Publish date:

midday04-12-00

Author:

TheStreet.com's MIDDAY UPDATE

April 12, 2000

http://www.thestreet.com

Market Data as of 4/12/00, 1:13 PM ET:

o Dow Jones Industrial Average: 11,416.45 up 129.37, 1.15%

o Nasdaq Composite Index: 3,934.94 down 120.96, -2.98%

o S&P 500: 1,502.05 up 1.46, 0.10%

o TSC Internet: 906.07 up 0.23, 0.03%

o Russell 2000: 505.51 down 4.62, -0.91%

o 30-Year Treasury: 105 14/32 down 1 12/32, yield 5.825%

In Today's Bulletin:

o Midday Musings: Market Rotates Hard Into Old Economy Faves as Techs Get Slapped
o Herb on TheStreet: No Longer Going With the Mo'

Also on TheStreet.com:

Wrong! Dispatches from the Front: Manifesto for a New Market: Part 6

Looking for the next big winner is now part of the game.

http://www.thestreet.com/comment/wrong/918010.html

Internet: B2B Stocks Keep Sliding as Investors Talk of a Change in Focus

Exchanges are out, infrastructure in. And valuations are getting a long, hard look.

http://www.thestreet.com/tech/internet/917900.html

Hardware/PCs: Compuware Plunges After Announcement It Will Miss Estimates

The company says it will fall short of expectations by at least 57% due to unexpected problems selling its software.

http://www.thestreet.com/brknews/hardware/918292.html

Dear Dagen: Why Johnny Has Bad Credit

A recent test found teenagers' financial knowledge to be lacking. Is yours any better? Take the test.

http://www.thestreet.com/funds/deardagen/918208.html

Midday Musings: Market Rotates Hard Into Old Economy Faves as Techs Get Slapped

By

Christopher H. Schmitt

Staff Reporter

4/12/00 1:13 PM ETWith tech stocks getting hammered in recent days, it was just what a jittery market didn't need to hear -- a warning of sluggish sales in the personal computer market.

The results, alas, were predictable. At midday, the

Nasdaq Composite Index

had taken a three-stair-step tumble, seemingly intent on grinding out a long, steady decline. It fell through the 4000 level not long after the opening, before leveling, diving again, stabilizing and finally tumbling again to a loss of 152, or 3.8%, to 3903.

The

Dow Jones Industrial Average

initially headed off on one of its fork-in-the-road-style splits with the Comp, trading up as much as 123.17 to 11,410.25. By midday, it had given back most of its gains and then gained some back, to stand up 85, or 0.8%, at 11,372.

The Dow's performance was particularly impressive given the heavy, heavy weight on the index from its key tech components. Besides

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

, on which there's more below,

Intel

(INTC) - Get Intel Corporation (INTC) Report

,

IBM

(IBM) - Get International Business Machines (IBM) Report

and

Hewlett-Packard

(HWP)

were sapping a huge amount of upside from the blue-chips.

"There has not been an awful lot of strength," said Jim Volk, co-director of institutional trading for

D.A. Davidson

in Portland, Ore. "It's been pretty much a downdraft here, led by technology."

The

S&P 500

, meanwhile, was down 5, or 0.4%, to 1495. The

Russell 2000

joined in the down day, falling 7, or 1.3%, to 503 1/2.

The spur for it all was bad news of a different sort for tech behemoth Microsoft. No, it didn't have anything to do with the company's continuing antitrust travails. Instead,

Goldman Sachs

analyst Rick Sherlund cut his revenue outlook for the March quarter.

Citing "very sluggish" growth in PC sales from November through February, he cut his forecast for fiscal third-quarter revenue from $5.95 billion to $5.75 billion. That could cost Microsoft 2 cents a share in earnings, he said, although investment gains could offset that.

Microsoft got its ears boxed on the news, falling 3 15/16, or 4.7%, to 79 15/16. That left the stock down nearly a third from its January high of 116 9/16.

The news rippled to sting other members of the tech food chain, too. The

Philadelphia Stock Exchange Computer Box Maker Index

was down 4.2% to 412. Likewise, the

Philadelphia Stock Exchange Semiconductor Index

was down 4.1% to 1086. Intel slid 3 1/8 to 127 5/8, and even highflier

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

stumbled, losing 3 to 67.

"They're all folded together -- no mystery, no real surprise," said Volk.

TheStreet.com Internet Sector

index was off 18, or 2%, to 888, having traded as low as 861.96.

Optimism, and an Eye on the Close

Still, there was optimism amid the slide, and some saw overreaction in the market's response to the Goldman revenue forecast.

"That had been the whisper on Wall Street," said Brian Belski, chief investment strategist for

George K. Baum

in Kansas City, Mo. "That should not have been a surprise."

Today's key development will be the Nasdaq close, he said. "Any close above 4000 today -- that would be a major psychological and emotional positive."

Likewise, renewed interest in fundamentals -- which is helping drive the continuing flight from New Economy to Old Economy stocks -- should eventually benefit top-line tech issues, too, Belski said. "As investors levitate back to 'real' Old Economy stocks, they'll also levitate back to 'real' tech stocks," he said.

Once again, cyclical proxies revealed Old Economy strength. The

Morgan Stanley Cyclical Index

was up 2.2%, while the

Philadelphia Stock Exchange Forest & Paper Product Index

was turning in another strong performance, up 4.3%.

Market Internals

Volume continued light, in the face of general uncertainty and upcoming release of the latest batch of inflation and retail sales statistics.

New York Stock Exchange: 1,580 advancers, 1,213 decliners, 649 million shares. 37 new 52-week highs, 29 new lows.

