May 17, 2000

Market Data as of Close, 5/17/00:

o Dow Jones Industrial Average: 10,782.42 down 152.15, -1.39%

o Nasdaq Composite Index: 3,656.08 down 61.49, -1.65%

o S&P 500: 1,447.64 down 18.40, -1.26%

o TSC Internet: 901.67 down 27.95, -3.01%

o Russell 2000: 500.18 down 5.80, -1.15%

o 30-Year Treasury: 100 31/32 down 30/32, yield 6.174%

In Today's Bulletin:

o Midday Musings: Many Players Still Sidelined as Stocks Slide Post-Fed
o Herb on TheStreet: How Amazon Booked 'Air' Last Quarter

Donald Luskin, president, CEO and co-founder of, will be the guest on "" show on Fox News Channel May 20 and 21.

Also on

Wrong! Dispatches from the Front: Seeking Terra Firma

The Terra deal is under attack, but Cramer has faith in the Lycos CEO to do what's right for shareholders.

Banking: North Fork-Dime Battle Set to Take Another Turn

Hostile bidder North Fork sets an afternoon conference call as markets continue to expect a rival deal.

Brokerages/Wall Street: Southwest Securities' Technical Troubles May Put Off Suitors

The Dallas brokerage is trying to bounce back from technology woes and find itself a rich mate.

SuperModels: Even the Bears Find This Market Unbearable

Those who predicted the Nasdaq's drop still took a hit, so there's no money left to chase away the bear market.

Midday Musings: Many Players Still Sidelined as Stocks Slide Post-Fed


Eileen Kinsella

Staff Reporter

5/17/00 1:14 PM ETYesterday's post-

Fed party left the market with a lingering headache as stocks coasted lower. Judging from the light volume, a lot of investors simply opted out for the day.

Major proxies chopped lower out of the gate and were lately all in the red. The

Dow Jones Industrial Average was down 157, or 1.4%, to 10,778, while the tech-laden

Nasdaq Composite Index was off 80, or 2.1%, to 3638. The broader

S&P 500 was down 21, or 1.5%, to 1445, while the

Russell 2000 was down 7, or 1.5%, to 499.

Yesterday, after the Federal Reserve doled out its most aggressive rate hike in five years, stocks initially stumbled but managed to regain their momentum and wrap up a day of solid gains. The blue-chip Dow had lately surrendered all of yesterday's 126-point gain. The Nasdaq was close to erasing yesterday's 109-point pop.

Adam Wagner, president of

Wagner Hermann & Herbst

in Houston, was having difficulty making sense of the recent market action. Referring to the 50-basis-point hike and the Fed's

hints at further tightening, he said, "That was pretty much the worst announcement they could make. Some people felt like 'Look out, we're going to retest the lows,' but there was also a lot of talk that maybe this is a good thing," if the tightening cycle is going to draw to a close sooner, he said.

The "super selloff" immediately after the announcement was expected, Wagner said. "I don't know what to make of

today's selling. Anything can happen. It's like this is Stock Market 102. Forget everything you learned in Stock Market 101."

Ray Hawkins, vice president of block trading at

J.P. Morgan

, viewed the action as "just a reprieve from yesterday," saying that people are realizing interest rates aren't done going up. Hawkins also mentioned an upcoming options

expiration on Friday, noting that Wednesday and Thursday are the days where things get shifted around beforehand. "All things considered, it's not that bad," he said. "We're putting out bids and not finding sellers. There's a lot of people sitting on their hands."

Profit-taking in



was hurting the Dow. H-P and its spinoff

Agilent Technologies

were tumbling after both companies reported solid earnings

last night. H-P was off 5.9% while Agilent was down 10.1%.

J.P. Morgan

(JPM) - Get Report

was a rare green spot in the blue-chip Dow, lately up 1.7%, though it wasn't representing the general direction of financial stocks. The

American Stock Exchange Broker/Dealer Index

was down 1%, while the

Philadelphia Stock Exchange KBW/Bank Index

was off just a fraction.

Chase Manhattan


was edging up 0.1%, and

American Express

(AXP) - Get Report

had reversed earlier weakness to rise 0.6%.

