June 04, 1999

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Market Data as of 6/4/99, 1:37 PM ET:

o Dow Jones Industrial Average: 10,690.61 up 26.92, 0.25%

o Nasdaq Composite Index: 2,444.42 up 41.10, 1.71%

o S&P 500: 1,311.76 up 12.22, 0.94%

o TSC Internet: 544.11 up 9.81, 1.84%

o Russell 2000: 438.92 up 2.94, 0.67%

o 30-Year Treasury: 90 04/32 down 3/32, yield 5.965%

In Today's Bulletin:

o Midday Musings: Techs Bounce but Jobs Report Leaves Uncertainty in Place
o Herb on TheStreet: How Healtheon Stays One Step Ahead of the Skeptics

Also on

Wrong! Dispatches from the Front: The Big Bad Event Has Passed

And now it's time to dabble on the long side, at least until the next BBE arrives.

Networking: Wary Investors Punish Aware Over Talk Cisco Link Is Fraying

The DSL firm's execs dismiss rumors it's being supplanted by GlobeSpan as Cisco's main supplier.

Market Features:


Guide to Bonds Online: How the Biggest Online Brokers Stack Up

Bond services on the Net are limited, but some brokerages stand out.

Asia/Pacific: China's Commanding Hand Still Guides the Market

Using manipulation to explain any market strength is easier than looking at company fundamentals.

Fixed-Income Forum: Which of These Closed-End Floating-Rate Loan Funds Is Not Like the Other?

One of the four funds holds some junk bonds, giving it a bit of interest-rate exposure.

Midday Musings: Techs Bounce but Jobs Report Leaves Uncertainty in Place


Aaron L. Task

Senior Writer

SAN FRANCISCO -- Benign is fine (but whiskey's quicker). Thus far, at least, a somewhat conflicted

jobs report

has proven more favorable than un, giving investors license to buy the recent dip.

Traders fretting about a


rate hike were put somewhat at ease when the

Labor Department

reported nonfarm payrolls rose just 11,000 in May, far below the 216,000 expected. However, components of the report prevented the headline figure from being


and eliminating all the worry warts: The unemployment rate fell to 4.2%, below the 4.3% expectation, and average hourly earnings rose by 0.4%, above the 0.3% target.

"I think it's hard to find any convincing evidence in the employment report that pushes the Fed to tighten at the end of the month," said John Lonski, senior economist at

Moody's Investors Service


Tech stocks were leading the bounce today, much as they have spearheaded the recent decline. The

Nasdaq Composite Index

was up 54 to 2458 while Internet Sector

index was higher by 16 to 550. Within tech, chip and equipment makers were the standouts after

Merrill Lynch

made some positive comments about


(INTC) - Get Intel Corporation (INTC) Report

, although the brokerage firm did not upgrade the chip giant, as was rumored. The

Philadelphia Stock Exchange Semiconductor Index

was up 3.8%.

Blue-chip gauges were also on the rise. The

Dow Jones Industrial Average

was up 47 to 10,711 although down from its earlier best of 10,756.46. Meanwhile the

S&P 500

was higher by 16 to 1315 and the

Russell 2000

was up 4 to 440.

Gains notwithstanding, the action was pretty sparse and traders weren't anticipating any big increase in the afternoon.

"It was a confusing number but bonds reacted positive and the market followed suit," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee.

That positive reaction had faded entirely by midsession. The price of the 30-year Treasury bond was down 8/32 to 90 4/32, its yield rising to 5.96%. (For more on the fixed-income market, see today's early

Bond Focus.)

"I think

the market was oversold but I don't know if oversold is the right term," Herrick continued. "I think the better term is to say it was a relief rally that we didn't see a stronger number. But there are still some concerns."

With the Dow, particularly, coming off its morning high as lunchtime approached on Wall Street, the trader predicted "if anything, we'll turn lower" in the afternoon. "Techs might be doing better but there are still concerns about Y2K and earnings for the second quarter," he said. "I think it will slowly peter out."


New York Stock Exchange

trading, advancers were leading declining issues 1,541 to 1,235 on 378 million shares. In

Nasdaq Stock Market

action, gainers were ahead 1,892 to 1,634 on 491 million shares. New 52-week highs were leading new lows 49 to 30 on the Big Board and 55 to 33 on the Nasdaq.

Should They Stay or Should They Go?

