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midday07-13-99's MIDDAY UPDATE

July 13, 1999

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Market Data as of 7/13/99, 1:11 PM ET:

o Dow Jones Industrial Average: 11,143.99 down 56.99, -0.51%

o Nasdaq Composite Index: 2,763.97 down 26.47, -0.95%

o S&P 500: 1,390.08 down 9.02, -0.64%

o TSC Internet: 647.24 down 11.55, -1.75%

o Russell 2000: 456.72 down 2.58, -0.56%

o 30-Year Treasury: 90 29/32 up 3/32, yield 5.894%

In Today's Bulletin:

o Midday Musings: With Argentina in the Background, Stock Players Book Profits
o Herb on TheStreet: A Lesson From GM on What Not To Do in the Wake of Bad News

Also on

Wrong! Dispatches from the Front: The Load Gets Lighter

The anticipated selloff could be more benign than typical overbought selloffs, Cramer says.

Semiconductors: Looking Past Earnings, Analysts Clash on Intel's Future

As the world's biggest chipmaker continues to evolve, some analysts disagree on where the company is headed.

Internet: eBay's Traffic Could Be Going, Going, Gone

But its recent outage troubles could be boosting the bidding business at new auction sites, such as Yahoo! Auctions.

Taxes: States Take Lead in Offering College Savings Plans

The Education IRA, passed by Congress, is small potatoes compared with what some states offer.

Dear Dagen: Dear Dagen: NAV Is Not a Variable You Need to Worry About

Don't get hung up on a fund's net asset value.

Midday Musings: With Argentina in the Background, Stock Players Book Profits


Brian Louis

Staff Reporter

After brushing off the concerns about Argentina and Latin America yesterday, the market decided it was time to think about it today as traders and investors dumped stocks.

While some may really be concerned about the situation, others seem to be using the news for profit-taking considering the way the market's run up lately.

The selling came right away in the market this morning. All of the major market barometers hit their session lows within a half hour of the opening bell before coming off those levels. Major gauges, however, late in the morning stocks took another downturn, but have since reversed course again.

Meanwhile, in new issues,

(CHINA:Nasdaq) was soaring in its trading debut, up 204.6%.

Yesterday, the Treasury market rallied in part thanks to flight-to-quality buying on worries over Argentina's ability to repay debts and on political problems there, to name just a couple of the jitters. Yesterday, Argentina's


index tumbled nearly 9%. It has begun to repair that damage, and was lately up 3.3%. Brazil's


index was down 1.2%, but off its lows.


Dow Jones Industrial Average

was down 60, or 0.5%, to 11,141.46.

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

was taking a hit, down 2 3/8 to 138 3/16, and was the biggest drag on the Dow. The second-biggest drag on the Dow came via



, which was off 2 3/16 to 96 3/4.

Meanwhile, the

S&P 500

was down 8, or 0.6%, to 1391. The

Nasdaq Composite Index

was down 21, or 0.8%, to 2769.

In the Net arena, Internet Sector

index was down 9, or 1.4%, to 650.

(AMZN) - Get, Inc. Report

was making a notable advance. It was up 3.8%.

Small-caps were also lower: The

Russell 2000

was down 3, or 0.6%, to 457.

Bruce Bittles, market strategist at

J.C. Bradford

in Nashville, Tenn., said back in early May that the market was going to move into a trading range of 10,300 to 11,100 on the Dow, with that trading range staying into effect to mid-to-late June, which was around the time the


was going to raise rates. Then, his call was for a big rally with the potential for the Dow to go to 11,600.

Going forward, Bittles said today, he's looking for a correction in the market from August to September and lasting through October.

Some market watchers and participants discounted the events in Latin America.

Bittles said overall he doesn't think the situation in Argentina will be a major influence on the market at all.

Among today's big movers,


(AMGN) - Get Amgen Inc. Report

was up 8.4% after a better-than-expected earnings report and news it is pushing up its rheumatoid arthritis drug,



Banks were suffering a bit of a thumping. The

Philadelphia Stock Exchange/KBW Bank Index

was down 1.3%.