Semiconductor stocks were taking a rest after yesterday's action, with the

Philadelphia Stock Exchange Semiconductor Index

down 1.3%. News of a minor earthquake in Taiwan wasn't lending any confidence amid the overall weakness today. But

Analog Devices

(ADI) - Get Report

was jumping 8.6% after delivering strong second-quarter earnings and a sunny outlook. The company said its revenue could rise more than 65% for the full year.

Internet stocks were under water, with Internet Sector

index off 27, or 2.9%, to 902. Analysts and fickle investors were frowning on the finally announced merger of Spain's

Terra Networks


and U.S.-based portal



. Terra was sliding 10.6%, while Lycos was off 12.2%; Terra parent


(TEF) - Get Report

was off 6.2%. This morning

ABN Amro

cut Lycos to hold from outperform, while

Merrill Lynch

analyst Peter Bradshaw cut Terra to neutral from accumulate.

UBS Warburg

downgraded Lycos to hold from buy.

Net bellwether

America Online


was down 1.8%, while



was pushing up 1.2%.

Most airline stocks were riding higher, with the

American Stock Exchange Airline Index

up 0.8%.

American Airlines




was up 4.4%, while

Delta Air Lines

(DAL) - Get Report

was rising 0.3%. The

Dow Jones Transportation Average

was down 0.6%, though, largely on weakness in




Northwest Airlines



The 10-year Treasury was down 9/32 to 100 7/32, its yield rising to 6.47%.

Market Internals

Breadth was negative, particularly on the Big Board, on light volume.

New York Stock Exchange:

824 advancers, 1,929 decliners, 479 million shares. 16 new 52-week highs, 39 new lows.

Nasdaq Stock Market:

1,210 advancers, 2,513 decliners, 678 million shares. 12 new highs, 62 new lows.

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

Herb on TheStreet: How Amazon Booked 'Air' Last Quarter


Herb Greenberg

Senior Columnist

5/17/00 9:37 AM ET

A big issue (

here and elsewhere) when

(AMZN) - Get Report

reported its first-quarter rev last month was the legitimacy of so-called advertising revenue from a series of recent marketing deals with upstart companies like


that aren't making a dime. But Wall Street cheered the creation of the so-called Amazon Commerce Network as (in the words of one analyst at the time) a "high-margin revenue stream." Others credited the "advertising" revenue, as it was also called, from these deals as an important factor in the surprising strength of Amazon's gross margin.

And some of it was. But not most of it.

At least $13 million of the $19.9 million of so-called unearned revenue in the latest 10-Q was merely the difference between the discounted price Amazon paid for its Ashford stake ($8 per share) and the fair market value of Ashford (mid-teens) on the day the deal was signed. In other words, 65% of what showed up as revenue from these deals in last quarter's earnings press release was really little more than an accounting differential. A bookkeeping entry. Air. Call it whatever you like: it wasn't the real McCoy. It was nonincome income.

What's more, you won't find mention of this in any company document. I had heard it through the Wall Street grapevine, and it was confirmed to me Tuesday by Amazon (which I should point out was very accommodating and very willing to talk about it).

The number will be included in Amazon's revenue through the duration of the Ashford alliance, which runs through December. While just a speck in the last quarter's $574 million in revenue, it represented almost a full two percentage points -- almost all the improvement in gross margin above what analysts had expected.

A spokesman, however, says that just because the Ashford deal wasn't cash doesn't mean it isn't income. "The cash comes in when we sell the stock," he says.

That's the point: Amazon bought the stock for 8; it's now around 4. Even Jethro Bodine knew that knot minus knot equals knot. And that's why there's concern for


of these marketing deals, especially in a market that doesn't like e-commerce (and where many stocks are headed for knot!).

One other thing: One analyst who is an unabashed Amazon fan was not happy to learn of the Ashford air. "When they don't tell you things like that," wondered this analyst, "you can only wonder what else they're not telling you." Indeed, if Amazon had simply mentioned the nuances of the Ashford agreement when it announced earnings (by highlighting it in neon lights), it would've pre-empted a column like this!

The best defense, even in corporate America (and as trite as this sounds), is still a great offense.

As originally published, this story contained an error. Please see

Corrections and Clarifications.

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,