Nasdaq Stock Market: 1,122 advancers, 2,892 decliners, 1 billion shares. 20 new highs, 139 new lows.

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

Herb on TheStreet: No Longer Going With the Mo'

By

Herb Greenberg

Senior Columnist

4/12/00 6:30 AM ET

Wednesday wallop:

TheStreet Recommends

Momentum in reverse (otherwise known as "thoughts for a volatile market")

: So much for this column's try at "going with the mo." (That was the sure sign, if I ever saw one, that this market was headed for trouble!)

On March 2, the day after my satirical "

throwing in the towel" column, I followed with another, headed, "

Going for the Mo: Where Will Investors Go Next?" I used it as an opportunity to check in with this column's most consistent hot hand, Scott Turkel of

TCM Partners

in Connecticut, whose prior picks here (

TSI International Software

(MCTR)

,

Artisoft

(ASFT)

,

Unify

(UNFY)

and

Verity

(VRTY)

) had performed nothing short of phenomenally.

His list of faves at the time:

Centura Software

(CNTR)

,

Informix

(IFMX)

,

Sybase

(SYBS)

,

Versant

(VSNT)

,

Intuit

(INTU) - Get Intuit Inc. (INTU) Report

and

Geoworks

(GWRX)

.

How've they done?

All but Informix (which is up about a point): Rotten. Centura, in fact, has been halved. So, did Turkel use the drop to buy more of

any

of those stocks?

Nope. Sold every single one. "The biz model here is twofold," he explained, "fundamental and technical, and the technical portion prevents me from getting emotional or falling in love or in hate with a name."

So, here's Intuit, which he owned at around 48 1/4, but won't touch here. "I love Intuit and I can't wait to buy it," he says. But his chart tells him not to, so he doesn't. Ditto for the rest of his picks, save for Sybase and Versant, which he isn't so sure he'd buy again at any price. Centura, for example, remains a favorite. He has visited the company, likes the CEO and CFO, and believes the stock trades at a "disconnect" to its fundamentals.

But like all traders, he's in the biz to make money. So, with his fund up 30% so far this year -- down from an earlier gain of 50% -- he's playing it safe and claims a "significant" portion of his portfolio (he wouldn't disclose the exact amount) is in cash, waiting for just the right opportunity to buy. "The fear factor is not so much

not

being there," he says, "but how much money you're willing to lose. This is the type of market where even the strong swimmers are getting sucked down the drain."

Market mania:

Reader

Matt Thompson

, impressed with my call on our weekend

Fox

show that the

Nasdaq

would touch 4100 this week, wants to know when I would change my outlook. "In other words, now that both of your down targets have been hit (including the 4400 target of a few weeks ago), do you look for further weakness, or were you implying that 4100 would be the bottom?"

Matt, I don't know bottoms from tops. I know my gut, and right now, considering the number of geniuses that have been wrong, my gut is about as good an indicator as anything else out there. My gut thinks the Nasdaq will continue to see lower lows until there is a real washout. I mean, until it gaps down several hundred points for several days in a row -- enough to scare the daylights (and probably bankrupt) enough daytraders (especially those still heavily margined) to wring out the remaining excesses. Then you'll have to see the Nasdaq get boring -- so boring that the biz pubs will be running cover stories that say stuff like, "Nasdaq ... Yearning for the Good Old Days."

What nobody knows, however, is whether that "boring" period (thanks to technology) will be compressed into weeks or months rather than years. (A bear market

ain't

a day's drop of 20%.)

That said, the

Greenberg Garbage Index , which had jumped by more than 80% to its all-time high several weeks ago, is now up a mere 12%. (In theory, the higher the Garbage index goes, the greater the likelihood that a correction is imminent, because the index is filled with stocks that had no business rising in the first place.) The contra to that: The index's biggest winner is

CopyTele

(COPY)

, one of the longest-running favorites among shorts, which at 2 3/8 is up 183%. And one stock not on the list, our old nonfavorite

Lernout & Hauspie

(LHSP)

-- one of this market's great "story" stocks -- continues to fly.

I'd say that when gravity catches up to both Lernout

and

CopyTele, then -- and only then -- will it be safe to go back in the water.

Just Kid-ding:

An item

here yesterday on Pokemon and

4 Kids Entertainment

(KIDE)

said that the stock had done a round trip from when it was first mentioned here -- going from around 20 to 90 to 20. Unfortunately, we didn't take into account the impact a September stock split had on the original price, so it should've been 10 to 90 to 20. Sorry.

Incidentally, prior to yesterday's item

Martinez

(as in Mark, my assistant) had called 4-Kids execs to get their read on the Pokemon pontificating. The company never called back. So he called again yesterday and was told that the company had seen the item and wanted to respond and would get right back to us. It didn't.

Finally, Cisco kid:

"Just in case investors are feeling that the market has corrected itself and valuations are once again reasonable, consider the following," writes one valued source. "For half a trillion dollars, an investor could theoretically buy either 1)

Cisco Systems

(CSCO) - Get Cisco Systems, Inc. Report

or 2) the entire gas and electric utility industry in the U.S.

In the first case, the investor would be buying a company with trailing 12-month revenues of $15 billion. In the second case, he'd be getting an industry that is paying about $15 billion per year of cash dividends. Oh, and with option No. 2, he'd have about $100 billion left over to go buy something else."

Martha, can you believe it, the guy has lost his marbles ... talking gas and electric utilities!

Pass the scissors, please. (For clipping the coupons, you silly young-uns! Of course, if you don't have a clue what I'm talking about, you've probably also never seen a bear market!)

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

Copyright 2000, TheStreet.com