TheStreet.com's MIDDAY UPDATE
May 8, 2000
Market Data as of 5/8/00, 1:22 PM ET:
o Dow Jones Industrial Average: 10,543.60 down 34.26, -0.32%
o Nasdaq Composite Index: 3,707.54 down 109.28, -2.86%
o S&P 500: 1,421.49 down 11.14, -0.78%
o TSC Internet: 878.07 down 19.69, -2.19%
o Russell 2000: 504.54 down 8.30, -1.62%
o 30-Year Treasury: 100 06/32 down 24/32, yield 6.229%
In Today's Bulletin:
o Midday Musings: Cisco Leads Techs Into Morass of Malaise
o Herb on TheStreet: Herb Part 1: The Plot Thickens at Cyber-Care
Also on TheStreet.com:
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Dear Dagen: Ratings Redux: Primer on Analyst Language Raises More Questions
Why would an analyst initiate coverage with a hold? Also, how does one find out which analysts carry weight?
Midday Musings: Cisco Leads Techs Into Morass of Malaise
5/8/00 1:12 PM ET Stocks stumbled out of bed this morning, trying to muster up enthusiasm for work, but by midday, the groggy feeling remained. Blue-chips were dipping in and out of the red, while technology stocks wished they had just stayed in bed.
Nasdaq Composite Index
was down 90, or 2.4%, to 3727, though it rebounded slightly from its morning low of 3716.97. The
Dow Jones Industrial Average
managed to fight off the early selling and lately was above break-even, up 5 to 10,582. The small-cap
, which was the only major index that pocketed a gain last week, was down 7, or 1.4%, to 506. The broader
was down 6, or 0.4%, to 1427.
was blamed for a lot of the pressure in tech stocks today. The networking giant lately was off 6.2% after the story questioned Cisco's valuation in the wake of $6 billion all-stock bid for
The market "just sort of has a blue-funk feeling," said Doug Myers, vice president of equity trading at
in Atlanta. "There is just no compelling reason to run out and buy stocks right now. Most of the people who want to own them already do. They don't need to add to positions now." A glance at the volume on both exchanges certainly backed up that viewpoint.
Myers was referring to the general malaise of
Fed fever weighing on the market as all eyes stay focused on the May 16
Federal Open Market Committee meeting. Investors were taken for a wild ride last week as report after report showed signs that inflation might finally be rearing its ugly head.
When Friday's numbers showed
at a 30-year low and the market hopped higher, some market watchers dubbed it a "relief" rally, saying that the uncertainty of a 50-basis-point hike had been removed. Given Friday's thin volume and today's limited upside, the so-called relief looks more like wishful thinking. Things aren't likely to be any smoother this week with
Producer Price Index
, two closely watched economic indicators, on the way.
Net Stocks Share in Suffering
Net stocks were underwater, with
TheStreet.com Internet Sector
index off 14, or 1.5%, to 884.
all were down.
John Babyak, portfolio manager at
WHB/Wolverine Asset Management
, said there has been little rhyme or reason to the "topsy-turvy" market of late. "This is definitely a trader's market. They're selling the stuff that was up last week. There's no trend or real theme, nothing in here that anyone can hang their hat on."
Babyak pointed to
Young & Rubicam
as a stock that is almost emblematic of the recent market. The stock lately was down 2 1/2, or 4.6%, to 51 5/8 after news this morning that it will be taken over by British advertising giant
. The stock had a volatile ride last week. "One day it's up on news of rumors, then on Friday it sold off on rumors that the deal was off," he said.
"From a portfolio manager's standpoint, you have to take profits selectively," said Babyak. "We're stocking up on the names we like when they're down. You have to have faith. Fundamentally everything is going on sale at some point. Nothing is immune."
Indeed, watching the speed of rotation in and out of sectors these days is enough to give an investor whiplash. Financials are up today, seemingly for no other reason than that they were beaten up last week. Dow component
was rising 2.7% while
was up 2%. The
American Stock Exchange Broker/Dealer Index
was up 1.1%.
Cyclical stocks were benefiting from the stream out of tech stocks today. The Dow Jones Utility Average was up 1.7%, while the
Dow Jones Transportation Average
Oil service stocks were higher, with the
Philadelphia Stock Exchange Oil Service Index
was rising 4.4%.
Breadth was negative, particularly on the Nasdaq. Both exchanges had light volume.
New York Stock Exchange:
1,158 advancers, 1,603 decliners, 444 million shares. 63 new 52-week highs, 37 new lows.
Nasdaq Stock Market:
1,450 advancers, 2,343 decliners, 625 million shares. 29 new highs, 51 new lows.
For a look at stocks in the midsession news, see Midday Stocks to Watch, published separately.
Herb on TheStreet: Herb Part 1: The Plot Thickens at Cyber-Care
5/8/00 6:30 AM ET
here last week raised questions about whether
approval to market its heavily hyped "Internet-based technology system that provides remote monitoring of individuals for health care purposes." That prompted one reader, who goes under the handle Hodgetx, to write: "This is a huge retail stock. ... My question to you would be what investors do you see yourself serving with this article with accusations of non-FDA compliance? Who pays your salary? Should we call for an ethical review? By the way, did you report all of the facts?"
