Publish date:

midday06-09-99's MIDDAY UPDATE

June 09, 1999

Phillips Publishing

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Market Data as of 6/9/99, 12:55 PM ET:

o Dow Jones Industrial Average: 10,708.65 down 56.99, -0.53%

o Nasdaq Composite Index: 2,505.98 up 31.42, 1.27%

o S&P 500: 1,319.95 up 2.62, 0.20%

o TSC Internet: 572.35 up 2.80, 0.49%

o Russell 2000: 444.03 up 0.27, 0.06%

o 30-Year Treasury: 89 12/32 down 10/32, yield 6.024%

In Today's Bulletin:

o Midday Musings: Mixed Stock Reaction Greets Soaring Bond Yields
o Herb on TheStreet: The Lesson Learned as the Hot Air Is Released From Select Comfort

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Midday Musings: Mixed Stock Reaction Greets Soaring Bond Yields


Heather Moore

Staff Reporter

You might think today's stock market amounts to taking an extra smoke break, doing an embarrassing amount of research for buying a new air conditioner and running out of droll comments about the




Game 5 to entertain co-workers with.

But some market watchers are taking the major indices' quiet, mixed action as an encouraging sign. Especially considering yesterday's equity

fallout and today's bond yields of 6% and higher.

"I see this as very constructive," said Eugene Peroni, director of equity research at

John Nuveen

in Philadelphia. "That techs are driving higher bodes well for the market and the economy. The long bond is trading at the upper end of its range, above 6%, but I see this as a short-term event. A yield of 6.1% is tolerable in this market, and maybe will spur a 5% to 7% total correction

for stocks from that point. Anything above 6.1 is ticklish."

The yield on the 30-year bond was getting closer to having fingers at its armpits, and was lately at 6.03%, with the price of the Treasury falling 13/32 to 89 8/32. (For more on the fixed-income market, see today's early

Bond Focus.)

Large-cap technology names, meanwhile, were serving as the morning's stars. The

Nasdaq Composite Index

was jumping 31, or 1.3%, to 2505, off an earlier high of 2513.46. The

Nasdaq 100

was climbing 1.6%.


(INTC) - Get Intel Corporation (INTC) Report



(CSCO) - Get Cisco Systems, Inc. Report

were up about a point each, while

Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report



(MSFT) - Get Microsoft Corporation (MSFT) Report

were up about 2 points each.

Among other tech indices, the

Philadelphia Stock Exchange Semiconductor Index

was expanding 3.7%, and the

Morgan Stanley High-Tech 35

was advancing 1.5%.


Lou Dobbs

-endorsed Internet industry was feeling somewhat worthy again, but it wasn't quite rocketing to outer space. Recently, Internet Sector

index was up 3, or 0.5%, to 573.

Not everyone was as giddy about today's tech strength as Peroni, though.

"It's nice to see 'em up rather than down, but one day doesn't make a trend," said Barry Berman, head of stock trading at

Robert W. Baird

in Milwaukee.

"We're just sitting here waiting for


," the trader said of the Producer Price Index figures scheduled for release Friday. "It's all interest-rate- and


-driven. We've seen that in the volume -- 650 million -- the last two days."

Indeed, with volume summerlike and breadth about flat, the status quo doesn't seem to be going anywhere anytime soon. It seems buyers, at least the bulk of them, continue to linger on the sidelines, waiting for that Godot-esque confirming word on inflation.

That interest-rate know-it-all, Fed Chairman

Alan Greenspan

, is attending the

International Monetary Conference

in Philadelphia today, but it's a closed-door affair. So don't hold your breath for any excitement from the City of Brotherly Love.

Peroni says while there's a 40% likelihood that the policy-setting

Federal Open Market Committee

will tighten interest rates at its June 29-30 meeting, he expects the Fed to postpone any action to the next meeting. Instead, the Fed will give the market more time to take care of any overheating itself, the strategist predicted.

