April 11, 2000

Market Data as of Close, 4/11/00:

o Dow Jones Industrial Average: 11,294.99 up 108.43, 0.97%

o Nasdaq Composite Index: 4,069.43 down 118.77, -2.84%

o S&P 500: 1,499.67 down 4.79, -0.32%

o TSC Internet: 925.08 down 34.97, -3.64%

o Russell 2000: 512.11 down 6.55, -1.26%

o 30-Year Treasury: 106 24/32 down 1 19/32, yield 5.772%

In Today's Bulletin:

o Midday Musings: Tech Struggles Through Rough Session but Rebounds From Lows
o Herb on TheStreet: Herb Part 1: 1-800 Contacts in FDA's Sights

Also on

Wrong! Dispatches from the Front: A Brightening Outlook

The trader thinks the drugs, cyclicals and tech sector might rally.

Telecom: Telecom Gear Makers Had Strong Quarter, but Don't Expect a Rally

The stocks have been sliding from their vertigo-inducing highs despite indications numbers will be strong.

Market Features: Where Is This Market Headed?

With the market at a critical juncture, we asked


columnists what they see in the weeks ahead.

Dear Dagen: It's OK to Buy Funds Early -- Just Not Too Early

Young funds have several advantages. But buying before the launch doesn't increase the advantage.

Midday Musings: Tech Struggles Through Rough Session but Rebounds From Lows


Thomas Lepri

Staff Reporter

4/11/00 1:26 PM ET One week from the very hour that the

Nasdaq Composite Index

was marking the bottom of what turned out to be a 13.6% intraday decline, technology stocks once again found themselves plumbing the downside.

Near midday, the

Nasdaq Composite Index

was off a relatively modest -- relative to its recent swings, that is -- 37, or 0.9%, to 4151. The Comp had been down as much as 180 points earlier in the session, but bounced sharply off its nadir of 4009.52, a mere half-point above the intraday low it hit April 5. Poor performances by big-cap components





(ORCL) - Get Report


Sun Microsystems

(SUNW) - Get Report

were keeping the Nasdaq under wraps.

As has been the recent trend, a number of blue-chips were catching bids amid the tech-sector pain. The

Dow Jones Industrial Average

was up 156, or 1.4%, to 11,343, buoyed by old-line stocks like


(DD) - Get Report


General Motors

(GM) - Get Report



(MMM) - Get Report



S&P 500

, meanwhile, was up 5, or 0.3%, to 1509.

The mood on trading desks has been far from panicky. But many observers seem to have resigned themselves to the notion that the Nasdaq won't be revisiting 5000 anytime soon.

"Whenever a market experiences a 20% drop, it changes the complexion of things," said Richard Cripps, chief market strategist at

Legg Mason

in Baltimore. "In 1998, the complexion clearly changed to all tech, which has been the market's driver until this past March. I think this correction marks the peak in terms of tech's weighting in the S&P 500."

The Nasdaq closed yesterday 17% below its March 10 high. This time a week ago, it was down nearly 28% from that high.

A lot of the latest iteration of tech selling can be traced to



. That stock had already gotten a lukewarm reception to its in-line first-quarter

earnings report when it warned that it expected its second-quarter results to come in below expectations. That news sent Motorola into a tailspin, which spread throughout the semiconductor sector.

Motorola was lately down 25 13/16, or 17.1%, to 125 3/16. The

Philadelphia Stock Exchange Semiconductor Index

had recovered down much of its early losses, though. It was lately down 13, or 1.1%, to 1155, up from an intraday low of 1093.25.


(RMBS) - Get Report

, a volatile issue that has been moving to its own rhythm recently, was down 5 1/16, or 1.9%, to 257 15/16.

Moves like that are a little nerve-wracking to those who've bought in at tech's top. "They should be a little nervous," said Peter Boockvar, equity strategist at

Miller Tabak

, of the late-coming retail investor. "Motorola was at 180. It could be many, many years before this thing sees 180 again. I wouldn't necessarily puke it out down here, but people have to be careful about what they pay for things."

Unfortunately, the arrival of earnings season has done little to assuage fears over valuation so far. Embedded expectations for earnings are so high right now that even the slightest misstep is causing immense pain in the market's momentum favorites.



, for its part, was lately down a whopping 11 13/16, or 18.2%, to 53 3/16 after the company missed estimates by 2 cents

last night.

Judging by the continued rotation into cyclicals, that sort of damage is likely making more than a few individual investors take a second look at their asset allocation. "The broad public has embraced venture capital-like risk over the last five to six years without knowing it," said Michael Clark, managing director head of equity trading at

Credit Suisse First Boston

. "It's fine for firms equipped to judge those risks to be taking them. But the average person doesn't do nearly enough homework."

The market's cyclical proxies were telling a tale of Old Economy strength. The

Morgan Stanley Cyclical Index

was up 1.7%, while the

Philadelphia Stock Exchange Forest & Paper Product Index

was 3.4% higher. The

S&P Chemicals Index

, meanwhile, was up 3.7%.

