Publish date:

TheStreet.com's MIDDAY UPDATE

March 27, 2000


Market Data as of 3/27/00, 1:39 PM ET:

o Dow Jones Industrial Average: 11,038.88 down 73.84, -0.66%

o Nasdaq Composite Index: 4,984.82 up 21.79, 0.44%

o S&P 500: 1,525.86 down 1.60, -0.10%

o TSC Internet: 1,270.59 down 1.94, -0.15%

o Russell 2000: 574.79 up 0.78, 0.14%

o 30-Year Treasury: 103 17/32 down 2/32, yield 5.986%

In Today's Bulletin:

o Midday Musings: Oil Stocks Turn Around, Adding Spark to Middling Session
o Wrong! Dispatches from the Front: Don't Be Fooled by False Protection

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The trader gives his last word on this controversial piece of advice.


Midday Musings: Oil Stocks Turn Around, Adding Spark to Middling Session


Justin Lahart

Associate Editor

3/27/00 1:15 PM ET The tourists lined up near the corner of Wall and Broad have had an unexpected treat today: An unusually large herd of traders are sunning themselves on the curb outside the

New York Stock Exchange

. Though some expressed disappointment that feeding the traders is not allowed, most accept that any variation in the typical floor-broker diet of coffee and cigarettes and egg sandwiches from


could have disastrous consequences for capital markets around the world.

These occasional lulls in the action are not unwelcome. With the


meeting over and first-quarter earnings still a while off, the market is getting a chance to digest recent gains. Stocks kept to a tight range through the first half of the day, with oil-related stocks providing one of the few points of interest.

The oil sector was bouncing back at midsession, in a move indicating that the market expects lower production increases from


than had been thought. There had been talk that OPEC, which is meeting today in Vienna, would increase production over its current quotas by around 1.7 million barrels a day -- a bit more than the market expected.

But around 12:30 p.m. EST, oil service stocks spiked higher and integrated oil stocks moved toward break-even, suggesting that the market expects exploration activity to increase. The

Philadelphia Stock Exchange Oil Service Index

was up 2.3%, while the

American Stock Exchange Oil & Gas Index

was off just 0.4%. The May oil futures contract off by 14 cents to $27.88 a barrel, having come up from lower levels.

Elsewhere, though, traders saw little to grab their attention.

"I'm not seeing anything making me jump in to buy or sell anything," said Sam Ginzburg, senior managing director of equity trading at


. "I'm kind of waiting for something to do rather than trying to make something happen. Hands are in the pockets."


Dow Jones Industrial Average

lately was off 48 to 11,065.


(MSFT) - Get Report

, down on disappointment that it didn't broker a deal with the

Justice Department

over the weekend, and

J.P. Morgan

(JPM) - Get Report

, giving back some of its recent gains, were jointly taking 53 points out of the Dow.

The broader

S&P 500

was near the flat line, off 2 to 1526.

Tech stocks were doing well. The

Nasdaq Composite Index

was up 31, or 0.6%, to 4994, while the

Morgan Stanley Dean Witter High Tech Index

was up 19, or 1.7%, to 1169.

TheStreet.com Internet Sector

index was off 2 1/2, or 0.2%, to 1270.

The small-cap

Russell 2000

was up less than a point to 575.

Bank and consumer cyclical stocks were all giving back some of their recent run-ups today, with the

Philadelphia Stock Exchange/KBW Bank Index

down 2.4% and the

Morgan Stanley Consumer Index

off 1.2%. Some people are beginning to wonder whether the apparent shift into Old Economy names will have any staying power.

"I'm very intrigued by the sector rotation we've had in the last few weeks," said

Merrill Lynch

chief investment strategist David Bowers. "One of the questions you need to ask is, is this a meaningful change or not?"

By Bowers' reckoning, such a shift comes at a strange time. The world and U.S. economies have yet to peak out, and the recent Fed hikes have yet to bite into demand. "The bottom line," he said, "is the rotation of the last few weeks -- we're not convinced it's the start of an change in emphasis."

Market Internals

New York Stock Exchange:

1,282 advancers, 1,528 decliners, 517 million shares. 68 new 52-week highs, 30 new lows.

Nasdaq Stock Market:

1,916 advancers, 2,104 decliners, 822 million shares. 93 new highs, 43 new lows.

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

Wrong! Dispatches from the Front: Don't Be Fooled by False Protection


James J. Cramer

3/27/00 12:42 PM ET Selling an out-of-the-money call is not the same as selling the stock. I don't know how I can be more plain about that. Those who think they are taking it off the table by selling an out-of-the-money call are just kidding themselves. Those written calls will not protect you from downside. They will only make the ordeal more problematic.

I can't emphasize to you enough how my logic on this issue is both rigorous and empirical. As one of the largest options traders on the Street for years and years, I can tell you that if you think selling a call is protective, you are just smoking something that doesn't fly in my house.

In a severe market breakdown the price of the call you sold might actually expand as volatility can make calls more expensive. You can get the gain until you buy the calls in, but chances are the premium in the call will be so pumped up that you won't want to do that until it is too late and the common is so low that the call didn't make you enough money.

Brokers love it when you sell calls. It is a regular commission generator and you feel like you are doing something safe. You feel like you are taking stock off the table and raising cash.

All you are doing is locking in a terrible trade if the market really takes a bath and cutting off your upside if it doesn't. That's the worst of all possible worlds. I know -- I have done it hundreds of times. Hundreds of times I found myself caught with a big decline in the common and a small gain in the short call. Hundreds of times I have cut off my upside or lost a common stock position before a big move because I wanted to pick up a few bucks selling an expensive call.

Use me as your laboratory. I am not trying to make any money off you or gather assets from you or make commissions from you. I am just telling you the way it is. (I will rewrite this article Saturday for those who are lost in the terminology.)

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at


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