If there is a rate hike, there will be an "initial knee-jerk negative reaction, but it will only be an eye blink," said Peroni, who sees a summer rally starting around the July 4 holiday. "Long-term, we'll realize this is a stimulating event. But I don't think

a rate hike is necessarily an expected event -- there's still a lot of division out there now. I don't get any absolute sense that they are going to raise rates."

In the meantime, Peroni expects to see leaders in semiconductors, telecoms and financials. "One of the old adages that's still true is 'Don't sell a dull market short.' That's still a positive. Sometimes the market has a hard time seeing beyond its nose," he added.

Rising as high as 10,790.02, the

Dow Jones Industrial Average

was lately losing 51 to 10,715.

American Express

(AXP) - Get American Express Company Report


General Motors

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


Procter & Gamble

(PG) - Get Procter & Gamble Company Report

were contributing the most downward pressure to the blue-chip proxy. P&G was off 4.1% after saying it will lay off about 13% of its workforce as part of a $1.9 billion restructuring plan.

Following recent earnings warnings from

United Airlines



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


US Airways


TheStreet Recommends

, airline names weren't doing too swell. The

Dow Jones Transportation Average

was falling 1.2%, and the

American Stock Exchange Airline Index

was dropping 2.7%.

The broader

S&P 500

was up 3 to 1320, and the smallish-cap

Russell 2000

was up a fraction to 444.

As mentioned earlier, market internals were nothing to write anyone anywhere about. On the

New York Stock Exchange

, decliners were leading advancers 1,506 to 1,228 on 348 million shares. But the ups had the downs 1,864 to 1,650 on 442 million shares in

Nasdaq Stock Market

activity. New 52-week lows were outpacing new highs 36 to 32 on the Big Board, but new highs were ahead of new lows 56 to 24 on the Nasdaq.

Wednesday's Midday Movers

By Thomas Lepri
Staff Reporter

The day's big loser thus far has got to be aerospace giant

Lockheed Martin

(LMT) - Get Lockheed Martin Corporation (LMT) Report

, which was plummeting 6, or 14.8%, to 34 7/16 after it said it expects to lose 10 cents to 15 cents a share in the second quarter of this year, a far cry from the 72 cents a share it was expected to earn by the 10 analysts polled by

First Call

. Lockheed, which blamed increased costs and reduced production rates, also said it sees itself earning at least $1.50 in 1999 and at least $2.15 in 2000, as opposed to analysts' estimates of $3.10 and $3.39, respectively.



was falling 2 3/8, or 7.2%, to 30 5/8 in sympathy with Lockheed, which is in the process of buying the satellite capacity provider through a tender offer.

In other news:

Investors are still flying the Koop. After surging more than 80% yesterday in its first day of trading,


lately was up a further up 1 3/8, or 8.4%, to 17 13/16. But yesterday's other big-gaining Net IPO,

BackWeb Technologies


, was lately off 2, or 9.8%, to 17 11/16.

Internet credit card provider



was soaring 7 3/4, or 21.2%, to 44 after

Donaldson Lufkin & Jenrette

started it with a buy rating and set a price target of 17.

Procter & Gamble was falling 3 11/16 to 91 1/8 after setting plans to lay off 15,000 workers, or about 13% of its total workforce, as part of a $1.9 billion restructuring plan.

French chip maker


(STM) - Get STMicroelectronics NV ADR RegS Report

was up 7 5/8, or 6.2%, to 131 1/8 after

Morgan Stanley Dean Witter

raised its price target to 160 from 130.

Terayon Communication Systems


was surging 5 1/8, or 15.8%, to 37 3/4 on no particular news whatsoever.

VWR Scientific Products


was advancing 8 5/8, or 31%, to 36 1/2 after it last night said it's being bought by majority shareholder

Merck KgaA

-- a German drug, specialty chemicals and medical equipment maker with no relation to U.S.-based drug maker


(MRK) - Get Merck & Co., Inc. (MRK) Report

-- for $37 a share in cash. Merck KgaA already owns 48.9% of VWR Scientific.

