July 23, 1999


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Market Data as of 7/23/99, 2:06 PM ET:

o Dow Jones Industrial Average: 10,900.83 down 68.39, -0.62%

o Nasdaq Composite Index: 2,674.68 down 9.76, -0.36%

o S&P 500: 1,354.23 down 6.74, -0.50%

o TSC Internet: 584.88 down 8.87, -1.49%

o Russell 2000: 446.89 down 4.60, -1.02%

o 30-Year Treasury: 89 15/32 down 18/32, yield 6.014%

In Today's Bulletin:

o Midday Musings: Note, Mr. Greenspan: No Inflation in the Stock Market Today
o Herb on TheStreet: *Extra* Sunset on Sunrise? Investors Learn the Hard Way About Hype

Don't Miss the TSC Series: Digital Music Unplugged This three-day package explores investment rewards and risks created by the digitalization of the music industry, examining the impact that this trend will have on the financial world -- as well as those companies that will set the standard for the new medium.

o Digital Music Unplugged: Universal Soldier

o e.Digital, the Speculator's Choice in Downloadable Digital Music

Also on

Wrong! Dispatches from the Front: A Soggy Market Sandwich

Instead of heavy mayo, it's the drug stocks that are weighing down this market. 'Smooth Sailing' at Network Associates Is Not Likely

Also, GE shareholders stand to see little benefit from an NBC Internet tracking stock.

Brokerages/Wall Street: First Boston Stomps Closer to Its Bulge-Bracket Goals

Credit Suisse First Boston's recent pillaging of Deutsche Banc Alex. Brown's health-care unit is part of its quest to win the underwriting war.

Stock Strategies: Space Stocks Poised for Liftoff

Commercialization of the final frontier has been a long time coming, but it's coming nonetheless.

Biotech/Pharmaceuticals: Sunrise Dims as FDA Panel Rejects Farsightedness Tool

The Laser Thermal Keratoplasty raises both efficacy and safety concerns.

Fixed-Income Forum: In Defense of TIPS

The idea that taxes render inflation-indexed Treasuries a bad investment rings false to anyone who's held them this year.

Midday Musings: Note, Mr. Greenspan: No Inflation in the Stock Market Today


Heather Moore

Staff Reporter

Stocks have been flat-to-down all morning, the yield on the 30-year bond is at 6% and it's been a rough week. As the most concentrated earnings week this quarter comes to a close, the mood -- among the few taking part in the action today -- is contemplative: What's next? And why did


have to be so mean


While many market watchers maintain the


head said nothing shocking in his


testimony (

guess what? Stocks just might be overvalued

), certainly investors don't appear to be thrilled with what they heard. It seems, despite recent inflationless data, they're still worried about another rate hike come Aug. 24, when the central bank's policymaking committee meets next.

Or ... not. Tony Dwyer, chief market strategist at

Ladenburg Thalmann

, said today's trading is simply profit-taking in "vulnerable" bond and stock markets after recent rallying and strong second-quarter earnings. Greenspan, he said, just provides another excuse to rake in some gains. But the usually bullish strategist believes we ain't seen nothing yet.

"I'm calling for the end of the summer rally," he declared. "Fundamentals are the same -- still positive --

but they've just priced in 30 times operating earnings. All the positives have been discounted and there is some negative news. And I don't think it's interest rates, even though I think the Street thinks it's interest rates. I think it's Y2K. And I think it will be the catalyst for a technical correction."

Dwyer foresees the

Dow Jones Industrial Average

plunging to as low as 9700 over the next two months.

If that's the truth, Wall Street doesn't know it yet. The major equity proxies so far have been as inspired as a lazy atheist.

Down, But Not Out

The Dow recently was down 42, or 0.4%, to 10,927, with



playing the hare and

J.P. Morgan

(JPM) - Get Report

in the role of the tortoise.

The broader

S&P 500

was down 3.24, or 0.2%, to 1358, and the small-cap

Russell 2000

was down 3, or 0.7%, to 448.

The lately slaughtered, tech-driven

Nasdaq Composite Index

was down 2.35, or 0.1%, to 2682 vs. its intraday high of 2708.87. On strong earnings and analyst upgrades,

Sun Microsystems

(SUNW) - Get Report

was up 4.1%. Internet Sector

index was off 10, or 1.7%, to 584.