Brokerage stocks were mostly softer. Two Wall Street brokerage giants --

Merrill Lynch





-- posted earnings this morning and both beat estimates. Merrill was lately up modestly, while PaineWebber slipped a bit.


Nasdaq 100

was down 0.8%. The

Philadelphia Stock Exchange Semiconductor Index

was down 0.5%. The

Morgan Stanley High-Tech 35

was off 0.7%.

Traders said many market participants are awaiting chip giant


(INTC) - Get Intel Corporation (INTC) Report

earnings report, which is expected to be released after the close. Ahead of the report, Intel was off a hair.

Bear Stearns

, in a note, said it expects Intel's earnings will probably be in line. "The key with Intel is: 1) What sequential growth can they show, given Q2 is a seasonally strong? 2) Can they keep gross margins in the 59-60 range? 3) Are there any fears related to Y2K that could impact Q4?"

Scott Curtis, senior equity trader at

Brown Brothers Harriman

, said around midmorning it was "kind of quiet" and there wasn't much flow one way or another in the market.

In the Treasury market, the 30-year bond was lately up 1/32 to 90 28/32, yielding 5.91%. The long bond, however, is well off its best levels of the session. (For more on the fixed-income market, see today's early

Bond Focus.)

A good thing for stocks is that the long bond is back under 6%, Curtis said.


Labor Department

reported that U.S. import prices fell 0.2% in June, after a revised jump of 0.8% in May. Meanwhile, export prices were unchanged in June after a revised rise of 0.1% in May.

Looking ahead on the economic front, market participants are also looking ahead to tomorrow's release of the

Producer Price Index

and the Thursday release of the

Consumer Price Index


On the

New York Stock Exchange

, decliners were leading advancers 1,756 to 1,017 on 431 million shares. On the

Nasdaq Stock Market

, losers were beating winners 2,156 to 1,472 on 568 million shares.

On the NYSE, 41 issues had set new 52-week highs while 39 had touched new lows. On the Nasdaq, 91 issues had set new 52-week highs while new lows totaled 26.

On the Big Board,

Health Management Associates


was most active with 15.8 million shares changing hands. It was down 29.8% after issuing an earnings warning.

On the Nasdaq,


(DELL) - Get Dell Technologies Inc Class C Report

was most active with 15 million shares changing hands. It was down 1 3/8 to 42 1/4.

Meanwhile, among other indices, the

Dow Jones Transportation Average

was down 0.8%, the

Dow Jones Utility Average

was up 0.1% and the

American Stock Exchange Composite Index

was down 0.7%.

Tuesday's Midday Watchlist

By Heather Moore
Staff Reporter

As noted above, ISP was rocketing skyward by 40 15/16, or 204.6%, to 60 3/16 after

Lehman Brothers

priced its 4.2 million-share initial offering at $20. The offering's price range has been raised to $17 to $19 from $14 to $16.

wrote about the offering earlier this month.

Mergers, acquisitions and joint ventures

Air Products & Chemicals

(APD) - Get Air Products and Chemicals, Inc. Report

was up 1/8 to 41 3/8 after saying it and

L'Air Liquide

are jointly acquiring Britain's

BOC Group

(BOX) - Get Box, Inc. Class A Report

TheStreet Recommends

for a total of about $11.2 billion in cash. BOC was off 5/8 to 41 15/16.

Online music retailer



was down 1 11/16, or 7.6%, to 20 1/2 on news it's merging with

Columbia House

, the club-based direct marketer of music and videos, which is owned equally by




Time Warner


. Sony and Time Warner each will have a 37% stake in the newly formed public company. CDnow's existing shareholders will own the remaining 26%. Sony was down 1/8 to 117 3/8; Time Warner was down 5/16 to 75 3/4.

Separately, CDnow said it expects its second-quarter loss to be narrower than the

First Call

six-analyst projection for a loss of 83 cents a share.



was up 1 3/8 to 95 3/8 after agreeing to buy



in a stock swap valued at $530 million. NetGravity was down 1 7/8, or 6.8%, to 25 5/8.


