Publish date:

midday06-08-99's MIDDAY UPDATE

June 08, 1999

Log on and see why National Discount Brokers was awarded the top rating in both Barron's and Money Magazine's online broker surveys:

Market Data as of 6/8/99, 1:06 PM ET:

o Dow Jones Industrial Average: 10,817.88 down 91.50, -0.84%

o Nasdaq Composite Index: 2,518.07 down 6.14, -0.24%

o S&P 500: 1,326.97 down 7.55, -0.57%

o TSC Internet: 585.81 down 0.06, -0.01%

o Russell 2000: 446.70 up 0.05, 0.01%

o 30-Year Treasury: 90 06/32 up 5/32, yield 5.956%

In Today's Bulletin:

o Midday Musings: Market Wears Cement Shoes Amid Continuing Volume Strike
o Herb on TheStreet: Is Barclays About to Turn the Fund World Upside Down?

Also on

Wrong! Dispatches from the Front: Renting Stocks

Cramer has little conviction on any of his positions at this point. That's why he's a renter, not an owner.

Retail: Searching for Growth in the Kmart Karma

Some observers aren't persuaded this turnaround story has turned the corner.

Biotech/Pharmaceuticals: Feeling Fritzky, Immunex CEO Transforms Boutique Into Biotech Biggie

How the company's CEO helped a biotech boutique become a household name.

Bob Gabele: More Insider Moves at Electro Scientific, Hibernia and Compaq

While they're selling at Electro Scientific, insiders are picking up shares at both Hibernia and Compaq.

Dear Dagen: Dear Dagen: Can I Move Money Out of My 403(b) Plan?

There's no simple answer. It all depends on the plan and the paperwork.

Midday Musings: Market Wears Cement Shoes Amid Continuing Volume Strike


Brian Louis

Staff Reporter

Indeed, there's not a lot of huge news today. Yes, volume is light. Sure, everyone's waiting for upcoming economic data and the

Federal Open Market Committee

meeting later this month. Expect those phrases to reappear over the next few days, probably at least until Friday.

But unlike the next few days, today is different. Today is special. Today is the trading debut of

(KOOP:Nasdaq). (There's got to be a few traders on desks today shouting out "Kooooooop, Koooooooop," harking back to the sounds they used to hear at

Milwaukee County Stadium

for former



Cecil Cooper

). The "koop" refers, of course, to former U.S. Surgeon General

C. Everett Koop

, who co-founded the online health-care concern.

Anyway, was soaring in its first day of trading (see Midday Movers). It was also most active on the

Nasdaq Stock Market

, with 16.3 million shares changing hands so far.

Meanwhile, stocks were taking a breather after rallying handsomely Friday and yesterday.

"It's really slow," said Scott Curtis, senior equity trader at

Brown Brothers Harriman

, adding that the "summer doldrums have started already."

Curtis said people are just marking time ahead of upcoming inflation data and waiting for the FOMC's meeting later this month. The FOMC is slated to meet June 29 and 30.

Indeed, the market's in a holding pattern as bond and stock market participants look ahead to upcoming economic data: On Friday,

retail sales

and the

Producer Price Index

will be released, while on June 16, the

Consumer Price Index

is set for release.

Leading major averages on the downside was the

Dow Jones Industrial Average

, which was off 100, or 0.9%, to 10,809. Among the Dow's main drags were


(IBM) - Get International Business Machines (IBM) Report



(DD) - Get DuPont de Nemours, Inc. Report


Procter & Gamble

(PG) - Get Procter & Gamble Company Report


The tech-heavy

Nasdaq Composite Index

was down 8 to 2516. In tech, analysts' actions were helping push movement in the sector.

PC makers were being pressured after

Donaldson Lufkin & Jenrette

trimmed earnings estimates for later this year on





(DELL) - Get Dell Technologies Inc Class C Report




and IBM.

In the enterprise sector, DLJ trimmed estimates on

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report





Conversely, semiconductor equipment stocks gained, albeit well off their session highs.

Warburg Dillon Read

initiated coverage of several of the sector's issues, which in turn helped boost the

Philadelphia Stock Exchange Semiconductor Index

, which was up 1%. Warburg initiated coverage of

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report


LAM Research

(LRCX) - Get Lam Research Corporation (LRCX) Report


Novellus Systems


, all with buy ratings. Applied Materials and Novellus are index components.

Among tech sector gauges, the

Morgan Stanley High-Tech 35

was down 1.2%, while the

Nasdaq 100

was down 0.8%.


