Skip to main content's MIDDAY UPDATE

May 22, 2000

Market Data as of 5/22/00, 1:21 PM ET:

o Dow Jones Industrial Average: 10,411.64 down 215.21, -2.03%

o Nasdaq Composite Index: 3,211.24 down 179.16, -5.28%

o S&P 500: 1,375.33 down 31.62, -2.25%

o TSC Internet: 772.80 down 51.03, -6.19%

o Russell 2000: 462.07 down 17.63, -3.68%

o 30-Year Treasury: 101 07/32 up 21/32, yield 6.160%

In Today's Bulletin:

o Midday Musings: The War Wages and the Generals Are Starting to Fall
o Herb Greenberg: Herb's Hotline: The Market, Rock Centre and More Cybernasties

Also on

Wrong! Dispatches from the Front: Blame Europe, Equant and Vodafone pulled tech stocks down in the U.S.

Hardware & PCs: Rising Rates Could Horn in on Gateway's Consumer Business

The company's expanding financing efforts illustrate its dependence on consumer spending.

Biotech/Pharmaceuticals: Name That Tune: Drug Price-Cap Talk Has Generic Drugmakers Humming

Possible legislation and patent expirations could boost stocks in the hot generic-drug business.

Mutual Funds: Fund Openings, Closings, Manager Moves: Strong Rethinks Move to Sell Through Brokers

Also: Loomis Sayles launches research fund.

Midday Musings: The War Wages and the Generals Are Starting to Fall


Justin Lahart

Associate Editor

5/22/00 1:16 PM ET A selloff is something like siege, with the advancing army slowly encroaching on the castle's fortifications. First one battlement falls, then the next. The foot soldiers with the pikes are overrun, the archers get cut down.

Then they kill the generals.

Stocks were down sharply at midday, with selling concentrated in big technology issues. These are companies that lay at the core of many portfolio holdings like


(CSCO) - Get Free Report

, down 3.6%,

Sun Microsystems

(SUNW) - Get Free Report

, off 5.7%, and


(ORCL) - Get Free Report

, down 8.2%. All are stocks that did not get hit by the first wave of selling in March -- in fact, they went higher as investors sold secondary positions and retreated to core holdings. All are now below their April lows.

"There's nothing but big-cap tech for sale," said Matt Johnson, head of Nasdaq trading for

Lehman Brothers

. Mutual funds "have been raising cash for the past month and a half, and that is continuing."

Traders are speculating that funds, which have whittled away their holdings so that little but core positions are left, must now reduce even these positions to raise cash.

"I would think that any mutual fund would have to be liquidating, in case there are redemptions," said Jim Volk, co-director of institutional trading at

D.A. Davidson


That's brought the

Nasdaq Composite

down below its closing low of the year. It was lately down 166, or 4.9%, to 3225. And though the so-called old-economy stocks of the

Dow Jones Industrial Average

held up a bit in the early going, they fell under the selling. The Dow was down 190 to 10,436.

Only three components,


(CAT) - Get Free Report



(MCD) - Get Free Report



(XOM) - Get Free Report

were flashing green.

The broader

S&P 500

was down 28 to 1379. Small-caps, too, were doing poorly: the

Russell 2000

was off 17 to 462. Internet Sector

Index was down 45 to 779.

Bad as the selloff has been, some believe that a bottom, albeit a temporary one, will form soon.

"We've got a short-term selloff that's going to lead to an oversold condition very quickly," said Phil Roth, chief technical analyst

Morgan Stanley Dean Witter

. But, Roth adds, "The tech sector was so extended on the upside it's going to take many months to finish this correction. The final low of the year is unlikely to come in the spring, more likely in the fall, and probably below 3000," on the Nasdaq.

Johnson concurs, believing that a tradable bottom will come soon, but that it will not mean the troubles are over for tech.

"This is a marketplace that was fueled by momentum," he said. "Tech investing for the past couple of years hasn't been just investing; it's been the trend, the hot thing to do."

Market Internals

New York Stock Exchange:

871 advancers, 1,872 decliners, 486 million shares. 22 new 52-week highs, 87 new lows.

