TheStreet.com's MIDDAY UPDATE
March 13, 2000
Market Data as of 3/13/00, 12:46 PM ET:
o Dow Jones Industrial Average: 9,948.37 up 19.55, 0.20%
o Nasdaq Composite Index: 4,990.85 down 57.77, -1.14%
o S&P 500: 1,391.56 down 3.51, -0.25%
o TSC Internet: 1,303.85 down 16.46, -1.25%
o Russell 2000: 597.22 down 6.59, -1.09%
o 30-Year Treasury: 101 04/32 up 4/32, yield 6.144%
In Today's Bulletin:
o Midday Musings: Resilience, Thy Name Is Market: Stocks Storm Back From Early Lows
o Herb on TheStreet: Life Beyond P&G and Dial
Also on TheStreet.com:
Smarter Money: Playing the Home Game, Part 1
In the first of a four-part address, the trader explains his intent to level the playing field.
Silicon Babylon: Is InfoSpace Bigger Than the Internet?
Impassioned CEO Naveen Jain says his company is on the way to a trillion-dollar market cap. You want to disagree?
Dear Dagen: Tech Spiders Don't Have Enough Web Stocks to Keep Up With QQQ
The exchange-traded funds demonstrate how dramatically different two tech indices can be.
Asia/Pacific: Japan Slips Back Into Recession
Japan's GDP pulled back for the second quarter in a row, putting the country back into a technical recession.
Midday Musings: Resilience, Thy Name Is Market: Stocks Storm Back From Early Lows
3/13/00 12:54 PM ETConey Island's Cyclone opened June 26, 1927, is 2,640 feet long and takes 100 seconds to ride. Its first drop is 85 feet over planks that feel like they're about to crumble away -- and is the chief reason enthusiasts reckon it's one of the best wooden roller coasters in the world. But sometimes it doesn't hold a candle to the U.S. stock market.
Pullbacks on the Asian bourses and heavy selling in the futures market made for a big drop at the open this morning: at the outset, the
Dow Jones Industrial Average
lost 193 points; the
Nasdaq Composite Index
, a gut-wrenching 209. But no more than 10 minutes into trading, stocks started to come back. Past noon the Dow had made it into positive territory, while other indices, though still down, weren't down so much that you felt like you needed to skip lunch.
Some observers worry, however, that there may be more selling before the day is out.
"We got a bounce here, but to tell you the truth, I don't have much faith in it today," said Paul Rich, a trader at
. "I don't think it's going to hold. If it does, I'll be amazed."
The Dow lately was up 11 to 9940, while the broader
was down 5 to 1391.
Things remained worse in the Nasdaq. The tech-heavy index was down 59, or 1.2%, to 4990.
Dot-com and small-cap proxies were also in a bind.
TheStreet.com Internet Sector
index was down 18, or 1.4%, to 1302. The
was down 7, or 1.1%, to 597.
Banks were bucking the trend, though in a limited way.
was up 1 15/16, or 2.5%, to 80 5/8 after
upped earnings estimates. The
Philadelphia Stock Exchange/KBW Stock Index
was up 13, or 2%, to 658. Bear in mind that Friday it hit a low not seen since October 1998.
Meanwhile, the Treasury market was benefiting from the fear in stocks. The bellwether 10-year note was up 7/32 to 101 1/32, its yield easing to 6.36%.
Charles Blood, the
Brown Brothers Harriman
director of financial markets strategy who has been rending his clothes over the stock market since the fall, figures the thing really is going to give up the ghost pretty soon here.
"I think we're going to see a major decline in tech stocks here," he said. "The risk in the S&P is for a correction of 30%, peak to trough." (That would be a drop to around 1030.) The problem, thinks Blood, is that the
will continue to hike interest rates, and he thinks that will eventually hurt techs -- but not in the way you might think.
There are a lot of people who argue that higher rates cannot hurt tech earnings, because tech companies are not reliant on the credit markets and because global demand for tech is so strong. Blood does not disagree with this. But he does point out that when the Fed raises rates, there is less money flowing into the system. Eventually this liquidity drain will take its toll on tech stocks -- there simply won't be as much money coming to market to support them. And so, they will fall.