Robert Harrington, co-head of block trading at


, said tech is a mixed bag today and will be until we get a better handle on interest rates in the coming weeks and then on the third-quarter earnings outlook. "I think we'll be backing-and-filling for a while," he said. "This group has been sold pretty good, but I still think we'll have some up, some down after that run-up going into

second-quarter earnings."

Harrington said he has seen some investors "getting a little defensive," taking money out of tech and putting it into utilities. At midday, the

Dow Jones Utility Index

was up 0.15 to 321.41. Otherwise, the trader said all is calm on this summer Friday: "We're trying to read into a tape that's a quiet tape."

Market internals were negative on low volume. On the

New York Stock Exchange

, decliners were leading advancers 1,813 to 916 on 369 million shares. And the downs had the ups 2,161 to 1,421 on 559.3 million shares in

Nasdaq Stock Market

activity. New 52-week highs were outpacing new lows 76 to 50 on the Nasdaq, but new lows were outnumbering new highs 65 to 37 on the NYSE.

The 30-year Treasury was down 23/32 to 89 10/32, its yield rising to 6.03%. (For more on the fixed-income market, see today's early

Bond Focus.)

Dwyer, meanwhile, says he was spooked by



comments earlier this week about lower fourth-quarter sales and the impact of the year 2000.

"That must have come from their customers," he said. Equity weakness from Y2K "is going to be corporate and individual. People are overly optimistic in their fourth-quarter estimates. I think the individual mentality right now is people are not worried

about Y2K, but there's going to be a slowdown and we're going to see people take out some cash and lower that money flow. The end of the year is out there, and I think portfolio managers are starting to think about that."

None of this means Dwyer thinks there will be any actual problems from the turn of the millennium, however. "All the financials and banks are compliant

with government standards in America," he said, "and Europe is a little behind but they're working on it." The real silver lining is that a nice, healthy correction could make for some mighty fine buys, he said.

"If we let corporate growth catch up to valuations, that could provide a wonderful buying opportunity

in October. The market trades near-term on perception and long-term on reality. Last year, the perception was that Asia was going to fall apart; this year, Y2K will drive the market down."

Friday's Midday Watchlist

By Thomas Lepri
Staff Reporter


Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.


The earnings story of the day is boxmaker



, which was lately soaring 9 11/16, or 15.4%, to 72 9/16 after it yesterday posted second-quarter earnings of 56 cents a share, a penny above the 23-analyst

First Call

view and ahead of the year-ago 38 cents. The strong report unleashed a flurry of upgrades:

ANB Amro

raised it to outperform from hold;

Donaldson Lufkin & Jenrette

to buy from market perform;

Deutsche Banc Alex. Brown

to strong buy from buy;


to attractive from neutral;

ING Baring Furman Selz

to strong buy from neutral; and

Salomon Smith Barney

to buy from neutral. (Bandwagon, anyone?)

Separately, Gateway also denied recent rumors that it's negotiating to acquire a major Internet service provider, such as







Meanwhile, two Dow components reported upside surprises today, but (

Jimmy crack corn

) no one cares very much about any of it.


(MRK) - Get Report

was lately off 1/4 to 69 1/8 after it reported second-quarter earnings of 61 cents a share, in line with the 24 analyst consensus and up from last year's 54 cents. And



was up a scant 3/8 to 94 after reporting second-quarter earnings of 73 cents a share, 3 cents above the 20-analyst forecast but down from the year-ago 94 cents.

Mergers, acquisitions and joint ventures



was advancing 2 11/16, or 5.3%, to 53 7/16 after the food and drug chain said it will acquire privately held supermarket chain

Randall's Food Markets

for more than $1.4 billion in cash and stock.

Earnings/revenue reports and previews

Copper Mountain Networks


was surging 13, or 14.4%, to 103 after the company yesterday reported second-quarter earnings of 9 cents a share, a marked improvement from the four-analyst forecast of break-even results and last year's pro forma loss of 21 cents a share.

Morgan Stanley Dean Witter

raised Copper Mountain to outperform from neutral today.



was rising 4 1/8, or 14.9%, to 31 3/4 despite a 44% decline in the company's pretax profit in the first half of 1999. Investors instead focused on CEO Lars Ramqvist's prediction the company will be "back on track by the end of this year."



was up 3/8 to 101 5/16 after posting second-quarter earnings of 81 cents a share this morning. That's 8 cents above the 21-analyst call and even with the year-ago figure.

Software firm



was adding 5 7/8, or 11.4%, to 57 1/2 after it reported second-quarter earnings of 27 cents a share, two cents above the 18-analyst and up from last-year's 18 cents.

