are usually buried in one of the small "short positions" near the bottom of my column. Whenever he weighs in I listen because his instincts, as far as this column is concerned, have been excellent.

A year ago, for example, he

mentioned the

Hambrecht & Quist Healthcare Investors

(HQH) - Get Tekla Healthcare Investors of Benef Interest Report


Hambrecht & Quist Life Sciences Investors

(HQL) - Get Tekla Life Sciences Investors of Benef Interest Report

funds, which are both run by the same veteran manager (Alan Carr) and both have large biotech holdings. At the time they were both trading at discounts in the 25% range to their net asset values. "If small-caps ever come back in favor, these two funds could move big time," he said.

By September, when I last

checked with him, both stocks had posted decent gains and the discounts had narrowed. Still, Tepper was bullish, based on merger activity among the biotechs.

Great call, but get this: Historically, Hambrecht & Quist Life Sciences has been more of a pure biotech fund than Hambrecht & Quist Healthcare, which in the past has included the likes of service companies, managed care and hospitals.

At least that's what Wall Street has been thinking, and you can see it in the current discounts of both funds (this is the good part of the story, folks): While the stocks of both funds have done quite well this year -- both rising more than 64% -- H&Q Healthcare currently trades at an 18% discount, while Hambrecht & Quist Life Sciences trades at a 4% discount.

Why such a big spread? According to a fund official, it's simply because the Life Sciences fund has received a bigger boost from Wall Street. It's been a favorite, in fact, of Michael Murphy, who publishes the

California Technology Stock Letter

. Murphy told me late yesterday the only reason he has pushed Life Sciences over Healthcare is that Life Sciences historically has been more of a pure-play biotech fund.



true. But as he found when he compared the two portfolios while he was on the phone with me yesterday, the two portfolios have converged. "Right now they're basically holding the same names, with just different proportions in one than in the other," a fund official said.

Which brings us back to the spread: What should an investor do? Murphy would only dollar cost average (or buy a specific amount on a certain date) into Life Sciences at this small a discount. Tepper, who owns both funds, isn't sure he would buy the fund outright at this skimpy a discount, either. But he still believes Healthcare is a buy, "assuming the market holds together."

He notes that during the last big biotech boom, in the late '80s and early '90s, Healthcare traded at a discount wider than 20%. "I was buying it for 7 or 8 bucks, when the NAV was 10 (its NAV is now 41 3/4). By the time the NAV got to the mid-to-high teens, the fund actually started selling at a premium. At that point I started to sell. But the momentum of the NAV was so strong that the NAV went to the high 20s and the fund basically sold at or above the NAV all the way up.

"Now, biotechs have been out of favor for so long, and they're institutionally underowned. The trump card yet to be played is that we could see six to 24 months of biotech IPOs, and anywhere from 15% to 25% of the holdings in these portfolios involve private placements in companies that haven't yet gone public. So, the NAVs on these funds could run."

So says Tepper. Who, when it comes to closed-ends, has not let this column down.

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,