Earnings/revenue movers

Informations technology services firm

Condor Technology Solutions


had lost about half its market cap at midday after the company warned that it expects to post a second-quarter loss of 5 cents to 3 cents a share. The four-analyst consensus was for second-quarter earnings of 25 cents a share. Condor was lately off 4 7/8, or 49.7%, to 5.

Conexant Systems

(CNXT) - Get VanEck Vectors ChinaAMC SME-ChiNext ETF Report

was moving up 3 15/16, or 8.7%, to 49 3/16 after the semiconductor and chip maker said last night that it expects its third-quarter earnings to "significantly" beat the 11-analyst consensus of 11 cents a share. Morgan Stanley and

Credit Suisse First Boston

each upped their 1999 per share earnings estimates for Conexant to 45 cents from 30 cents and 42 cents from 28 cents, respectively.

U.S. Bancorp Piper Jaffray

analyst Ashok Kumar also upped his estimate, to 42 cents from 28 cents a share.

Ocular Sciences

(OCLR) - Get Oclaro, Inc. Report

was plunging 2 3/8, or 12.1%, to 17 1/4 after the company said its second-quarter revenues would come in lower than expected, citing a stagnant U.S. optical market. Ocular stressed that its second-quarter earnings would be in line with the nine-analyst estimate of 40 cents a share, but

SG Cowen

cut Ocular to buy anyway, and reduced the company's 1999 earnings estimate to $1.55 a share from $1.70.

In other earnings news:

Italian luxury goods maker



was little changed after posting first-quarter earnings of 77 cents a share, 2 cents above the four-analyst consensus and up from last-year's 67 cents. Gucci, which also said it was "comfortable" with expectations of about 1999 earnings of $3.40 a share, lately was up 1 to 63 15/16.

Oil and gas exploration firm



was off 1 5/16 to 27 5/8 after it came in with second-quarter earnings of 41 cents a share, beating the 35-cent eight-analyst view and up from the year-ago 25 cents.

Herb on TheStreet: The Lesson Learned as the Hot Air Is Released From Select Comfort


Herb Greenberg

Senior Columnist

Sorry for an abbreviated column -- taking off to show my son the sights, sounds (and smells) of summer in New York. Just a couple quick items:


The lesson you should really learn from

Select Comfort


, the air bed maker that's no

stranger to this column, is to be leery anytime a company keeps hyping studies that show its technology is the best.

Be extra leery of studies that aren't quite what they appear. (You remember: the


study for Select Comfort that wasn't really done by Stanford and involved only eight people?! You remember:

The University of Memphis

study that was performed by a "doctor" who, the company didn't disclose, is really a doctor of mechanical engineering?!) Be downright skeptical if the company's margins are ultra-high (Select Comfort's gross margins were a software-like 66%) but there's a flood of lower-priced competition.

As it turns out, those were only a few of the warning signs preceding the company's warning yesterday that not only would its second quarter "significantly" miss analyst estimates of a 15-cent-per-share profit, it may actually report a loss. The stock fell 43% Tuesday to 7 7/16.

A Bed Maker's Woes
Select Comfort says it won't meet second-quarter estimates

Kmart kalamity:

Suzanne Kapner's

story Tuesday questioning whether the mass marketer's turnaround has failed hit bullseye. At least if the



on busy Route 17, in Paramus, N.J., is any indication.

Here we have the only big box mass merchandiser for miles, serving a fairly affluent population not far from NYC. Yet this store is a shopping nightmare. Never mind that it's dirty, disorganized and regularly out of stock. The shopping experience is only outdone by the checkout experience, where they might as well have a sign that says, "Thanks, and don't come again."

Speaking of checkout? From what era did they get those filthy checkout counters? Haven't they ever heard of that newfangled device called a conveyor belt?

The irony (or tragedy) is that Kmart CEO Floyd Hall is the former CEO of


. I always wondered why Kmart couldn't simply copy Target. After all, Hall knows the formula. But knowing the formula is one thing, executing it is another.

As one business-savvy friend remarks, the problem with Kmart is that the stores aren't run by merchants. They're run by the same old crew that didn't get it then and certainly doesn't get it now.

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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