Publish date:

TheStreet.com's MIDDAY UPDATE

June 23, 1999



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Market Data as of 6/23/99, 12:55 PM ET:

o Dow Jones Industrial Average: 10,643.43 down 78.20, -0.73%

o Nasdaq Composite Index: 2,573.00 down 7.26, -0.28%

o S&P 500: 1,327.03 down 8.85, -0.66%

o TSC Internet: 575.17 down 1.75, -0.30%

o Russell 2000: 444.96 down 2.37, -0.53%

o 30-Year Treasury: 88 00/32 down 28/32, yield 6.130%

In Today's Bulletin:

o Midday Musings: Continued Rate Worries Put Clamps on Stocks
o Herb on TheStreet: Why Short Interest Figures Are Worth Watching

Also on TheStreet.com:

Wrong! Dispatches from the Front: JJC Abandons His Qwest

When good companies do stupid things, the trader bails.


SiliconStreet.com: E-Lend Me Your Ears: A Planned IPO and a Nettlesome Lawsuit

A Virginia-based nonprofit sues E-Loan over its name -- and it's all just part of the territory.


Asia/Pacific: Investors Can't Count on Asian Currencies

With the region apparently on the mend, investors worry that currencies might rise too quickly, choking off the export-led recovery.


Building Blocks: Retail REITs Feel the Threat of the Net

At least one REIT is trying to cope by using innovative lease clauses, but the challenges still outnumber the solutions.


Dear Dagen: Dear Dagen: How Do the Carrying Costs of WEBS, SPDRs and Funds Compare?

WEBS and SPDRs are passively managed investments, hence their low expenses.


Midday Musings: Continued Rate Worries Put Clamps on Stocks


Heather Moore

Staff Reporter

Investors found themselves in familiar territory at midday: worrying about interest rates, watching stocks fall but regularly find support, and seeking solace in oil and cyclical equity names. Several stock traders, meanwhile, said technology was holding itself together pretty well after five sessions of rousing rallying.

And the market strategists? Many were bored or on vacation. (Catch


reborn "Business Center" last night? We didn't know

Barton Biggs



that dark!)

"We're basically stuck in this trading range, looking for closure on the coming week about what


and his merry men will do," said Bryan Piskorowski, market analyst at

Prudential Securities

. "I think the concern is much more in what the commentary says than what the actual move is. Clearly, the easing

in 1998 wasn't a mistake, but people are considering the 25

-basis-point cut last December as a gimme, and so it's not that bad to give it back."

The trader expects a 25-basis-point hike in interest rates from the

Federal Open Market Committee's

meeting June 29-30 and said the inflation picture doesn't support a greater increase. "If something starts changing there, we'll see the bond vigilantes sell with reckless abandon," he added.

"My colleague Larry Wachtel said it best this morning," Piskorowski continued. "We do a good job getting over the big humps, but we find it hard when there's nothing to do and we're just sitting here. I'm impressed that tech is not giving back more of its gains. I think they're moving on expectations for good quarterly earnings. ... But this is still a very quick market, it's very choppy: yesterday's winners are today's losers and then tomorrow it could be yesterday's winners again. I mean, paper has moved a year and a half's worth. Part of the

recent buying is momentum, and it's not just the same old tech stocks."


Dow Jones Industrial Average

lately was losing 82, or 0.8%, to 10,640, near its session low of 10,625.07. Oil names were performing most gracefully among the otherwise battered gilded 30, with



up 1.6% and


(XON) - Get Report

up 1.5%. The

American Stock Exchange Oil Index

was gliding up 0.7% while the

Philadelphia Stock Exchange Oil Service Index

was climbing 2.4%. The pop comes after two down sessions.

Stock pickers who've found some recent light in energy can thank last night's inventory statistics for today's oil strength. The

American Petroleum Institute

reported a huge draw of 5.8 million barrels in crude stocks in the week ended June 18. Expectations were for 1 million barrels. August crude oil lately was up 51 cents to $18.26 a barrel.

Dow component

International Paper

(IP) - Get Report

was jumping 3.2% following an upgrade from

Morgan Stanley Dean Witter

, and the

Philadelphia Stock Exchange Forest and Paper Products Index

was rising 1%.

