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midday04-07-00's MIDDAY UPDATE

April 7, 2000

Market Data as of 4/7/00, 12:59 PM ET:

o Dow Jones Industrial Average: 11,153.98 up 39.71, 0.36%

o Nasdaq Composite Index: 4,391.38 up 123.82, 2.90%

o S&P 500: 1,515.30 up 13.96, 0.93%

o TSC Internet: 1,046.21 up 30.78, 3.03%

o Russell 2000: 540.38 up 7.88, 1.48%

o 30-Year Treasury: 107 15/32 up 31/32, yield 5.728%

In Today's Bulletin:

o Midday Musings: The Nasdaq Was Down How Much on Tuesday? Never Mind, Let's Buy
o Herb on TheStreet: Where the SEC Is Likely to Look Next

Ask Cramer

Got a stock question for Jim Cramer? He'll answer it this week on "" 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-TELLFOX. The phone number provided in previous bulletins from is incorrect, so please make sure to use this one and call in!

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The link-up could open the European door for U.S. media companies.

Fixed-Income Forum: How to Calculate Your Basis in Target Maturity Fund Shares

The reverse split that zero-coupon bond funds undergo every year makes for headaches at tax time.

Midday Musings: The Nasdaq Was Down How Much on Tuesday? Never Mind, Let's Buy


David A. Gaffen

Staff Reporter

4/7/00 1:05 PM ETThere's no doubt some of the aftershocks of Tuesday's

debacle are still being felt. Which makes investing decisions obvious -- why, technology! Of course.


Nasdaq Composite Index

is advancing smartly today, led by well-worn tech names, while the

Dow Jones Industrial Average

is marginally higher, as profit-taking hits financial stocks. There was little reaction to the typically strong March

employment report

, released this morning.

For the Comp, it's a strong, solid advance overall, with breadth nearly 2-to-1 positive, but on light volume.

Monday and

Tuesday took a lot of juice out of the market, so investors are responding, for the third day in a row, by focusing on the most well-capitalized, fundamentally solid technology stocks, despite how overvalued (by conventional standards) they remain.

So while the Dow was up a modest 44, or 0.4%, to 11,158, with the most positive thrust coming from


(INTC) - Get Free Report

, up 3.9%, the Comp lately was up 126, or 3%, to 4394. The

S&P 500

was up 15, or 1%, to 1516.



(ORCL) - Get Free Report

, the


(DELL) - Get Free Report

, the


(SUNW) - Get Free Report

and the Intels never really broke with that

upward market," said Larry Rice, chief investment strategist at


. "With any degree of skittishness

investors are going to come back to the four horsemen. And you can throw


(CSCO) - Get Free Report

in there too."

Oracle was lately up 3.3%, Dell gained 5.9%, Sun Microsystems rose 2.9%, and Cisco, the

Nasdaq Stock Market's

most active, was up 2.8% on 28.4 million shares. All of those stocks, save Oracle, finished


on topsy-turvy Tuesday. That bolstered investor confidence -- the sky wasn't falling, they'd say -- and has been a prime factor for the Comp's advance for the balance of the week, despite technicians who believe the Nasdaq needs to re-test the lows.

"Tech investors have been emboldened with the confidence that if you buy dips, you're immediately rewarded, said Alan Skrainka, chief market strategist at

Edward Jones

in St. Louis. "The response from Wall Street to the massive selloff is to 'trade up to quality,' so instead of owning Internet stocks, you buy blue-chips like Oracle, Cisco or Sun."

Not that the market is ignoring Internet stocks today. Internet Sector

index was lately up 33, or 3.2% to 1048, led by the likes of



, rebounding after yesterday's earnings-related selloff.



was up a big 12.3% and



was up 3.2%.


, an online British auctioneer (just in case you need

Oliver Cromwell

memorabilia), was smacked, however, down 7.5%. The stock soared yesterday on a lofty

SG Cowen

price target.

Strong Jobs Report Shrugged Off

But the renewed confidence -- which many still believe is fleeting -- is partially why the market has also shaken off another strong jobs report. (Economists who have gone to great length to dismiss the strength as a bunch of technical factors are also part of the reason.)