"This report did not provide the smoking gun in terms of evidence of a rise in inflation risk," Lonski said. "An 11,000 gain

in payrolls plus signs aggregate hours have slowed preserve the possibility that U.S. economic activity may not continue at a pace that augments inflation risk."

Lonski conceded the headline figure was "an oddity" and there's still a better-than-even chance the Fed will tighten. "But this report in and of itself doesn't mean a Fed rate hike at the end of June is a closed case," he said. The "decline in manufacturing employment

in today's report contradicts the latest

National Association of Purchasing Management

survey," he said, while noting average hourly earnings has increased an average of just 0.3% this year, same as in 1998 and 1997.

However, there are external factors at play, the economist said, noting the "odd" timing of Vice Chairwoman

Alice Rivlin's

resignation for a position with "not exactly the prestige and power of sitting on the Fed board of governors." Beyond the "conjecture" about Rivlin's mindset, the Fed may feel compelled to tighten now, rather than wait until later in the year when Y2K concerns may make a rate hike "awkward if not impossible," he said.

International developments could play a role in the central bankers' thinking as well. Today's rumors of a yuan devaluation quickly faded, but the possibility of a Chinese devaluation remains, Lonski said, noting Chinese trade results have been "horrible" this year; its trade surplus has fallen from $15 billion to $5 billion in the first four months of 1999.

Nonetheless, the

Consumer Price Index

report June 16 will probably be the ultimate determinant as to whether the Fed hikes rates at its June 29-30 gathering.

"If there are any signs of destabilization internationally, it will force the Fed to hold off," he said. "But when the Fed decided to go ahead an assume a tightening bias, the Fed implicitly announced it believes the worst of the global financial crisis has past. In all likelihood

Alan Greenspan

plans to go ahead and tighten unless something pops up in core CPI inflation that would make it very difficult politically."

Friday's Midday Movers

By Heather Moore
Staff Reporter

Wit Capital

(WITC:Nasdaq) was flying up 6 9/16, or 72.9%, to 15 5/8 after

Bear Stearns

priced its 7.6 million-share IPO top-range at $9 a share last night.

wrote about the Internet investment banking and brokerage firm's offering this morning.

Elsewhere in new issues,

High Speed Access

(HSAC:Nasdaq) was up 6 1/2, or 50%, to 19 9/16 after

Lehman Brothers

TheStreet Recommends

priced its 13-million-share IPO top-range at $13 a share. High Speed Access provides Internet access via cable modem. And

Network Access Solutions

(NASC:Nasdaq) was flat at 12 after

Donaldson Lufkin & Jenrette

priced its 7.5-million-share IPO below-range. The price range for the data communications company's offering was $14 to $16.

In other news:

Goldman Sachs

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

was up 2 15/16 to 66 9/16 after DLJ started coverage with a buy.

Sprint PCS


was up 2 5/8, or 5.7%, to 48 13/16 after DLJ pushed up the stock to top pick from buy.

T. Rowe Price Associates

(TROW) - Get T. Rowe Price Group Report

was down 2 13/16, or 7.4%, to 35 after

Morgan Stanley Dean Witter

dropped it to neutral from outperform.


(VIA) - Get Viacom Inc. Class A Report

was up 2 7/16, or 6.3%, to 40 13/16 after Lehman Brothers raised it to buy from outperform, with a price target of 50.

Earnings/revenue movers

AEP Industries


was down 1 13/16, or 5%, to 34 5/8 after late yesterday reporting second-quarter operating earnings of 28 cents a share, missing the single-analyst estimate for 32 cents but moving ahead of the year-ago 16 cents. Today, the company filed for a 2.4 million-share offering. That stock represents


33% interest in AEP.

(BYND) - Get Beyond Meat, Inc. Report

was up 5 5/16, or 30.5%, to 22 13/16 after

Credit Suisse First Boston

said it estimates the company will lose $3.88 a share in 1999, better than its previous estimate of a loss of $3.90. For fiscal 2000, the firm expects the company to lose $1.54, narrower than a previous estimate for a $1.61 loss.

Guitar Center


was down 3 15/16, or 26.1%, to 11 3/16 after saying its merger with

Musician's Friend

would dilute earnings in the final three quarters of fiscal 1999 by about 8 cents a share and that current business trends would lower earnings by an additional 2 cents.


slashed the stock to neutral from buy.

Haverty Furniture

(HVT) - Get Haverty Furniture Companies, Inc. Report

was up 1 13/16, or 6.4%, to 30 after last night saying its May same-store sales jumped 15.3%.

