April 25, 2000

Market Data as of 4/25/00, 1:08 PM ET:

o Dow Jones Industrial Average: 10,990.48 up 84.38, 0.77%

o Nasdaq Composite Index: 3,592.53 up 110.05, 3.16%

o S&P 500: 1,453.17 up 23.31, 1.63%

o TSC Internet: 794.18 up 37.83, 5.00%

o Russell 2000: 479.62 up 11.08, 2.36%

o 30-Year Treasury: 104 20/32 down 16/32, yield 5.910%

In Today's Bulletin:

o Midday Musings: Traders Feeling Good Amid Broad-Based Rally
o Herb on TheStreet: The Downside of StarTek's Heavy Reliance on Microsoft

Also on

Wrong! Tactics and Strategies: The Market Has Legs, So What?

Ups and downs are wearing out the bears and the bulls.

Tech Savvy: The Semi-Rich Get Semi-Richer -- Part 2

The short short-list on those dot-coms that will survive.

Banking: At Bank of America, Merger Still Hasn't Paid Off

Analysts warn of restive shareholders if performance doesn't pick up.

Dear Dagen: Turning to Tech Heavyweights for Security

Investors who don't want to abandon the sector can look to funds that invest in tech leaders.

Midday Musings: Traders Feeling Good Amid Broad-Based Rally


David A. Gaffen

Staff Reporter

4/25/00 12:59 PM ET Displaying

Chuck Wepner


resilience, the

Nasdaq Composite Index

has followed through on yesterday's late-session bounce, and has by now recovered nearly all of yesterday's Microsoft-led losses.

With strong earnings reports providing the backbeat, breadth is strong, with advancers ahead of decliners 2-to-1 on both the

New York Stock Exchange

and the

Nasdaq Stock Market

. That's all well and good, but it's left traders wondering: Will it last?

"The saga of the yo-yo continues," said Bill Schneider, head of U.S. equity block trading at

Warburg Dillon Read


Lately, the Comp was up 131, or 3.8%, to 3614, continuing a rebound that started with the Comp down 298 points intraday yesterday. Money flowed back into most technology arenas. The

Dow Jones Industrial Average

gained 95, or 0.9%, to 11,001 -- its first intraday sojourn above 11,000 since April 13 -- led by tech components


(INTC) - Get Report




. The

S&P 500

was up 27, or 1.9%, to 1456.

"We've seen good volume and good breadth, but the question is sustainability," said Brian Piskorowski, market analyst at

Prudential Securities

. "We've seen volatile moves on both sides of the coin."

For the most part, traders were pleased with the advance, which has built on the near-150 point jump the Comp put together in the last half-hour of

yesterday's session. From a market standpoint, yesterday's reaming of


(MSFT) - Get Report

is a positive, because the loss of that company as a market leader is, perhaps, a sign that the Nasdaq has retested its recent lows for good.

Microsoft, which fell sharply yesterday, was up today, gaining 2 1/8 to 68 3/4 on 50.9 million shares, making it the Nasdaq's most active. Published articles today suggest the

Justice Department

is weighing a breakup of the software company that would split its Office applications off from the rest of the company.

"The turnaround felt pretty good yesterday and, through the ensuing rally, feels like a capitulation that took apart the largest Nasdaq stocks," said Schneider. "Well, if not them, at least Microsoft."

As a TaskMaster column pointed out

yesterday, big-cap tech names like


(CSCO) - Get Report



(ORCL) - Get Report

haven't flinched since hitting their nadir on April 14. Cisco was up 12.8% from that day through yesterday, but was lately flat, and Oracle was up 20%, tacking on a further 1.5% today. Internet Sector

index gained 43, or 5.7%, to 799 1/2. led by the likes of



, up 8.9%, and



, up 5.3%, after both were losers yesterday.

America Online


was the most actively traded on the Big Board, gaining 2 1/16, or 3.6%, to 60 1/16 on 10 million shares.

Yesterday's middling volume prevents some from feeling confident that the low was touched, but volume is much improved today, especially on the Nasdaq, where more than 869 million shares have already changed hands (translating to approximately a 1.6 billion-share day, which is reasonably strong).

Not that calling a bottom matters these days, according to Schneider. "All you have to do is not get committed to one side or the other," he said. "You just need to remain nimble -- you're not going to make a fortune, but you're not get blown up either."

Oh, Yeah -- Earnings

Several Dow components have beaten the Street today, reporting first-quarter earnings that exceeded expectations, as has been the case for most S&P companies this quarter.


(XOM) - Get Report

, up 1%, and

SBC Communications


, up 4.4%, are among the stalwarts rising on strong first-quarter reports.

Meanwhile, Dow components

Procter & Gamble

(PG) - Get Report



(MMM) - Get Report

are bleeding, even after both companies reported solid first-quarter earnings. 3M, which reported earnings per share of $1.21, far outpacing estimates for $1.08 a share, lately was down 7 7/16, or 7.6%, to 89 15/16, while P&G, which reported in line with estimates, was off 4 1/2, or 6.4%, to 66.