(ATHM) - Get Autohome, Inc. Sponsored ADR Class A Report

was down 1 7/8 to 49 11/16 after saying it's acquiring



, which was down 9/16 to 21 11/16. Excite@Home will issue about 8.3 million shares of stock, totaling about $425 million. It also will assume iMall's outstanding options and warrants.

Sunstone Hotel Investors

(SSI) - Get Stage Stores, Inc. Report

was up 9/16, or 6.3%, to 9 1/2 on word it's being acquired by

SHP Acquisition

, an affiliate of

Westbrook Partners

, and certain members of Sunstone's senior management for $10.35 a share in cash.

Earnings/revenue reports and previews

Amgen was up 5 9/16, or 8.4%, to 71 7/8 after last night reporting second-quarter earnings of 50 cents a share, topping the 23-analyst estimate of 46 cents and moving up from the year-ago 41 cents. The even better news for Amgen was that the company is pushing up its rheumatoid arthritis drug,


. The

Food and Drug Administration

said it was OK to file based on the two Phase II trials the company did on the drug. Amgen won't have to conduct Phase III trials. It will file for approval of the drug by the end of the year, way ahead of schedule. Today,

Morgan Stanley Dean Witter

upped its 1999 earnings estimate for Amgen to $1.97 from $1.80 a share.

Salomon Smith Barney

lifted its one-year price target for the stock to 112.



was down 5 1/16, or 27%, to 13 3/4 after last night saying it expects to break even in its second quarter. The six-analyst view called for earnings of 12 cents vs. the year-earlier 6 cents. The company blamed severance costs for a former CFO for the expected shortfall.

Flowers Industries

(FLO) - Get Flowers Foods, Inc. Report

was down 3 1/2, or 16.4%, to 17 7/8 after last night saying it sees second-quarter earnings coming in around 10 cents a share due to production realignment costs and promotional expenses at its

Mrs. Smith's Bakeries

business. The 10-analyst estimate called for a repeat of the year-ago 19 cents. Today,

Donaldson Lufkin & Jenrette

cut the stock to market perform from buy and Morgan Stanley Dean Witter lowered its 1999 earnings estimate for the company to 97 cents a share from $1.15.

Health Management Associates was down 3 3/8, or 29.8%, to 8 after warning it sees third-quarter earnings coming in even with the year-ago 15 cents a share. The 13-analyst estimate called for earnings of 18 cents. The company blamed lower-than-expected same-unit growth and timing of hospital acquisitions for the expected shortfall.

Tropical Sportswear


was down 10 5/16, or 38%, to 16 15/16 after last night saying it sees third-quarter earnings of 40 cents to 42 cents a share due to the cancellation of about $6.5 million in orders and the deferral of about $4.5 million in other orders. The single-analyst forecast called for earnings of 67 cents vs. the 40 cents made a year earlier.

Vitesse Semiconductor


was down 3 1/2 to 68 5/16, hit by a bout of profit-taking. Last night, the company announced third-quarter earnings of 24 cents a share, 1 cent ahead of the 13-analyst estimate and above the year-ago 18 cents.

In other earnings news:

Miscellany was up 4 1/2 to 121 3/4 after launching two new stores -- one selling electronics, one selling games.

Herb on TheStreet: A Lesson From GM on What


To Do in the Wake of Bad News


Herb Greenberg

Senior Columnist

From the "This Is Old News, but Use This as a Lesson" department:

During last Thursday's rehearsal for's

new show, which premieres this Saturday on the

FOX News Channel

, Bob Olstein of the

Financial Alert Fund

was getting drilled by




. (For more info on the show, click to the


on Fox link to the left.)

One of his top picks was down-and-out


(MAT) - Get Mattel, Inc. Report

. (Check out JJC's post-rehearsal

column on


stock.) Another was

General Motors

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

, which he raved about largely because of its stellar balance sheet, which is flush with cash.

Cash? Ha! If Olstein had only been with us at


rehearsal after GM was slapped with that $4.9 billion product liability judgement! Here's a guy who owns 71,500 GM shares, and one of his faves gets financially body-slammed by the courts.