Michaels Stores


was up 3 1/8, or 11%, to 31 1/2 after last night posting first-quarter earnings of 18 cents a share, 3 cents above the 11-analyst estimate and a repeat of the year-ago figure.

Nu Skin Enterprises

(NUS) - Get Nu Skin Enterprises, Inc. Class A Report

was down 1/2 to 17 3/8, above an earlier low of 16, after warning that "unanticipated delays in significant marketing initiatives in Japan" will likely lead to softer-than-anticipated second-quarter earnings, which could be up to 10% lower than the current two-analyst estimate for 35 cents a share. The company also said a pending public offering of shares by existing stockholders was postponed.



was down 1 5/16, or 6.7%, to 18 1/4 after last night saying it sees first-quarter earnings of 5 cents to 15 cents a share, citing aggressive pricing in the desktop hard-drive market. The 11-analyst forecast called for 31 cents vs. the year-ago 2 cents. The company also sees first-quarter revenue coming in below the fourth quarter's. Today,

Prudential Securities

cut its first-quarter earnings estimate to 10 cents from 32 cents.

Herb on TheStreet: How Healtheon Stays One Step Ahead of the Skeptics


Herb Greenberg

Senior Columnist



When they were hot, investors threw caution to the wind on Internet stocks, ignoring the types of disclosures and risks that used to take on some kind of meaning. And if there's one thing the likes of me and

Adam Lashinsky

thought we'd learned, it's that it's not much use mocking young public venture Internet companies for one common disclosure: heavy reliance on a few customers. Whaddaya expect out of year-old company, anyway, you goofball?

But these days, it's starting to come clear that even with these fledgling Internet companies, those disclosures may be there for a reason: The company doesn't want you to come back saying that you weren't warned. Take



, the online health transaction and information company. If there were ever a company


to bet against, it would be Healtheon. Or so you would think. It's backed by some of the brightest and richest in Silicon Valley.

However, Wall Street's sudden lack of interest in Internet stocks provides a good reminder to investors to go back and re-read two important disclosures from the company's recent 10-Q, 10-K and pre-IPO registration statement.

The first involves

SmithKline Labs

, which is one of four customers that generate the bulk of Healtheon's revs. In February

SmithKline Beecham

(SBH) - Get Sally Beauty Holdings, Inc. Report

sold SmithKline Labs to

Quest Diagnostics

(DGX) - Get Quest Diagnostics Incorporated Report

. Healtheon discloses that it has no clue whether Quest will continue the relationship with Healtheon. The company declined comment beyond the docs.

The second, and perhaps more important, discloses that Healtheon is in the middle of renegotiating the terms of its agreement with

UnitedHealth Group

(UNH) - Get UnitedHealth Group Incorporated Report

, another of its Big Four. Healtheon says the two sides are negotiating new prices "that will reduce the rates paid by UnitedHealth" to Healtheon.

That raises the question, of course, whether the other three will try to get the same deal. Sure they will, but like most new Internet companies, Healtheon will keep changing its biz plan to try to stay one step ahead of the skeptics, which is why its deal to buy


may have been just what the doctor ordered.

For now.

Skewered by Sabratek:

Reader Mathew Mitchell sends an email headlined, "do you ever admit being WRONG??? You never gave

Lernout & Hauspie


any credit for closing the


(INTC) - Get Intel Corporation (INTC) Report

deal, which you said may not happen. Stock has not changed too much, no harm. BUT, you blew it, as of now at least, on



!!!! People who read your

column and shorted or sold their shares lost BIG! DO you care to revisit or at least admit some error on your part?"

What, just because the stock is up 50% since then? This column isn't written for daytraders. If somebody wants to short or buy a stock based exclusively on what they read here, they do it at their own risk. The only apparent reason Sabratek's stock is up is because the FDA re-approved one of its products, which it had been forced to take off the market. That really wasn't much of a surprise, but it nevertheless appears to have been a good excuse to bid up the stock.

The key points of the column still stand: The drug infusion company's receivables are outa sight and the hope (or hype) is that the company's imminent purchase of a medical Web portal will get it an Internet valuation.

Short-term stock swings, one way or the other, don't validate a company's strategy. Fundamentals do.

Carnegie Capers

: When we last

checked on Carnegie International


, the company said that its long-halted stock would begin trading early this week, at the latest. It's still not trading, and company officials did not return a call seeking comment. Do I hear next week?

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.


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