Skip to main content's MIDDAY UPDATE

April 26, 2000

Market Data as of 4/26/00, 2:09 PM ET:

o Dow Jones Industrial Average: 10,986.76 down 138.06, -1.24%

o Nasdaq Composite Index: 3,701.33 down 9.90, -0.27%

o S&P 500: 1,470.61 down 6.53, -0.44%

o TSC Internet: 822.94 up 4.38, 0.54%

o Russell 2000: 489.26 up 0.23, 0.05%

o 30-Year Treasury: 104 11/32 up 2/32, yield 5.942%

In Today's Bulletin:

o Midday Musings: Earnings Reports Provide Some Solace as Indices Decline
o Herb on TheStreet: Why Microsoft, Intel Differ on PC Sales

Also on

Wrong! Rear Echelon Revelations: The Dearth of IPOs Is a Tell

Once again, the trader detects a bottom. Corporate Punishment

Individuals aren't the only ones hurt by tech stocks' plunge; corporations also bought ridiculous valuations.

Retail: April Showers Promise Few Flowers for Retail Stocks

Expect to see selling pressure if same-store sales fail to impress.

Dear Dagen: Decline of Euro Highlights Risks, Rewards of Currency Hedging in Funds

If your Europe-focused fund is among the few that hedge, you're better off -- for now.

Midday Musings: Earnings Reports Provide Some Solace as Indices Decline


Tara Murphy

Staff Reporter

4/26/00 1:28 PM ET The two major indices diverged earlier in the session, leaving the


sorry that it couldn't travel along the


upside trading trail. But investors found that the grass wasn't any greener on the tech side, as the Nasdaq also encountered a downward turn. With no follow-through from yesterday's rally, the market's recent volatile performance has investors stumped as to which investments will make the difference.

With the Dow and the Nasdaq giving back some of their 200-plus-point gains of yesterday, the market's bulls had little to cheer. Sectors across the board continued to suffer from the selling pattern that has continued after a session pops to the plus side. So where are investors taking cover?

"Companies that have had good conference calls and provided a good outlook, like




Sun Microsystems

(SUNW) - Get Free Report

," said Brian Gilmartin, portfolio manger at

Trinity Asset Management

. Gilmartin noted that these stocks are producing results, and therefore are trading close to the 52-week highs.

The buy-low-sell-high philosophy was reflected in early-morning trading, as investors jumped on stocks that have been beaten down in recent sessions, "Investors snapped up some stocks at bargain prices," said Jim Herrick, head of trading at

Robert W. Baird

in Milwaukee. "Good earnings particularly in tech have provided some leadership."

Lately, the Nasdaq was falling 33, or 0.9%, to 3678 1/2. The Comp remains 8.8% in the red for the year.

In Nasdaq trading,

F5 Networks

(FFIV) - Get Free Report

was getting pummeled 16 49/64, or 28.6%, to 41 15/16, after posting earnings in line with the

First Call/Thomson Financial

consensus estimate.

JDS Uniphase


continued to climb on news of strong earnings report and a 155% increase in sales.

In the past, Wall Street has used earnings as a guide to making sound investments. But after tech investors decided to get out of the kitchen before getting burned by their hot holdings, market insiders are now demanding not only strong earnings, but also solid revenue growth.

"For all the high P/E tech stocks, revenue is more critical than earnings because they're in their early stages of growth cycle, Gilmartin said. "Earnings can be manipulated by a lot of things -- a change in depreciation, expense removal -- and that's harder to do with revenues."

Yesterday, investors punished

Exodus Communications


, after the company surpassed earnings expectations but failed to produce acceptable revenue.



is also receiving the cold shoulder. The computer maker's earnings beat the Street, but it posted near-flat revenue.

"You need to see where the money is coming in the door, especially how the revenue is booked." said Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo. "It's testimony to the success of their products and services."

The revenue gauge is particularly important useful for selecting stable Internet investments. Large-cap tech investors like Gilmartin use revenues to determine which of these new economy investments will come out on top in the wake of the Web boom. "


(AMZN) - Get Free Report

uses its book business as a cash cow and is reinvesting in faster-growth businesses tangential to the e-tailing concept," he said. "One way to make sure that this is successful is to watch its revenue."

