TheStreet.com's MIDDAY UPDATE
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 TheStreet.com:
Wrong! Dispatches from the Front: A Soggy Market Sandwich
Instead of heavy mayo, it's the drug stocks that are weighing down this market.
SiliconStreet.com: '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
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
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
, 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
in the role of the tortoise.
was down 3.24, or 0.2%, to 1358, and the small-cap
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,
was up 4.1%.
TheStreet.com 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
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
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
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
view and ahead of the year-ago 38 cents. The strong report unleashed a flurry of upgrades:
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.
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.
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.
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
heads the list of today's new issues, lately up 2 1/2, or 19.2%, to 15 1/2 after
priced it last night top-range at $13 a share.
Internet insurance quote provider
was rocketing up 21 13/16, or 129%, to 38 13/16.
priced the offering at $17 a share yesterday, at the top of its pricing range.
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
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
was rising 2, or 7.7%, to 28 1/2 on yesterday's news that its
lymphoma treatment, which the company jointly developed with
, was given fast-track status by the
Food & Drug Administration
Saving the most pain for last:
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.
Eric Gillin contributed to this story.
Herb on TheStreet: *Extra* Sunset on Sunrise? Investors Learn the Hard Way About Hype
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
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
, 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
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 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
email@example.com. Greenberg also writes a monthly column for Fortune.
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