Integrated oil stocks were moving higher, helped by a modest rebound in crude oil. Gains in





(XOM) - Get Report

were helping the

American Stock Exchange Oil & Gas Index

advance 1.9%.

Meanwhile, service stocks like


(SLB) - Get Report



(HAL) - Get Report


Global Marine


were sending the

Philadelphia Stock Exchange Oil Service Index

5.5% higher.

Small-caps and Net stocks were on the downside. The

Russell 2000

was down 2, or 0.4%, to 516, while the Internet Sector

index was off 11, or 1.1%, to 949.

The bond market was experiencing a rare bout of weakness, with the benchmark 10-year Treasury down 25/32 to 104 19/32, putting its yield at 5.88%. The 30-year Treasury, meanwhile, was 1 23/32 lower to 106 20/32 and yielding 5.78%.

Market Internals

Breadth was mixed on moderate volume.

New York Stock Exchange:

1,475 advancers, 1,372 decliners, 611 million shares. 29 new 52-week highs, 28 new lows.

Nasdaq Stock Market:

1,221 advancers, 2,778 decliners, 1 billion shares. 13 new highs, 99 new lows.

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

Herb on TheStreet: Herb Part 1: 1-800 Contacts in FDA's Sights


Herb Greenberg

Senior Columnist

4/11/00 6:30 AM ET

Tuesday's talk:


Food and Drug Administration

is investigating 97 companies, including

1-800 Contacts

(CTAC) - Get Report

, as part of a probe into companies that sell devices such as contact lenses and hearing aids by mail.

Eric Latish, chief of the FDA's Dental, Ear, Nose, and Throat and Ophthalmic branch, told me the agency has targeted companies (most of them presumably private) that sell prescription devices to the public. The agency's intention, he says, is to clamp down on companies that sell such products without a prescription.

"Some play legitimately," Latish says. But others don't.

Latish confirmed that 1-800 Contacts was part of the sweeping inquiry in a discussion we had after an item

here last week pointed out that 1-800 Contacts volunteered in SEC documents that "a significant portion" of its sales don't comply with state laws governing the sale of prescription contact lenses. The company -- which bills itself as a leading direct marketer of replacement contact lenses -- claims it tries to verify prescriptions, but that many doctors refuse to release prescription data, forcing the company to ship the lenses without confirmation. That may be true, Latish says, "but the law is the law."

Which brings us to an FDA probe. I asked Los Angeles attorney Garth Vincent, who represents 1-800 Contacts, whether 1-800-Contacts is part of a probe into whether companies verify prescriptions. In a written response, he said: "We are not aware of any allegation by the FDA or anyone else that 1-800 Contacts has failed to comply with any federal law or regulation. Any specific prescription requirement regarding the sale of contact lenses is a matter of state law, not federal law. As far as we are aware, the FDA has never contended otherwise."

When I pressed him further about whether 1-800 Contacts was aware of a probe, he wrote in response: "We are not aware of any investigation of 1-800 Contacts by the FDA. Although the FDA indicated nearly one month ago that it might want to inspect the company's facility in the future, it indicated that it would notify the company in writing if it decided to request an inspection, and if it believed it had the authority to do so." He added that was the last the company had heard from the agency.

Latish, however, tells a different story. While declining to comment specifically on the details of the investigation, he says 1-800 Contacts is "aware" of the FDA's concerns -- so much so that the company itself states in SEC documents it is "not complying with federal laws."

To be sure, while states


regulate the prescription sale of drugs, the FDA oversees the labeling of drugs. And according to the company's week-old 10-K (rehashing what the company has previously disclosed): "Although the FDA has not objected to the sale of contact lenses without a written prescription ... it is possible that the FDA will consider contact lenses that are sold in such a fashion to be misbranded," which could lead to any number of actions, from a simple warning letter to seizure of inventory or prosecution.

The FDA also regulates contact lenses, and as such, Latish says, it has the right to visit any warehouse where lenses are held -- especially if they're being shipped in "contradiction to regulations and the states can't or won't take action." What's more, the FDA is charged with ensuring that all domestically sold lenses are manufactured in compliance with good manufacturing practices. Latish says there can be no assurance that all of the lenses sold by 1-800 Contacts comply with good manufacturing practices because the company itself discloses (also in its 10-K and other documents) that it buys "a substantial portion of its products from unauthorized distributors."

One other point: My original column said that 1-800 Contacts went public last year. It went public two years ago. The company complains that the information I originally cited came from two-year-old documents. Actually, it all came from an eight-month-old document tied to a secondary stock offering that was canceled; much of the same data is included in its recent 10-K.

Market mania:

If I were an investor in "the markets," I would start getting awfully nervous when armchair market timers start to be right. That armchair market timer would be me. On last week's


show, I predicted that the


this week would touch 4100. OK, it got down to only 4188 yesterday. But a few weeks ago, I predicted it would fall to 4400, and that week it got to 4475


getting hit by last Tuesday's wind shear, which took it below 4400. Beginner's luck! And don't go asking me where it goes from here

because I don't have a clue!

Of course, neither do most of the other pundits, but that never stops them!

Don't forget to check out my later column, also posted this morning.

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,