The tech-endorsing

Nasdaq Composite Index

was dripping down 9 to 2571, above an earlier low of 2557.46. A handful of the proxy's biggest names were clawing their way out of negative territory, with


(INTC) - Get Report



(CSCO) - Get Report



(ORCL) - Get Report


Sun Microsystems

(SUNW) - Get Report

all in the green. The

Nasdaq 100

remained down 0.1%.

Interents failed to be overwhelmingly inspired by talk that



may buy



Internet assets, including

Alta Vista


TheStreet.com Internet Sector

index was off 2 to 575.

TD Waterhouse

(TWE:NYSE) -- the world's second-largest discount broker and a unit of


(TD) - Get Report

-- was advancing 2 1/16, or 8.6%, to 26 1/16 in its IPO. Yesterday, the company boosted the size of its initial offering to 42 million shares from 32 million.

Piskorowski said the days of outrageous Internet IPOs are gone, at least for now. "And that's because there has been a salvation of demand," he said. "There are so many of these companies now that we have to separate the men from the boys, from what's a true growth engine and what are the dot-com add-ons."

Also falling short as a giddy influence,

Goldman Sachs

(GS) - Get Report

, like

Lehman Brothers


yesterday, could not lift the financial segment with its earnings report. In its first earnings report as a publicly traded company, Goldman posted second-quarter pro forma operating earnings of $1.30 a share, topping the 11-analyst

First Call

forecast of $1.07. The

American Stock Exchange Broker/Dealer Index

was skidding 1.9%.

American Express

(AXP) - Get Report


J.P. Morgan

(JPM) - Get Report

, meanwhile, were the most negative influences on the Dow. The broader

S&P 500

was down 10 to 1326, and the small-cap

Russell 2000

was down 2 to 445.

The 30-year Treasury was down 27/32 to 88 1/32, lifting its yield to 6.13%. (For more on the fixed-income market, see today's early

Bond Focus.)

Market internals were decidedly negative. On the

New York Stock Exchange

, decliners were leading advancers 1,854 to 956 on 392 million shares. And downs had the ups 1,977 to 1,481 on 514 million shares in

Nasdaq Stock Market

activity. New 52-week lows were outpacing new highs 44 to 30 on the Big Board, but new highs were topping new lows 48 to 33 on the Nasdaq.

Wednesday's Midday Movers

By Thomas Lepri
Staff Reporter

Investors were giving



the business -- in the negative,

Eddie Haskell

sense of the verb -- after




First Union



Wells Fargo

(WFC) - Get Report

set plans to form a competing electronic bill payment company. The banks are giving the company the rather intimidating appellation

The Exchange

, and said it will be ready for business by the end of the year. CheckFree was lately down 9 3/16, or 24.4%, to 28 1/2.

In other news:

AboveNet Communications


, an outsourcer of Internet hosting and connectivity services to businesses, was moseying up 3 13/16, or, 10.4%, to 40 9/16 after fiber-optic network operator

Metromedia Fiber Network


set plans to buy it for about $1.6 billion in stock. Metromedia was off 5 1/2, or 12.9%, to 37 3/16.


(BYND) - Get Report

was advancing 4 15/16, or 19.3%, to 30 9/16, largely on rumors -- unsubstantiated thus far -- that


(AMZN) - Get Report

might be considering purchasing the online software seller.



was shooting up 3 13/16, or 6.7%, to 61 3/16 on speculation that



was interested in buying the Internet service provider. Gateway was lately down 15/16 to 63 13/16.

Stanford Telecom


was moving up 2 1/2, or 9.5%, to 28 15/16 after last night's news that Canada's

Newbridge Networks


was buying it for $280 million in stock. Newbridge was lately off 1 7/16 to 29 5/16.

Vulcan Materials

(VMC) - Get Report

was popping 3 7/16, or 8.1%, to 46 1/8 after

Standard & Poor's

said last night that it is scheduled to move into the S&P 500 along with

Network Appliance

(NTAP) - Get Report

, which lately was up 2 7/8, or 6.4%, to 47 11/16.