Sun Microsystems

(SUNW) - Get Report

was lately up 2 3/4, or 4.1%, to 69 15/16 after yesterday posting fourth-quarter earnings of 48 cents a share after the close yesterday, beating the 19-analyst estimate by 2 cents and up from the year-ago 35 cents.

In other earnings news:

Offerings and stock actions

BioMarin Pharmaceutical

(BMRN) - Get Report

heads the list of today's new issues, lately up 2 1/2, or 19.2%, to 15 1/2 after

Piper Jaffray

priced it last night top-range at $13 a share.

Internet insurance quote provider


(INSW) - Get Report

was rocketing up 21 13/16, or 129%, to 38 13/16.

Goldman Sachs

priced the offering at $17 a share yesterday, at the top of its pricing range.

Tanning Technology


was advancing 3 1/16, or 20.4%, to 18 1/16 after being priced last night above-range at $15 a share by lead underwriter

Credit Suisse First Boston


Analyst actions

Electronic Arts


was up 3 9/16, or 6.7%, to 56 7/16 after Deutsche Banc Alex. Brown raised it to strong buy from buy following the company's strong first-quarter earnings report last night. EA earned 4 cents for the quarter, surpassing the 13-analyst estimate of break-even results but off from last year's 6 cents.




was relatively unmoved -- off 3/8 to 24 9/16 -- after it yesterday named COO Michael Capellas its president and CEO, replacing Eckhard Pfeiffer.

Morgan Stanley Dean Witter

upgraded Compaq to outperform from neutral on the move, Which

wrote about in

last night.

Coulter Pharmaceutical


was rising 2, or 7.7%, to 28 1/2 on yesterday's news that its


lymphoma treatment, which the company jointly developed with

SmithKline Beecham

(SBH) - Get Report

, was given fast-track status by the

Food & Drug Administration


Saving the most pain for last:

Sunrise Technologies


was plummeting 10 5/8, or 70.8%, to 4 3/8 after an FDA advisory panel last night rejected its laser device for treatment of farsightedness.


covered the news in

a story this morning. Sunrise was trading at 19 1/2 last week when




questions about the company's prospects.

Editorial assistant

Eric Gillin contributed to this story.

Herb on TheStreet: *Extra* Sunset on Sunrise? Investors Learn the Hard Way About Hype


Herb Greenberg

Senior Columnist

Don't miss this morning's regular installment of Herb on TheStreet.

One of those innocuous items at the end of my column

yesterday mentioned that analyst Richard Leza of

John G. Kinnard

had initiated coverage on

Sunrise Tech


with a neutral rating and a target price of 3 1/2 -- a gutsy call on a stock that was trading in the midteens. His comments preceded a

move by a

Food and Drug Administration

advisory committee late yesterday not to recommend approval of Sunrise's laser treatment for farsightedness.

That prompted a mild, and I do stress


, move on the Hostile React-O-Meter.

Typical was my correspondence with reader

Karen Jenkins

, who wrote: "I have recently renewed my subscription to

. Until recently, I have enjoyed the articles from the various authors. On the whole, most articles are well presented. However, the recent articles regarding Sunrise Technologies by

Jesse Eisinger

and now again by yourself are biased and unprofessional. It certainly raises the question of credibility and personal agendas.

should be above this."

To which I replied: "Sorry, I don't see how pointing out that an analyst has a $3.50 target is a problem. If I were an investor ... I'd want to know that."

She shot back: "The report to which you refer lacks credibility and distorts facts. This is not the first time that this has occurred with this firm. By using their information, without the other side being presented, interferes with your own

credibility. I do have to say that I am impressed with your quick response." (Ah, shucks, I do try!)

My point here is not to embarrass Karen; she was kind enough to write in with serious, well-intentioned comments that lacked hostility. My point is that investors must understand that Jesse and I, and other reporters at

, are merely passing along info we believe, based on our sources, is timely and pertinent.

Here was an analyst, Leza, willing to put his neck on the line with a gutsy call that a stock was worth around one-fifth its current price. Did he catch flak? Sure, he says he was slammed on Internet message boards. But no wallflower he: Today, in the wake of the news, Leza cut his price target to 2, based on what he calls the "best case" scenario that delays in approval by the FDA will now take a year. He adds, however, that if based on "normal" expectations the target would be more like 50 cents.

At last check Sunrise was off 10 9/16, or 71%, at 4 7/16.

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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