How did he react when heard the news? What would he have done? Would he have been thinking about selling his shares the first thing Monday morning?

Now we know that that kind of knee-jerk reaction, which many investors had in after-market trading, would've been flat-out


. GM rose 2 9/16 yesterday, as investors appeared to discount the news and the threat of future litigation. (Just as



Katie Hobson

suspected during the rehearsal, by the way, and contrary to what JJC expected!)

But that doesn't mean Olstein dismissed it, la-dee-dah, when he first heard about it. He reacted the way he does whenever one of his holdings gets hit with bad news: "First, the pit goes into my stomach," he says. And for good reason. "A great analogy is

Johnson & Johnson

(JNJ) - Get Johnson & Johnson (JNJ) Report

, when all of the sudden someone laces


with cyanide, and it may have been no big deal (to the company's fundamentals), but it took the stock a couple of years to recover."

Still, events like the GM judgment or the J&J fiasco are examples of why Olstein doesn't generally put more than 2% or 2.5% of his portfolio into any one stock. "There


such a thing as human nature and bad luck," he says. "You can analyze everything in the world but no matter how well you analyze it, some court can give somebody $5 billion and everybody will blow it out of proportion."

In the case of GM, he went back and re-analyzed his original analysis. And that's when Olstein stopped worrying, headed to a


game and remembered why he bought the stock. If GM eventually is forced to pay the full amount, after an appeal, doing so wouldn't break its bank. The company has $6 billion of net cash (cash minus debt) and it generates $4 billion in free cash flow annually.

That's enough, even with the full judgment, for the company to take itself private in 10 years. (Olstein doesn't think it will, but it serves his point: Even with the judgment, cash isn't one of GM's problems.) He also expects the company eventually to spin off its

Hughes Electronics


unit, netting GM shareholders a stock he believes would be worth something in the neighborhood of $18 per share.

Armed with that analysis, Olstein doesn't want to repeat the mistake he made earlier in his career when he bailed out of


(PFE) - Get Pfizer Inc. Report

after it was hit with what appeared to be a damaging lawsuit. He sold on the news and the stock never got as cheap again!

Garbage Talk

An item here

yesterday quoted George Muzea, of

Muzea Insider Consulting

, as downplaying the recent mass sale of stock by

Waste Management




the company warned of lousy earnings. Among the reasons: Director Ralph Whitworth bought 686,000 shares in September 1998, increasing his holdings to 1,186,000 shares, and has not sold a share. Muzea was quoted as saying, "Wouldn't it be logical for a director with this much stock to know if bad news was coming?"

To which reader

David Brail

writes: "Misses an essential point. Whitworth is an outside director, far removed from the daily business of WMI. The insider sellers were MANAGEMENT, in the fray every day, and privy to the conditions leading to the shortfall."

Good point, and I'd like to get Muzea's response; couldn't get ahold of him. When I do, I'll pass it along.

Speaking of the Waste Management item:


Tom Grimes

, reacting to my comment that I felt compelled to write about the insider sales because it was news, says he's at a loss to understand why knowing that Waste Management insiders had dumped their shares before the bad news "is timely news that 'pays.' It's very interesting, and if they did it illegally, they should be punished, but the big scoop did nothing for me as an investor."

Maybe not, but I write a news column, not an investment advice column. Sitting on news just because it's not tradable doesn't work for me. It's all part of the process of knowing what you own, and based on everything I know, investors ought to be interested in


news affecting their investments. You never can tell when it turns out to be the missing piece to the puzzle.

While on the topic of garbage:




brouhaha included a steady stream of emails from one sicko whose emails went, shall we say, over the line. Sent them to his Internet service provider. Not only did the ISP threaten to yank his connection if he continued with the emails, but it told the emailer it would help with the prosecution. Let that serve as a warning: We really are


serious about going after unruly members of the online mob.

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.

Catch the premiere of on the FOX News Channel July 17! Join host Brenda Buttner and TSC regulars like Jim Cramer, Herb Greenberg and Dave Kansas. Saturdays at 10 a.m. ET and again on Sundays at 1 p.m. ET.

Copyright 1999,