Earnings/revenue movers



was sliding 4 1/8, or 13.1%, to 27 3/8 after the networker's CFO said last night that 3Com expects its revenue for the first and third quarter of 2000 to come in below year-ago figures. 3Com posted fourth-quarter earnings of 24 cents a share, 1 cent higher than the 25-analyst view and ahead of the year-ago 18 cents. The company also approved a 15 million-share repurchase plan.

Crown Cork & Seal

(CCK) - Get Report

was falling 3 15/16, or 12.1%, to 28 1/2 after warning that its second quarter earnings will come in at 75 cents to 77 cents a share, well below the eight-analyst view of 92 cents a share.

As noted above, Goldman Sachs posted its first earnings report today, and the venerable brokerage didn't disappoint, beating expectations with second-quarter earnings of $1.30 a share. But the company lately was mired in negative territory along with the other brokerages, off 2 9/16 to 65 7/16.

Collectibles company

Racing Champions


was scooting down 9 9/16, or 56.9%, to a puny 7 1/4 after it warned today that it expects to lose 30 cents to 35 cents a share for its second quarter, a far cry from the six-analyst call for earnings of 17 cents a share.

Herb on TheStreet: Why Short Interest Figures


Worth Watching


Herb Greenberg

Senior Columnist

Extra, extra:

If you missed the "Extra" version of this column that ran late yesterday, on why


(NVDA) - Get Report

may be the big loser in

Diamond Multimedia's


acquisition by




click here. (The reality of the Internet, which is finally sinking in after 15 months at


-- okay, I'm slow! -- is that there's no need for me to sit here and wait until morning to publish pertinent information, even if it appears


the market closes, as was the case with the Nvidia story.)

Internet insanity:

The apparent slowdown in Internet use, based on the latest from

Media Metrix


, is being written off by some analysts as seasonality. In other growth industries, however, isn't seasonality a euphemism for a maturing market? Growth industries, after all, aren't supposed to be affected by seasons and cycles. Makes some skeptics wonder whether the Internet appears to be plateauing faster than radio, television and cable.

And it very well may be plateauing, especially on specific sites. But the Internet's ramp up was also faster than that of any other media. And the Internet is still so shy from reaching its potential, technologically, that this slowdown (and it


a slowdown) may look like a blip in its evolution. All of which is not to say that


prices have been justified or will be justified, even in a promising future. On the fundamentals, though, the Internet is not merely an industry, it's a transformative technology that transcends many industries. (Yup, I'm conflicted as a shareholder of



, but I woulda written


even if I weren't. Honest. Really. Trust me. Psst, hey, buddy, need some knock-off Oakleys?)

Short interest-ing:

Yesterday the JJC goes on

at length about why short interest can't be used as a way to make money. He goes on to ask: "So, why bother to publish them?"

I'll tell you why, follicly-challenged one: Because


investor ought to know what the short interest of his or her investments are. Not because short interest can be used to make a market-timing call. (I suppose it can if you're

Gary B. Smith, but we won't go there.) And not because playing the possible short-squeeze on an individual company can fatten the wallet. (Oh, sure it can in the right kinda market, but what a lousy reason to own a stock! It's also the easiest way I know to get blasted. Squeeze out the shorts and suddenly there's no cushion to buy the shares when they go into a nosedive. StOOpid.)

The reason short interest should be published, as it is once a month by the exchanges, is so individual investors can get a heads-up to possible trouble. Not that all short interest is the work of shortsellers, who are betting against a company's fundamentals. And not that all shortsellers are right.

But several months of steadily rising short interest should be a clear signal that somebody knows or thinks they know something. And it's reason enough for every investor -- actually every investor, analyst, corporate exec and board member -- to start asking questions.

For some reason the shortsellers always seem to know a company is headed for trouble before the company itself.

But thanks to the publication of short interest, their negative bet was for all to see.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Get in the trenches with James Cramer... Invest a cool $500,000 without the risk - register for TSC's Investment Challenge and play for prizes, including a trip to NYC and a morning with James Cramer! Pre-registration - June 21. Game begins - June 28.


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