May 1, 2000

Market Data as of 5/1/00, 1:28 PM ET:

o Dow Jones Industrial Average: 10,806.82 up 72.91, 0.68%

o Nasdaq Composite Index: 3,918.11 up 57.45, 1.49%

o S&P 500: 1,465.78 up 13.35, 0.92%

o TSC Internet: 910.25 up 15.14, 1.69%

o Russell 2000: 513.81 up 7.56, 1.49%

o 30-Year Treasury: 103 27/32 down 5/32, yield 5.949%

In Today's Bulletin:

o Midday Musings: Against Backdrop of Intraday Strength, Wall Street Debates the Bottom
o Herb on TheStreet: Why Cheating Rarely Pays

Also on

Wrong! Tactics and Strategies: JJC's Mr. Softee Spot

The trader couldn't stay away from Microsoft anymore. Here is why he got back in.

Asia/Pacific: Tokyo's Debt Explosion Has Japan on Shaky Ground

Ten years of stimulus programs are driving Japan's national debt to unprecedented levels.

The Chartist: The Daily Chartist: Everything's Coming Up Indicators

Signs that the Nasdaq is on an upswing abound as the Chartist's indicators confirm each other.

Earnings: Grand Opening: Most Earnings Calls Now Available to the Public

Reflecting regulators' efforts and the scant cost of Webcasting, the first quarter saw open calls jump.

Midday Musings: Against Backdrop of Intraday Strength, Wall Street Debates the Bottom


Justin Lahart

Associate Editor

5/1/00 1:02 PM ET

In the aftermath of the big selloff a few of Fridays ago there was a lot of talk about whether the market had touched bottom. One camp argued that the drop was somehow incomplete, and that more pain would surely come. The other said that there was nothing incomplete about the downdraft. It was time to step in and buy.

It was the latter group, at least in the short term, that was worth listening to. The storm has settled and with it the chop that had kept investors reaching for the Bromo-Seltzer. Trading screens are a healthy shade of green today, bespeaking a broad-based rally that's carrying all the major indices higher. You'd almost think last month's drop had never happened. At least for now, things are looking pretty good.

"Basically, it's a spring bottom leading to a summer rally," said Phil Roth, chief technical analyst at

Morgan Stanley Dean Witter

. "The next big test comes in the fall. I think we had a selling climax in the middle of April in the glamour stocks and it's producing a minor base and a temporary recovery."

For traders, however, it's not so cut and dried.

"It's tough right now," said

JNK Securities

partner Scott Kaplan, who works from the floor of the

New York Stock Exchange

. "You can't have such a great feel. You get a little pop based on earnings, and then once earnings die down a bit you have your rate fears and BAM!"

To some, that back-and-forth between good earnings and an unfriendly rate environment means stocks will remain range-bound until investors get some sense of when the

Federal Reserve will go back on hold. Wall Streeters widely expect the

Federal Open Market Committee's next meeting, May 16, to produce at least a 25-basis-point hike in the

fed funds rate, and possibly a 50-basis-point leap.

A Bottom Forms -- For Now
Nasdaq Composite Index, two months

"We're busy bouncing off an oversold area," said Scott Curtis, senior trader at

Brown Brothers Harriman

. "Earnings season has worked out well. The economic numbers -- the markets took them well" considering how strong they were.

But Curtis reckons that "there's still pressure on the market. We might even go down again to retest. There's still a lot damage."

Around midsession, the

Dow Jones Industrial Average

was up 83, or 0.8%, to 10,816. Much of that strength came from


(MSFT) - Get Report

, up 4.5%, which was adding 15.51 points to the benchmark index.

Several analysts came out with positive notes on the software king this morning, after the government on Friday asked a federal judge to break the company into two separate companies. Most notable was

Lehman Brothers

analyst Michael Stanick's report, which said if Microsoft would be worth $120 a share if it were broken up.

The bump in Microsoft was also helping to lead the

Nasdaq Composite Index

higher -- it lately was up 96, or 2.5%, to 3957. The

S&P 500

was up 18, or 1.2%, to 1470.

Internets continued their recovery. Internet Sector

index was up 31, or 3.4%, to 926.

The small-cap

Russell 2000

was up 10, or 2.1%, to 517.

The 10-year Treasury was off 6/32 to 101 26/32, lifting its yield to 6.25%.

Market Internals

New York Stock Exchange:

1,673 advancers, 1,069 decliners, 492 million shares. 58 new 52-week highs, 19 new lows.

Nasdaq Stock Market:

2,451 advancers, 1,422 decliners, 818 million shares. 39 new highs, 36 new lows.