Nasdaq Stock Market:

732 advancers, 3,142 decliners, 898 million shares. 13 new highs, 220 new lows.

Herb Greenberg: Herb's Hotline: The Market, Rock Centre and More Cybernasties


Herb Greenberg

Senior Columnist

5/22/00 1:24 PM ET

It's the market, stupid: Ten days ago on our


show I predicted that the Nasdaq would hit 3225 -- meaning that the Nasdaq had fallen 35% from its high -- sometime this month. And it did just that (albeit briefly) earlier today! Gee, pinch me and tell me it ain't true: I can now call myself ... a guru! (

Gary B

. and

Dave the Kansas

still make me look overly optimistic, with their dire 3000 estimates -- and they may yet be right!) ... And, no, the excesses still haven't been squeezed out.

Lernout & Hauspie


, the ultimate stock of excesses, still trades well above where it was


it started its rapid rise. The company recently did a 2-for-1 stock split. The stock is down considerably from where it had been, but it still must fall (sez me) at least to around 20 -- it is currently at around 39 -- for the excesses to be considered totally wrung out. (The shorts, of course, believe the excesses won't be fully done until the stock falls


39 points or so. Like you would expect them to say anything else?!) ...

Greater fool follies: Now that

Rockefeller Centre

is for sale (


) you can't help but wonder whether this is the ultimate sign of the top. The sellers are trying to cash in on the soaring prices of New York real estate. If prices are so high, you can only wonder who the buyer will be. If history is any guide, it'll be foreign investors, who have a tendency to buy U.S. assets at highs and sell at lows (the case with both Pebble Beach and the prior owner of the Rock.) ... Speaking of rock, let's turn to dock, as in David MurDOCK: The California real estate tycoon has finally gone and done it: Bought the remaining shares of

Castle & Cooke

(CCS) - Get Free Report

that he didn't own. That ends one of


longest rumored takeover stories I can recall -- one that has come and gone for most of the 12 years I've been writing this column. ...

Cybernasties: This morning's


mentioned that three shareholder class-action lawsuits had been filed last week against


(CYBR) - Get Free Report

. The company this morning denied all of the allegations and took a swipe at short-sellers. From the press release (as if to state a revelation): "Those 'shorts' have a selfish motive, contrary to the interest of the ordinary CYBeR-CARE shareholder -- to drive down the price of CYBeR-CARE stock, through manipulation means which include unfavorable press stories and deflammatory attacks on the company, its business, and its management." Deflammatory? Not a word in my dictionary. ...

Moving on: Remember

Able Telecom


? The company that bought a ditch-digging biz from



-- the same ditch-digging biz that has come under fire for delay after delay, and problem after problem, with the installation of the EZPass system on the Garden State Parkway? As this column

reported at the time, Able was sued by

Sirit Technologies

, a Canadian company that had tried to buy the MCI biz, then claimed the deal was stolen from under it by Able. Last week a jury in federal court in Florida agreed, and awarded Sirit damages of $31.2 million. Able doesn't have $31.2 million. Who will pay? Well, WorldCom is Able's largest holder, and is believed to be its largest creditor and customer. Stay tuned. ...

Finally, from the inflationary front: The only signs that the stock-market wealth effect has been squeezed out of part of the economy is anecdotal at this point, so let's get some anecdotes: The first comes from Saddle River, N.J. Carpenter

John Rock

who writes: "Large insulation contractors have seen two 3-cent-per-square-foot decreases from

materials suppliers in the last few months. Large sheet-rock contractors couldn't get the stuff last summer, when there was a month's waiting time. Now they can get it when needed. These are contractors that do condos or new houses -- large jobs." ... And from our very own

Mark Martinez

: "My friend, who happens to supply plumbing fixtures for almost every wealthy individual in Rancho Santa Fe, Del Mar and other wealthy communities near San Diego, says that their last month of biz was their worst month in four years. Further, customers who used to come in talking about stock gains, riches from stock gains, etc., are no longer doing that. The whole atmosphere has become very somber." ... as has the tone of this edition of ... The Hotline.

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,