Amazon is set to release its first-quarter results and guidance report after today's close.

Elsewhere in techland, Internet Sector

index was off 2, or 0.3%, to 816, after its 8.2% bounce yesterday.

The Dow Jones Industrial Average was slipping 154 1/2, or 1.4%, to 10,970. At yesterday's close, the Old Economy indicator was still down 3.2% for the year.

Procter & Gamble

(PG) - Get Free Report

was helping to hold the index in negative territory, after the consumer giant provided a bleak outlook along with its first-quarter earnings.


(MMM) - Get Free Report



(INTC) - Get Free Report

also were dragging the index downward.

On the Big Board, oil stocks' earnings reports were fueled by higher oil prices.



was advancing 1 1/16, or 1.3%, to 85 7/8, after its first-quarter earnings quadrupled its year-ago report. The

American Stock Exchange Oil & Gas Index

gained 0.4%.



was jumping 5 3/4, or 10%, to 63 1/4, after the company topped the analyst estimate by 3 cents and posted a rise in revenue.

SG Cowen

lifted the stock to strong buy from buy.

The broader

S&P 500

was slipping 10 1/2 to 1467, while the small-cap

Russell 2000

was off 1 1/2 to 487 1/2.

Market Internals

Breadth was negative on both the New York Stock Exchange and the Nasdaq on moderately light volume.

New York Stock Exchange:

1,365 advancers, 1,422 decliners, 612 million shares. 47 new 52-week highs, 30 new lows.

Nasdaq Stock Market:

1,855 advancers, 2,037 decliners, 981 million shares. 36 new highs, 60 new lows.

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

Herb on TheStreet: Why Microsoft, Intel Differ on PC Sales


Herb Greenberg

Senior Columnist

4/26/00 6:30 AM ET

It just doesn't make sense:


(MSFT) - Get Free Report

gripes that corporate PC sales are softening, and


(INTC) - Get Free Report

claims PC demand is so great it can't make chips fast enough. (Puzzling, I say, damn puzzling.)

How can that be?

Simple, says Mike Kelly, who runs


, an Emeryville, Calif., market-research firm that has been tracking PC purchasing data for 15 years: They're both dealing with different ends of the distribution pipeline. "Microsoft is looking at shipments to OEMs

original equipment manufacturers, whereas Intel is looking at orders from OEMs," Kelly says. The result, he says, is that while shipments from OEMs may be falling, Intel wouldn't necessarily know because there's a normal lag of several weeks before a slowdown in shipments translates into a cutback in orders.

But that doesn't necessarily mean there


be a cutback in orders. Kelly, who has proven to

this column to be a good read of the PC industry, says he believes the current slowdown (which his surveys have confirmed is real) will be short-lived. His surveys of PC buying by companies with 250 or more employees show that purchases over the past two quarters were indeed flat, after rising for the prior two quarters. Kelly attributes that to Y2K-related issues.

However, while demand hasn't been there, interest in buying new computers has been rising "steadily and strongly" for five quarters. And interest, he says, almost always translates into future orders. "That indicates latent demand," he says, "which means sales will recover."

Notable quotable: According to Kelly, interest is especially high for purchases of








(IBM) - Get Free Report


Short Positions

Ancor's away:

The stock of

Ancor Communications


leaped 66% yesterday after the company announced it won a contract to supply its fiber channel switches to





reporter Kevin Max

quoted one analyst as saying the stock had risen so much because short-sellers were covering. Maybe some are, but not those who have steadily been quoted in this column as questioning the quality of Ancor's biz.

What the shorts found so intriguing yesterday was that while Ancor won some biz with EMC, so did Ancor's archrival



. And according to what an EMC spokesman told my assistant, Mark Martinez, one of the reasons EMC took Ancor in addition to Brocade is to give customers a choice. And


, my friends, was worth nearly $400 million in additional market cap.

Some Transaction!:

Transaction Systems Architects



no stranger to this column, reported dismal earnings Tuesday after the market closed. That's what sometimes happens to companies with revenue recognition issues, just like those mentioned

here earlier involving Transaction.

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,