New nonfarm payrolls totaled 416,000, stronger than the


consensus estimate of 376,000. Average hourly earnings rose 0.4%, a bit higher than the consensus for 0.3%, but the year-over-year rate of wage growth actually slowed to 3.7% from 3.8%. The 10-year bond was lately up 8/32 to 104 16/32, yielding 5.89%.

Some of the strength is attributable to the hiring of 117,000 temporary census takers. Bruce Steinberg, chief economist at

Merrill Lynch

, in a research note, said the figure was "essentially in line with expectations." However, that reasoning ignores the fact that in this economy, the bulk of those people would have found jobs anyway. The unemployment rate was steady at 4.1%.

"The jobs report didn't point out good news," Skrainka said. "The threat of a rate hike is still there."

Skrainka attributed some of today's weakness in the banks and brokerages to this report, but profit taking is also responsible, because nimble investors have fattened up on these stocks in the last few weeks.


American Stock Exchange Broker/Dealer Index

lost 1.8% while the

Philadelphia Stock Exchange/KBW Bank Index

shed 0.9%. Dow component

American Express

(AXP) - Get Free Report

was down 0.9%, while

Charles Schwab


lost 4.7%.

Among the banks,

Bank One


lost 2% and

Summit Bancorp

(SUB) - Get Free Report

lost 2.3%.


New York Stock Exchange's

most active stock was Dow component

Philip Morris

(MO) - Get Free Report

, up 0.3% on 12.6 million shares.


Russell 2000

was lately up 1.5%.


Dow Jones Transportation Average

was down 0.1%, while the

Dow Jones Utilities Average

gained 0.5%.

Market Internals

New York Stock Exchange

: 1,470 advancers, 1,301 decliners, 507 million shares. 44 new highs, 22 new lows.

Nasdaq Stock Market

: 2,475 advancers, 1,429 decliners, 895 million shares. 35 new highs, 36 new lows.

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

Herb on TheStreet: Where the SEC Is Likely to Look Next


Herb Greenberg

Senior Columnist

4/7/00 6:30 AM ET

Now that the market is off to the races


, excuse me for reminding you that fundamentals



Late yesterday, I was on a panel discussing securities laws. Participants were asked what they thought the


was most likely to go after in the coming year. I was exhausted and running what turns out to be a very high fever and mumbled something brilliant like "public disclosure" (duh!) -- but the real critical comments came from Michael McAlevey, deputy director of the SEC's corporation-finance division, who said he thought this year the SEC would go aggressively after revenue recognition issues.

And George Kelly,

Morgan Stanley Dean Witter's

network-equipment analyst, said his dream would be that the agency goes after channel stuffing. Channel stuffing? Uttered by an analyst?

Let's go over them one at a time:

Channel stuffing refers to companies shipping way more merchandise into the distribution channel than they can ever hope to sell in any given quarter. (The more they ship, the better their earnings look if they book the sales as the goods go out the door.) Analysts


talk about it publicly, but Kelly has been around for years, he has seen it all -- and has nothing to lose by speaking his mind.

The trouble with channel stuffing, he said, is that you never really know how much merchandise really is being bought out there because distributors (the usual customers) are under no obligation to report what they're holding. And other than reports on PCs, third-party data-collection companies don't offer reports on how many switches and hubs have been shipped from the company to the distributors.

The way around this, of course, is for companies


to book sales until they've been sold through to end customers by the distributor. Which company does it that way? "


(CSCO) - Get Free Report

," Kelly said, "because it's the class act." (To determine how a company books revenue, simply go to its 10-K and look for the section on "revenue recognition." Sometimes it's called something else, but it's always there and it'll tell you whether a company books revenue the moment a product leaves the shipping dock or when it is sold by a distributor. If it ships when the product leaves the dock -- and its customers tend to be distributors -- be on guard.)

That leads to revenue recognition. McAlevey didn't elaborate what he meant, but aggressive recognition of revenue -- actually booking sales as revenue -- can lead to a false picture of how a company is really doing. It works until it doesn't. Any slowdown in biz, and investors can expect to get blindsided with an earnings miss. Given issues already with the likes of


(MSTR) - Get Free Report


Pacific Gateway Exchange


, which was mentioned

here Monday, you can bet that just as last year was the year of the auditor, this year will be the year of revenue recognition.

(Just remember where you read it first.)

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,