Though there's a general feeling on Wall Street that tech may pull back, or at least pause for a bit, not many are hanging crepe on the bull market the way Blood is.
"If money starts to fly out of tech," said Rich, "it's going to go right into the Old Economy stocks before it goes into bonds or something like that."
New York Stock Exchange:
1,126 advancers, 1,727 decliners, 563 million shares. 26 new 52-week highs, 178 new lows.
Nasdaq Stock Market:
1,450 advancers, 2,657 decliners, 971 million shares. 112 new highs, 123 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.
Herb on TheStreet: Life Beyond P&G and Dial
3/13/00 6:30 AM ET
From the "nobody'll care, but ..." department:
On the weekend
show I predicted that when
report their earnings in a month or so, the surprise (for some, at least) will be that there won't be a negative surprise. The stocks of both companies have been walloped in the wake of
Procter & Gamble's
disappointing earnings news, but both Colgate and Kimberly have emphasized that they don't expect to take the same hit.
Who isn't disagreeing with Colgate and Kimberly? Try Bill Steele, the consumer goods analyst for
Banc of America Securities
, who isn't shy about raising red flags (though he certainly didn't raise one ahead of P&G!). He was quoted
here in the past voicing concerns about Colgate, which is one reason his Colgate comments are so noteworthy.
Colgate, he says, has no global competitor in its largest market, toothpaste. And while Kimberly-Clark goes head-to-head with Procter & Gamble in the tissue market, P&G has been fighting more serious battles on several other fronts, especially detergent, so has been less aggressive with pricing and promotion of tissue. What's more, he says, Kimberly-Clark's manufacturing is significantly more efficient than P&G's.
, which got clocked Friday after warning of lower earnings. At its current price of 11, Steele thinks it's a takeover candidate. With "lots of free cash flow" -- in the neighborhood of 10% -- Steele says he wouldn't be surprised if Dial is being reviewed by larger companies.
But even if it is -- and even if Kimberly-Clark and Colgate
disappoint -- do you really think in this environment anybody will care?
For the record, BofA rates P&G a buy (downgraded from a strong buy March 7), and lists Colgate a market perform, Kimberly a strong buy and Dial a market perform (downgraded Friday from a buy). BofA has done no recent banking for those companies.
Help, I've been Seymoured:
If you missed it last week, the luminous
picked a fight with me last week about
recent comments here that questioned the quality of
last earnings report. Specifically, he zeroed in on my comments that Intel shouldn't be judged on the returns from its investments -- but on its main business. "Was Intel," he wondered, "really cooking the books, trying to cover up a slide in its real business of making chips?"
No, it wasn't, and I never said it was. But meeting or beating Wall Street estimates just because of unexpectedly good investment returns
, I argue, lower the quality of those earnings. At least the earnings Wall Street thinks it's paying for. There is nothing wrong with a company making gobs of extra money by investing in stocks. Money
good. Companies can use the money -- no matter how they got it -- to invest in new equipment, hire new employees and build entirely new businesses.
But gains from the sale of stocks cannot be predicted with any consistency, which is why (when you follow my argument through) they should be reported separately from operating earnings. All Wall Street cares about is whether a company meets or beats its estimates -- not
As reader Todd Voigt emailed, "The fact of the matter is that if Intel didn't include those stock sales in their EPS, it would've missed its earnings estimates. Those estimates are not based on how much stock they will sell. It is based on their operations. They are hiding the fact that on the margin Intel's core operations were weaker than expected for that quarter. Intel is a great company, but if I want to own a company that will buy stocks for me I'll buy
. If I want to own Intel, I want to own them for their product, management and brand."
Unfortunately, in this market, that's not the way to make money.
Just go back and read the (other Jim's)
excellent piece last week about how he had to change investment styles because that's the way the "game" is now being played.
Tips for the Timid included a tip to beware of the stocks of companies that have "cutesy" stock symbols. Oh, you mean like LUV (
Ah ... an exception to every rule!
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
firstname.lastname@example.org. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
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