March 21, 2000

Market Data as of 3/21/00, 1:09 PM ET:

o Dow Jones Industrial Average: 10,809.92 up 129.68, 1.21%

o Nasdaq Composite Index: 4,566.12 down 43.88, -0.95%

o S&P 500: 1,467.27 up 10.64, 0.73%

o TSC Internet: 1,171.19 down 13.64, -1.15%

o Russell 2000: 539.65 down 9.55, -1.74%

o 30-Year Treasury: 103 19/32 up 6/32, yield 5.984%

In Today's Bulletin:

o Midday Musings: Bad Day at the Market Bowling Alley: Big Split Continues
o Herb on TheStreet: MicroStrategy: A Short Squeeze in Reverse Community:

You know's the place for great market commentary, but did you know it's also the place for intelligent investing discussion?

Join the discussion on our message boards and get a grip on this volatile March market. Check out Cramer's Latest for stock plays and strategies. Communicate with other TSC Investment Challenge participants on our Challenge message board. And share your thoughts on Jim Seymour's TechSavvy, Gary B. Smith and Ben Holmes' IPOs.

TSC Message Boards:

Also on

Wrong! Dispatches from the Front: Treading Carefully

Don your helmet and join Cramer as he navigates a secondary market filled with land mines. BuildNet Files for IPO Amid Choppy B2B Waters

But the North Carolina firm, which targets the home-building industry, has shown a penchant for raising cash.

Internet: B2B Investors in the Dark About Getty Images

The stock photo archivist is a business-to-business play with a twist: content.

Dear Dagen: Indices Aren't a No-Brainer for Small-Cap Investing

Returns can vary significantly from index to index, and you'll face some tax-efficiency problems as well.

Midday Musings: Bad Day at the Market Bowling Alley: Big Split Continues


Thomas Lepri

Staff Reporter

3/21/00 1:19 PM ETA thin market was emerging from a violent morning session in much the shape we've come to expect of late: Old Economy up, New Economy down.

The resurgent

Dow Jones Industrial Average

was once again confounding its disbelievers, up 132, or 1.2%, to 10,813 after falling as low as 10,603.61 early in the session. The Dow was getting especially juiced by its financial components.

American Express

(AXP) - Get Report


J.P. Morgan

(JPM) - Get Report


General Electric

(GE) - Get Report

each were up more than 3%, with GE's gains coming after it said it expects to beat expectations for its first-quarter earnings.

Tech performance remained spotty, with the

Nasdaq Composite Index

down 39, or 0.9%, to 4571. But that's way up from a morning low of 4467.53, a level that put the Comp 10.8% down from the intraday high it set back on March 10. Investors have bought the Nasdaq whenever it's hit correction levels this year.

"The 10% level seems to be some sort of magic trigger in the minds of investors," said Charles Crane, chief market strategist at

Key Asset Management

. "Folks seem willing to throw money into the market just on that basis alone. Funds started flowing into the most liquid stocks first and subsequently spread out to the broader list of OTC names."

Traders were ascribing the sharp morning dip to a lack of volume, as many market participants have been sidelined by today's

Federal Open Market Committee

meeting. "It's been a very illiquid market today," said Rob Cohen, co-head of listed trading at

Credit Suisse First Boston

. "People are not playing the market aggressively."

That's not necessarily because the outcome of the FOMC meeting is unclear. Nearly everyone believes the


announce a 25-basis-point hike when it concludes its meeting at 2:15 p.m. EST. It's also widely believed that the Fed will issue another boilerplate expression of its concerns about inflation going forward.

But when a Fed meeting happens in a market full of the wild equity action we've seen in names like


(MSTR) - Get Report


Protein Design Labs

(PDLI) - Get Report

-- well, a wait-and-see approach might not be the worst idea.

"People are confused on two fronts," said Cohen. "How to interpret the Fed's actions, and what's fundamentally going on in equities. People are not inclined to actively commit money to the market."

Banking issues were extending last week's strong rally, with the

Philadelphia Stock Exchange/KBW Bank Index

up 3.5%.

Biotech stocks were still under pressure. Protein Design Labs was getting killed after saying yesterday afternoon that its European patent claims would be revoked. It was lately off 54 1/8 to 80, a 40.4% decline. The

American Stock Exchange Biotechnology Index

was off 6.2%.

Tobacco issues were looking strong after the

Supreme Court

ruled that the

Food and Drug Administration

lacks the authority to regulate tobacco products. Dow component

Philip Morris

(MO) - Get Report

was up 5/16, or 1.6%, to 20 1/4.

Small-caps and Net stocks were lower. The

Russell 2000

was getting slammed with a loss of 9 1/2, or 1.7%, to 540, while the Internet Sector

index was down 10, or 0.8%, to 1175.

Market Internals

Volume was light. Breadth was narrowly positive at Broad and Wall, but sharply negative among electronically traded issues.

New York Stock Exchange:

1,427 advancers, 1,343 decliners, 621 million shares. 26 new 52-week highs, 30 new lows.

Nasdaq Stock Market:

1,269 advancers, 2,788 decliners, 1 billion shares. 23 new highs, 99 new lows.

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

Herb on TheStreet: MicroStrategy: A Short Squeeze in Reverse


Herb Greenberg

Senior Columnist

3/21/00 6:30 AM ET

The Tuesday brief (and I mean that, literally):

No natural cushion:

A week or so ago, when many of the


(MSTR) - Get Report

of the world were racing skyward in one of those "mothers of short squeezes," I

mentioned that the trouble with short squeezes is that when the shorts are squeezed out, there are no natural buyers to cushion the fall.

A few readers weren't clear on the concept, so I tried to explain how shorting works: that short-sellers borrow shares and sell them and, if all goes their way, the stock falls and they buy the shares at a lower price and return the stock to the owner. That buying by the shorts provides the cushion when the stock heads south.

A squeeze, on the other hand, pulls the shorts out before the fall, as the owners of the stock demand that the borrowed shares be returned, forcing the shorts to buy stock and get out of their positions.

Still don't get it? Take a look at MicroStrategy yesterday, where the short-sellers had been squeezed out by the time yesterday's bombshell was announced: That the company had been booking too much revenue upfront. (You know the shorts were gone -- or mostly gone -- because short interest in early February, just before the stock made its final push upward, had fallen to 1.29 million shares from 3 million a month earlier. Short interest presumably dropped even more as the stock more than doubled since then.)

With no shorts left to buy, or to cushion that fall, the only surprise was that the stock tumbled


62%, as sellers tripped over one another trying to be first out a very narrow door. (Add the heavily margined nature of many of these "yeehaw-squeeeeeeezzzzzeeeee-them-shorts!!!!!!!!!!!" message-board posters, as


has been

pointing out so well, and you get an all-out implosion. "The stocks are down 50% before you can get the first trade off," chortles one short-seller.)

Anecdotal evidence suggests shorts had abandoned such companies as


(RMBS) - Get Report

, which dropped 19% yesterday after an item

here raised some red flags;

Lernout & Hauspie


, the voice-recognition software company known for its

"momentum" press releases, which dropped 12%; and



, a cable-modem maker, which was off 9%.

Funny how fundamentals suddenly matter. Or at least they did yesterday.

Strange times:

In recent weeks, as the squeeze has occurred, my email has slowed to a trickle. It became eerily quiet. Don't know what it tells me other than the few other times the email has stopped, it has turned out to be the calm before the storm. Email indicator works every time. Interestingly, it almost correlates perfectly with

Gary B. Smith's

Smart Guy Alert.

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,