S&P 500

was off 7, or 0.6%, to 1327. The

Russell 2000

was flat at 447.

Internet stocks were mixed after sprinting higher over the last two sessions.

On the upside in the Net sector was



, up 17.6% and leading the Internet Sector

index on news that


(DIS) - Get Walt Disney Company Report

is in talks to buy the rest of the portal company, possibly in exchange for an Internet tracking stock Disney would create. Disney currently has a 43% stake in Infoseek. Disney was down 3.2%.

Meanwhile, the

Dow Jones Transportation Average

was under pressure again today, down 1.1%, as decaying airline stocks again undercut the average.

American Airlines'





United Airlines'



(UAL) - Get United Airlines Holdings, Inc. Report

TheStreet Recommends


US Airways


, which issued a profit warning, were three of the biggest drags on the average.

Dick Stein, chief technical analyst at

Noble Financial Group

, cited a subsiding of fear over interest rates as the catalyst for the market's surge Friday and yesterday, in light of May's measly 11,000 nonfarm payroll growth, a sign the economy is starting to cool off.

As for the


, Stein said he doesn't see it making a move at the end of June.

Overall, "I remain basically bullish," he said.

Treasuries were firm. The 30-year bond lately was up 6/32 to 90 6/32, yielding 5.96%. (For more on the fixed-income market, see today's early

Bond Focus.)

On the

New York Stock Exchange

, decliners were leading advancers 1,555 to 1,238 on a pale 379 million shares. On the Nasdaq, losers were beating winners 1,884 to 1,664 on 493 million shares.

On the NYSE, 60 issues had set new 52-week highs while 28 had touched new lows. On the Nasdaq, 77 issues had set new highs while new lows totaled 25.

On the Big Board, Compaq was most active, with 12.6 million shares changing hands. It was down 1 to 22 7/8.

Meanwhile, among other indices, the

Dow Jones Utility Average

was down 0.3%. The

American Stock Exchange Composite Index

was down 0.3%.

Tuesday's Midday Movers

By Heather Moore
Staff Reporter



was flying 7 7/16, or 17.6%, to 49 3/4 after


(DIS) - Get Walt Disney Company Report

last night said it's in talks to buy the rest of the company, possibly in exchange for an Internet tracking stock. Disney, which has a 43% stake in Infoseek, was losing 1 to 29 7/8.

In other news:

American Mobile Satellite


was up 4 3/16, or 25.4%, to 20 11/16 after signing an agreement with privately held


to buy the remaining 78% it doesn't own in

XM Satellite

for about $144 million.

Bank of New York

(BK) - Get Bank of New York Mellon Corporation Report

was up 2 3/4, or 7.9%, to 37 7/16 after agreeing to sell its

BNY Financial

commerce-finance unit to the


financing arm of

General Motors

(GM) - Get General Motors Company (GM) Report

for $1.8 billion in cash. GM was off 1 to 68 1/8., an online health-care company named after C. Everett Koop, the former U.S. surgeon general, was rocketing up 5 15/16, or 66%, to 14 5/8 after its 9.38 million-share IPO was priced at $9 a share.

Bear Stearns

served as the company's lead underwriter. Competitor

Superior Consultant Holdings


was off 1 1/16 to 35 1/8.

Elsewhere in new issues,

BackWeb Technologies

(BWEB:Nasdaq) was soaring 7 15/16, or 66.2%, to 19 15/16 after

Goldman Sachs

priced its 5.5 million-share IPO top-range at $12 a share. The Israeli company makes Internet software.



was up 1 11/32, or 33.6%, to 5 3/8 after announcing a set of technology and licensing agreements with Microsoft, including a total investment by Mister Softee of $125 million.

WellPoint Health Networks


was up 5, or 6%, to 88 7/16 on last night's news it will replace

Harnischfeger Industries


in the S&P 500 after today's close. Yesterday, Harnischfeger filed a voluntary petition for reorganization under Chapter 11 bankruptcy. Separately, WellPoint filed with regulators to resell 9 million shares.

