TheStreet.com's MIDDAY UPDATE
April 6, 2000
Market Data as of 4/6/00, 1:34 PM ET:
o Dow Jones Industrial Average: 11,146.85 up 112.93, 1.02%
o Nasdaq Composite Index: 4,306.71 up 137.49, 3.30%
o S&P 500: 1,505.36 up 17.99, 1.21%
o TSC Internet: 1,024.67 up 52.69, 5.42%
o Russell 2000: 533.65 up 15.61, 3.01%
o 30-Year Treasury: 106 03/32 down 17/32, yield 5.806%
In Today's Bulletin:
o Midday Musings: 'Everybody Into the Pool!' Market's Sides Unite in Broad Rally
o Tech Savvy: Looking Into the Pit of Civil Litigation Against Microsoft
Got a stock question for Jim Cramer? He'll answer it this week on "TheStreet.com" on Fox News Channel. But you have to call during our show's taping on Friday, April 7, at 6:45 p.m. EDT to get on.
The number to call is 1-888-CALLFOX (1-888-225-5369).
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Midday Musings: 'Everybody Into the Pool!' Market's Sides Unite in Broad Rally
4/6/00 1:20 PM ETThe market can wear many hats and so far, today's trading session appears to have a set of horns.
Despite Tuesday's wild ride, investors are once again embracing equity, and they're not discriminating either. By midday, both major indices continued to charge after a positive open, making for some very strange days on Wall Street.
"I came in and saw them going up and I said, 'They're back,'" said Scott Bleier, chief investment strategist at
, referring to today's buying spree.
Dow Jones Industrial Average
was jumping 118, or 1.1%, to 11,152.
was winning after posting first-quarter earnings that beat the consensus, while the two of the index's tech-giant components,
, were strongholds.
New York Stock Exchange
, retailers posting strong March same-store sales were being stamped with high price tags. Retail investors were filling their shopping bags with shares of
Lately the tech-laden
Nasdaq Composite Index
was surging 117, or 2.8%, to 4286, after suffering a 423.94 point, or 9.3%, loss on Monday and Tuesday. Despite the nosedive, the Comp is still on the plus side, up 2.5% for the year so far.
gave the tech sector a boost, after labeling
as the "super seven" names to hold in a turbulent market.
This week's violent swings in the market have left Wall Street wondering how long a market trend will last. Investors, with their psychology swinging from momentum to value in just two weeks, now seem to be buying anything they can get their hands on. But with first-quarter earnings season on the horizon, the question is, for how long?
"It was a 1-2 punch: first Abby Joseph Cohen and then
, which was really a surprise," said Brian Gilmartin, portfolio manager at
Trinity Asset Management
, referring to Goldman strategist Cohen's call to scale back stock holdings and Mister Softee's antitrust woes. "That was a reason to take the market down. But we're seeing corrections take place in a matter of a week. I think the market has found a bottom faster than it usually does."
"We're not going to be aggressively buying Nasdaq," said Jack Ablin, managing director at
Colonial Asset Management
. "The second and third quarters are not kind to the Nasdaq. I'd say about 80% of its gains come in the first and fourth quarter, so we're probably going to come into the second quarter with some trepidation."
Gilmartin agrees that earnings could take some of the air out of the stock market's highfliers due to last year's strong results. "The S&P 500 earnings growth in 1999 will make earnings comparisons much tougher in 2000."
Although 1999's stellar earnings might show up 2000's, Gilmartin said that strong fundamentals will keep investors dabbling in the risky tech issues that have given their wallets a rush in the past. "If you look at the way the stock have traded, it's the higher multiple stocks that have shown the most volatility," he said. "If there's nothing wrong with the fundamentals, you'll see investors going back in and buying."
In Nasdaq trading, biotech was on fire after
said it has completed the sequencing phase of one person's genome.
Nasdaq Biotechnology Index
was leaping 5.1%.
Unlike biotech, the drug sector couldn't find a fix, with Dow components
Johnson & Johnson
Elsewhere in techland,
TheStreet.com Internet Sector
index was booming 45, or 4.6%, to 1017. However, despite edging out the analyst estimate by a penny,
was floundering, down 5 11/16, or 3.4%, to 159 7/8.
was up 17, or 1.1%, to 1504, while the small-cap
was advancing 15, or 2.8%, to 533.
Breadth was positive on moderate volume.
New York Stock Exchange:
1,782 advancers, 1,042 decliners, 618 million shares. 30 new 52-week highs, 17 new lows.
Nasdaq Stock Market:
2,760 advancers, 1,225 decliners, 1 billion shares. 30 new highs, 37 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.
Tech Savvy: Looking Into the Pit of Civil Litigation Against Microsoft
Special to TheStreet.com
4/6/00 8:59 AM ET
I've said here a number of times that I think the biggest threat to the future health of
may not be the remedies sought by the
and the 19 state attorneys general cooperating with it, but rather the danger of huge and almost endless civil litigation by government agencies, businesses and individuals.