Piskorowski judged himself pleased with today's breadth, but he and others mentioned Thursday's first-quarter

Employment Cost Index, a key measure of wage inflation, as providing a bit of a ceiling on investor conviction right now.

After April 14's

Consumer Price Index report, which showed a 0.4% increase in core CPI (excluding food and energy prices), the market is understandably jittery of inflation figures, especially if anything signals that the

Fed could start hiking rates in increments greater than 25 basis points, starting with May 16's

Federal Open Market Committee meeting.

That's unlikely to happen, but Syl Marquardt, director of research at

John Hancock Funds

, believes the shift toward some traditionally defensive plays, such as drugs and consumer goods companies, will continue. The

American Stock Exchange Pharmaceutical Index

is only fractionally higher today, however, as investors concentrate on boosting tech stocks.

Semiconductors regained strength today, led by a 5.9% surge in

Micron Technologies

(MU) - Get Report

. The

Philadelphia Stock Exchange Semiconductor Index

rose 4.8%.

Champion International

(CHA) - Get Report

rose 22.7% after the announcement of a takeover bid by Dow component

International Paper

(IP) - Get Report

. IP was off 7.7%.

Among the big gainers on the NYSE were


(GLW) - Get Report

, up 14.9%, and

Texas Instruments

(TXN) - Get Report

, which gained 4%.


Philadelphia Stock Exchange Forest & Paper Products Index

gained 4.6% today. The

Dow Jones Transportation Average

was up 2.6%, while the

Dow Jones Utilities Average

rose 1.4%.

Market Internals

Breadth was solid on above-average volume.

New York Stock Exchange

: 1,861 advancers, 940 decliners, 577 million shares. 35 new highs, 39 new lows.

Nasdaq Stock Market

: 2,527 advancers, 1,314 decliners, 869 million shares. 23 new highs, 61 new lows.

For a look at stocks in the midsession news, see Midday Stocks to Watch, published separately.

Herb on TheStreet: The Downside of StarTek's Heavy Reliance on Microsoft


Herb Greenberg

Senior Columnist

4/25/00 10:59 AM ET

If you think that news of a slowdown at


(MSFT) - Get Report

is bad for investors, how about Microsoft suppliers? Outwardly, there are those such as


(SRT) - Get Report

Chairman Emmet Stephenson who don't think the company's warnings are a big deal. "They say that every quarter," Stephenson told my assistant,

Mark Martinez


He had better hope that's all it is. StarTek, which outsources personnel to handle mundane tasks like assembling the boxes and containers that hold software, has been able to show rapid growth, thanks largely to its relationship with Microsoft. In the past three years, sales from Microsoft have boomed to 76.5% of total sales from 44%.

However, a closer crunch of the numbers shows a disturbing trend: while Microsoft's share of StarTek's overall biz has been booming, the growth of sales from Microsoft has almost come to a screeching halt -- at least relative to what it had been. Last quarter, sales from Microsoft grew just 16% over the prior year, down from roughly 100% in each of the prior three quarters.

That's not all: non-Microsoft sales actually slid 6.2% last quarter -- the second straight quarter of declines. That's especially troubling in light of the way Wall Street has tagged StarTek as an e-commerce play.

It was that dot-com connection that helped StarTek's stock take off last summer -- in the heat of the Internet mania -- as investors were looking for unnoticed Internet plays. Not only did StarTek have an e-commerce fulfillment biz, but it also began touting itself as an operator of "branded vertical market Internet web sites."

The stock got another boost in September when the company bought just shy of 20% of in a joint venture with

Reader's Digest


, which bought the rest. With less than a 20% stake in, StarTek doesn't have to include its portion of the company's losses on its income statement.

Good thing: since its launching in November, has had little traction; it doesn't even rank among the top 500 sites, according to

Media Metrix

. Last quarter, in fact, Reader's Digest reported a $17 million loss from the site. If StarTek were required to include the loss, calculates one longtime StarTek short-seller, it would've only earned 21 cents per share in the fourth quarter -- not the 35 cents it reported.

"The whole growth story StarTek has been selling is that they are particularly suited to capitalize on the growth of the Web," the short-seller says. "Unfortunately for StarTek, that side of the business is going backwards."

Stephenson, StarTek's chairman, disagrees. He told Martinez that the non-Microsoft part of the biz has actually started to grow. And as for a slowdown in the Microsoft biz: It's true, he said, adding that "we think that we will grow right along with Microsoft."

Perhaps, but a slowdown is a slowdown is a slowdown. And these days anything Internet related has been crushed. StarTek's stock has already lost roughly half its value in recent weeks in the wake of one analyst's downgrade; the analyst cited little more than valuation as the reason. But even with the decline, StarTek is still trading at 50 times last year's earnings; it's also trading at about twice its pre-dot-com rally. This, for a company that, when all is said and done, is little more than a fabricator and order taker. That's why, even with the stock down as much as it is, some short-sellers still haven't covered.

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,