Elsewhere among changes to

Standard & Poor's


Labor Ready


was up 1 11/16 to 38 3/8 on word it will replace



in the

S&P SmallCap 600

after Friday's close. Resound is being acquired by

GN Acquisition



Westamerica Bancorp

(WABC) - Get Westamerica Bancorporation Report

was up 1 5/8 to 36 1/8 on word it will replace

Nine West


in the

S&P MidCap 400

June 14. Nine West is being acquired by

Jones Apparel



Earnings/revenue movers

Select Comfort


was down 5 31/32, or 45.5%, to 7 1/4 after warning second-quarter earnings will fall significantly below the four-analyst forecast for earnings of 15 cents a share. Along with disappointing sales trends, the company blamed the warning on a switch to a new consumer credit provider, which has resulted in a reduction in credit approvals. (Last month,'s

Herb Greenberg

wrote about Select's shenanigans with mattress studies.)



was down 1 3/8, or 9.6%, to 13 after last night saying it sees second-quarter earnings of 6 cents a share due to a continuation of problems identified in the first quarter. The five-analyst outlook called for earnings of 14 cents vs. the year-ago 17 cents. The problems include the transition to a new enterprise resource planning system at its

Intermec Technologies

subsidiary, right-sizing activities (yes, the company actually said "right-sizing activities," with what we presume is a straight face) at the

Cincinnati Machine

division, and new product introduction issues at the

German Honsberg Lamb


Following Friday's warning from UAL's United Airlines, US Airways said its second-quarter earnings will come in around $1.80 to $1.85 a share. The 11-analyst estimate called for $2.15 a share. The airline cited softer than expected May traffic and higher than expected costs. US Airways was down 2 1/4 to 49 5/16; UAL was down 2 9/16 to 63 13/16.

Herb on TheStreet: Is Barclays About to Turn the Fund World Upside Down?


Herb Greenberg

Senior Columnist

Barclays Global Investors

is best known as the largest institutional investment manager. That may be about to change. The company has quietly applied with the


to start trading open-end "managed" index funds on the

American Stock Exchange


If approved, they wouldn't be the first funds to trade on an exchange; that honor goes to closed-end funds, which unlike open-end funds issue a limited number of shares. But they would be the first so-called exchange-traded open-end funds. Their introduction could be the first step to the public's trading of all types of mutual funds, which could be a boon to the Amex.

Far-fetched? Perhaps, but a key component of the Barclays plan is that funds would be priced continuously throughout the trading day, just like any other stock, instead of just once a day at the market's close.

What's more, "many of the criticisms of mutual funds, such as high fees and taxes, would be eliminated," says financial adviser Robert Levitt of

Levitt Novakoff

in Boca Raton, Fla. The high fees would be substituted with a commission to a broker for handling the trade, rather than the fund manager in the form of a management charge. (There would still be a management fee, but it would be paltry compared with fees charged by typical mutual funds.)

Then there's the tax issue: By purchasing a fund that trades as a stock, rather than a fund, investors would no longer be directly responsible for capital gains incurred by the fund for trades by the manager. "The two things that control taxes

in open-end funds are the portfolio manager and other investors through the cash they put in and out" of individual stocks and the funds themselves, Levitt says.

Don't closed-end funds already offer that tax bonus? Sure, but because they issue only a limited number of shares, the shares often trade at big discounts or premiums to the value of the portfolio, or the net asset value. Barclays contends that those premiums and discounts can generally be eliminated by an unlimited supply of shares. In fact, in its application, Barclays makes a point of saying that its funds would create "efficiencies in pricing ... and minimize the

underwriting costs that are sometimes encountered" with closed-end funds.

How exactly Barclays is going to have an unlimited supply of shares that trade is unclear. Details are sketchy; the prospectus has not yet been issued and officials were unavailable for comment.

If some of this sounds familiar, though, it should, because Barclays' proposed funds are similar in concept to the

Standard & Poor's

depositary receipts, or SPDRs, and other products that already trade on the Amex. One difference is that SPDRs are unit trusts that trade a fixed portfolio, and they mirror a small number of indices. Barclays, however, has filed to trade, at the start, as many as 45 indices created by Standard & Poor's,

Dow Jones



. (Some aren't even in existence yet.)

Perhaps the biggest difference is that unlike SPDRs or even index funds, Barclays wants to add a level of active management to its funds by lending shares to short-sellers, and investing in derivatives, options and futures, tactics that it says "are desirable and in the interest of investors."

All of this sounds great to Levitt, who has been looking for ways to invest in sectors without taking the tax hit of an index or having to rely on the skills (or lack, thereof) of a sector fund manager. "If I could buy the same product like a mutual fund on an exchange and I could buy it cheaper with better tax efficiency, it would be tempting," he says.

If other advisers agree with Levitt, that could pose a challenge to the likes of index fund giant

Vanguard Group

, whose funds have low fees but are subjected to the same tax risks as other funds (though those taxes are often lower than taxes on some actively managed funds). Vanguard officials declined comment, but Levitt predicts, "This will be Goliath versus Goliath."

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.


Copyright 1999,