By seeking cash compensation for damages they suffered because of the actions defined by Federal Judge
Thomas Penfield Jackson
in his November findings of fact, and this week's findings of law as antitrust violations, those litigants could turn the Justice Department action into a relative sideshow.
Because those claims could be so numerous; because Jackson's findings provide an admissible "proof" of Microsoft's alleged misdeeds; and because the amounts sought could be vast, these class actions against Microsoft could keep the company tied up in risky litigation for many years, with both big legal bills and steep settlement or judgment costs along the way.
A number of readers have written to ask how this might work. So all week I've been talking with plaintiffs' lawyers already involved in, or planning, these suits. In a perhaps oversimplified explanation, this is a four-step process:
- Determination of Monopoly -- Microsoft must be shown to have created, and acted as, a monopoly. Remember that, contrary to most Americans' understanding, and the usual if mistaken definition of that heavily freighted word
monopoly, it is not illegal to become, and do business as, a monopoly. Monopolies just have to follow a different set of rules. Judge Jackson's Conclusions of Fact, delivered in November, largely solve this problem for plaintiffs' attorneys, who can introduce those findings as a substantial (but still challengeable) determination that Microsoft was and is a monopoly.
Determination of Illegal Actions as a Monopoly -- To succeed, plaintiffs must prove that Microsoft failed to follow those rules for monopolies. Again, Jackson's Conclusions of Law, released this week, pretty much solve this one for plaintiffs' lawyers.
Existence of Damages -- Plaintiffs' lawyers must then prove that someone was actually harmed by Microsoft's illegal acts.
Proving Up the Damages -- Finally, plaintiffs' counsel must show that their clients were among those specifically harmed by Microsoft's actions, and prove-up, or quantify, the extent of those damages.
The rewards of success here are great: Damages proven at trial are trebled in the final awards.
The vehicle for most of this litigation will be a series of class actions, in which one plaintiff, say, Mary Smith, is deemed to be a representative of a whole class of injured parties, say, residents of New Jersey who bought a computer between 1995 and 1997.
New Jerseyans who meet that test may choose to opt out of the class, either because they disagree with the action or because they want to pursue their own, independent action against the defendant. As a matter of practice few ever opt out, either because they don't know they're part of the class, or don't care. And very, very few opt out because they want to launch their own lawsuits, because the cost would be horrendous.
Indeed, one of the presumed benefits of class actions is that the costs of pressing the litigation are spread across such a large number of defendants that it becomes possible to effectively sue for, recover and distribute relatively small claimed damages for each member of the class.
Another advantage, not subject to dispute, is that class actions become gold mines for the handful of members of the plaintiffs' bar who specialize in them. We've seen that, for example, in the fallout from the past decade's tobacco litigation, where a small number of attorneys have gotten very rich from the awards to injured plaintiffs.
I don't say that as criticism -- the class-action approach is well established in American law -- but only to suggest that when we see awards of, say, $2 billion to the members of an aggrieved class, less than half that sum may in the end trickle down to the group of plaintiffs, after expenses and substantial lawyers' fees are deducted.
More than once I've been an (unwitting) member of a class, only to open a surprise letter from the court at the end of the proceedings, with the good news that I have recovered a whopping $50 or $60 in damages, after costs and fees.
In case you missed the news Wednesday, after a conference with Microsoft and Justice Department lawyers, Judge Jackson announced an aggressive schedule for completing his work.
Jackson directed the Justice Department and its state attorneys general partners to have their proposed penalties ("remedies") in his hands by April 25 to 28, and set a hearing date of May 24 for the announcement of his decision on which of those penalties he will apply.
He also agreed to support a fast-track appeals procedure for Microsoft, allowing the inevitable appeal of his ruling to move directly to the
U.S. Supreme Court.
(The court would not, of course, have to accept that appeal, but could instead simply let Jackson's ruling stand.)
Most observers agree that this very short period to conclude the trial and assess penalties is a good sign for Microsoft. If Jackson were going to break up Microsoft, he almost certainly would not have set such an aggressive schedule. Defining the specifics of a breakup would require far longer.
Thus, the judge seems to be leaning toward the kind of milder -- if still tough -- "conduct" remedies available to him.
Next: A talk with one of the lawyers organizing the civil suits against Microsoft.
Jim Seymour is president of Seymour Group, an information-strategies consulting firm working with corporate clients in the U.S., Europe and Asia, and a longtime columnist for PC Magazine. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. At time of publication, neither Seymour nor Seymour Group held positions in any securities mentioned in this column, although holdings can change at any time. Seymour does not write about companies that are current or recent consulting clients of Seymour Group. While Seymour cannot provide investment advice or recommendations, he invites your feedback at
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