Let's take them one at a time: Which investors do I see myself serving? Any invested in the stock. Retail investors, who live in the greatest vacuum -- especially with a stock like this that thrives off its message boards -- need the
information. As for why I would write about FDA compliance, it's a serious issue, especially with a heavily promoted stock like Cyber-Care, where it's often hard to distinguish fact from fiction. Who pays my salary?
. Should you call for an ethical review? Be my guest.
Oh, and did I report all of the facts? Actually, no, which brings us to Cyber-Care, the sequel:
As we mentioned last time, Cyber-Care has issued no fewer than 10 press releases touting the orders of its Electronic Housecall System, which still hasn't received FDA approval, from a number of companies.
However, it's one thing to issue a press release touting orders, it's another for those orders to materialize. That's important because it's not clear whether several companies that Cyber-Care has claimed to have deals with have the financial wherewithal to buy the products.
Cambridge Medical Centers
, which claimed that it was buying $2 million worth of the units from Cyber-Care, with the possibility of buying another $5 million or so in the future. Cambridge's president, according to a Cyber-Care press release touting the deal, is Barry Chapnick. He's the same Barry Chapnick who was CEO of the failed Commonwealth Savings & Loan in Florida. Two of his brothers, Jason and David, were sentenced to prison after the Commonwealth fiasco. Barry was sued by the
Securities and Exchange Commission
. It's unclear how the case was resolved; the SEC declined comment.
Given that backdrop,
, my associate) decided to check on Cambridge with
Dun & Bradstreet
. The president, according to D&B, is a "Larry Chaplick." Larry Chaplick? Wasn't that supposed to be Barry Chapnick? That's what D&B wanted to know, according to a source there. So D&B, as part of their routine verification process, contacted Barry Chapnick a while back to make sure the name on the D&B report was correct. D&B's records show that "we talked to him," meaning Chapnick, and that he wasn't bothered by Larry instead of Barry and Chaplick instead of Chapnick. (Our D&B source says D&B is now sending the Cambridge Medical file to its "high risk" department for further investigation.)
So, which is it, Barry or Larry? Mark called Cambridge and asked for Larry (per the name on the D&B report). Larry Chaplick, please. "Who?" asked Linda, the receptionist who answered the phone at Cambridge Medical Centers.
"Laaarrrryyyy Chap-Lick," replied Mark.
"There's no one here by that name."
"Has there ever been a Larry Chaplick?" asked Mark.
"No one ever by that name," said Linda. "You sure?" continued Mark, who tends to be tenacious. "There's never, ever been a Larry Chaplick?"
"No. No Larry. Larry is no one."
Later, Mark called again. He told the receptionist -- a different woman this time -- that he had been trying to get in touch with Barry for the last week, but that Barry had not returned any of Mark's calls. "She then told me that Barry told her I've been calling for weeks," says Mark. "She said, 'He (Barry/Larry) says you've been calling him for weeks.' I agreed with her, and told her that I don't think Barry wants to talk with me. She agreed, and told me why: 'He likes to escape a lot.' What do you mean by that?!!?? I asked. 'Forget it,' she said."
(Mark was simply trying to ask about a D&B report that said that Cambridge has been behind in its payments to creditors. In some cases, according to the report, Cambridge is 180 days, or six months, behind. There are nine accounts on record with D&B -- each of them showing that Cambridge is behind in payments.)
Metropolitan Health Networks
, which said (according to a Cyber-Care press release) it will buy up to 12,500 Cyber-Care units over the next 36 months. The cost of each unit, the company has said, is around $5,000, which means Metropolitan Health could be on the hook for at least $60 million. Why worry? Because in 1998 Metropolitan's auditors raised doubts about its ability to continue as a "going concern;" Metropolitan was delisted from the
on May 20, 1999. Then, four weeks ago, Metropolitan filed an 8K with the SEC disclosing that it cannot file its 10-K and 10-Q, citing "insufficient cash flow" as one of the reasons. What's more, according to D&B, Metropolitan is behind on at least four separate lease payments. It's also behind in payments to its largest customers. Our question: If it has insufficient cash flow to file an SEC document and has been behind on payments to its largest customers, what makes Metropolitan Health think it can buy $60 million of Cyber-Care's product? Metropolitan's CEO Fred Sternberg didn't return Mark's numerous phone calls, despite a receptionist's insistence that he would. Neither did Cyber-Care officials.
And this note: In our first story on Cyber-Care, Cyber-Care's General Counsel Danny Bivins said that the products Metropolitan and other companies had agreed to purchase from Cyber-Care were for a "low-end" product -- not, as the press releases suggested, the Internet product that is currently awaiting FDA approval. Unfortunately, Cyber-Care apparently failed to mention the "low-end" part to Metropolitan, which disclosed in a recent SEC filing that it had entered "a strategic alliance" with Cyber-Care for an electronic patient monitoring system that uses Cyber-Care's "patented Internet-based technology." Yep, the same one awaiting FDA approval. (Imagine trying to play "Who's on First" with these guys.)
Stay tuned for Part 2:
How Cyber-Care didn't tell the whole story about one medical study supposedly touting its product.
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
firstname.lastname@example.org. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
Copyright 2000, TheStreet.com