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

Herb on TheStreet: Why Cheating Rarely Pays


Herb Greenberg

Senior Columnist

5/1/00 6:30 AM ET


What goes around ... :

The other night I was talking to a group of business school students, when someone asked why I do what I do (you know, poke around at the underbellies of companies). My response: "I hate people who cheat." Couldn't stand them in school; can't stand them now.

So, when I heard that David Lipson, the former chairman of


, had been found guilty by a federal jury of illegal insider-trading charges, I felt a sense of accomplishment. Supercuts was the third of three companies I spent months chasing back when I was with

The San Francisco Chronicle

. This wasn't your run-of-the-mill column item; like the others, I took a brief time off the daily grind of the column to build a case on each company.

The first two --

California Micro Devices



Media Vision

-- resulted in investigations by the


and the

Department of Justice

. Cal Micro's former CEO and CFO were convicted of fraud, sentenced to about three years each and ordered to pay $100,000 in fines apiece. The two are now out on appeal. Media Vision's former CEO was indicted and is awaiting trial.

Lipson, however, was different: There was nothing illegal about how he ran the company, but his business practices pushed the far edge of what is considered acceptable and suggested possible poor judgment. In fact, two ex-CFOs filed lawsuits against the company alleging a variety of misdeeds, including the manipulation of earnings. Unlike the CEOs of Media Vision and Cal Micro, Lipson never got charged with anything quite as extreme. He was accused of insider trading tied to his sale of Supercuts' stock prior to the release of bad news. Lipson's attorneys say he's appealing the verdict.

In the meantime, he'll continue running

Knightsbridge Partners

, a merchant banking operation in Chicago, and

Frederick's of Hollywood

, the women's lingerie chain, which he bought after leaving Supercuts. But the insider-trading conviction, besides being a public embarrassment, will be a public mark against his integrity. Which is the least you can hope for cheaters.

School daze:

Last time we checked in on

ITT Educational Services

(ESI) - Get Report

, the Indianapolis-based operator of 68 technical schools was being

taken to task by

Bear Stearns

analyst David Nadel, who had downgraded the stock to a neutral, for extending the enrollment deadline at its schools for an additional week, to 14 days. Nadel's concern -- that the unexpected inclusion of extra days lowers the quality of the company's earnings -- held weight because he was one of the first to prick the balloon of

Sylvan Learning Systems


, and Bear Stearns had served as one of ITT Educational's investment bankers.

The company has since reported stronger-than-expected first-quarter total enrollment, with new student gains up an impressive 10%. Impressive to some investors, perhaps, but not Nadel, who is back with more questions about the quality of those numbers. This time he notes that much of the gain came from the company's new Computer Network Systems Technology program, on which bulls are hanging their hats for ITT's future.

His concern, however, is sparked by what he found during a survey of ITT schools. He found that contrary to the company's own policy, ITT recruiters tried to lure potential students with information about the kind of salaries they might make after graduation. (The trouble with that is that there's no way ITT can know, because so far it hasn't graduated any students from that program.) According to a report by Nadel, who declined to comment on the record, the recruiters also steer potential students to the Web site of the Information Technology Association of America, the tech school industry's trade group, which talks about industry salaries. (The trade group's president, Harris Miller, as it turns out, is also on ITT's board. I couldn't get a hold of Miller, who didn't return two calls over the past two weeks, so we'll refrain from asking what the prez of a trade group is doing as a director of one of its member companies.)

What's more, Nadel also questions whether the entrance exam for ITT's new Computer Network Systems Technology program is designed to exclude students who'd be better off


in the program. "Recruiting reps at the surveyed sites assured us that applicants would have no trouble passing the ... exam," Nadel wrote.

Meanwhile, ITT recently reported banner enrollment growth, thanks largely to the new Computer Network Systems Technology training program. And that's the reason for Nadel's gripe: The results of his survey "raises questions about the sustainability of its enrollment growth." In other words, if they can't push the envelope on recruiting, enrollment growth could fall.

Time will tell, but this much I know: Just as Harris, the trade group prez, didn't return two calls over a two-week period, neither did ITT CEO Rene Champagne. Silence, in these circumstances, is rarely golden.

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.

Roland Jones and Robert Shiller on

Monday, May 1

Join TSC reporter Roland Jones for a chat with Robert Shiller, author of Irrational Exuberance. Robert and Roland will be chatting today at 3 p.m. EDT. Register to chat at It's free!

Also, Chat with John J. Edwards on AOL's MarketTalk, hosted by Sage at 3:30 p.m. EDT, Monday afternoon. (Keyword: Live)

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