midday07-26-99

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TheStreet.com's MIDDAY UPDATE

July 26, 1999

http://www.thestreet.com

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Market Data as of 7/26/99, 1:36 PM ET:

o Dow Jones Industrial Average: 10,888.49 down 22.47, -0.21%

o Nasdaq Composite Index: 2,652.55 down 39.85, -1.48%

o S&P 500: 1,354.42 down 2.52, -0.19%

o TSC Internet: 570.88 down 20.97, -3.54%

o Russell 2000: 444.23 down 4.15, -0.93%

o 30-Year Treasury: 89 02/32 down 9/32, yield 6.039%

In Today's Bulletin:

o Midday Musings: Comeback Try Leaves Bulls All Wet
o Herb on TheStreet: More CHS Capers and the Lack of Courage Among Analysts

The merger of two mutual funds may seem like a nonevent if you own shares of the surviving fund. But the process of absorbing another fund's portfolio can impact your fund's returns and your tax return.

TheStreet.com

will take a close look at fund mergers in a two-day, four-story series. Be sure to check out Monday's offering:

o When Funds Collide, Survivors Often Suffer

http://www.thestreet.com/funds/funds/764567.html

o Mergers Cause Sleepless Nights at SEC

http://www.thestreet.com/funds/funds/765213.html

Also on TheStreet.com:

Chat Transcripts: Cramer Chats on Yahoo! About 'TheStreet.com' TV

Read Jim Cramer's views on

TSC's

television show.

http://www.thestreet.com/talk/chats/767951.html

Tech Savvy: At AOL, Shooting the Instant Messenger

Savor the irony as Steve Case tries to keep AOL a closed system, much to everyone's disadvantage.

http://www.thestreet.com/comment/techsavvy/767941.html

Semiconductors: A Transformed TI Is Still Calculating Future Growth

In the digital-signal-processor business, Texas Instruments looks like it will outdistance the competition.

http://www.thestreet.com/tech/semis/767675.html

SiliconStreet.com: For the Ultimate in Naysaying, Microsoft Looks in the Mirror

To listen to the company at an analysts' meeting last week, you'd think the sky was falling. Don't be fooled.

http://www.thestreet.com/comment/siliconstreet/767827.html

Dear Dagen: Dear Dagen: Why Don't Fund Share Prices Change During the Day?

Though technology will allow it, the fund industry has philosophical problems. And there's the cost issue.

http://www.thestreet.com/funds/deardagen/767992.html

Midday Musings: Comeback Try Leaves Bulls All Wet

By

Thomas Lepri

Staff Reporter

Upside earnings and sideways indices. What else is new?

After a cool morning dip, two of the Big Three proxies were toweling off around break-even. The

Dow Jones Industrial Average

was down 14 to 10,897 after trading as low as 10,832. The

S&P 500

was off 2 to 1355 after trading as low as 1346.

But the

Nasdaq Composite Index

was still in the deep end, off 38.42 to 2654 as technology remained investors' favorite whipping sector. The Comp's fraternal high-growth benchmark,

TheStreet.com Internet Sector

index, was down 17.62, or 3% to 574. The small-cap

Russell 2000

was down 3.57 to 444.81.

It's tempting to call the market's recent action a correction, but even at its worst levels this morning -- of around 2640.50 -- the Nasdaq was down "just" 7.8% from it all-time closing high. Meanwhile, the Dow remains comfortably above the 10,088 mark that would dictate a 10% "correction" from its all-time closing high.

Consolidations, meanwhile, can be a good thing, a necessary part of a child's or index's healthy growth. But they can sometimes be a lot bloodier, as

Delbert Grady

reminded us in

The Shining

.

Robert Dickey

, managing director of technical analysis at

Dain Rauscher Wessels

, sees the market's downtrend as the milder sort.

"There's a fear of a letdown from earnings season -- the numbers are impressive, but not a surprise," Dickey said. "When you get what's expected, the market exhales and turns the other way. And here we go again on the

Fed

watch. People are fading ahead of the next Fed meeting, and will probably rally it

the market into" that event.

"With earnings, people buy the rumor and sell the news," he said. "And they do the opposite with the Fed meetings. Right now, we're seeing selling on earnings news and selling on Fed rumors."

Dickey sees stocks stuck in this pattern until we get close to the next

Federal Open Market Committee

meeting on August 24th.

Add to all of this the recent upturn of the

Chicago Board Options Exchange's Volatility Index

, or the VIX, which measures implied volatility in the options market; the index was lately up 4.7% to 24.87.

"That's got everybody spooked," Dickey conceded. "The low VIX implied way too much complacency. The VIX works as a sentiment indicator, and sentiment was too bullish, meaning everybody had already bought. The available cash was pretty much depleted. Now we need a cash buildup."

Dickey wasn't drawing any comparisons to last July, when a sharp upswing in the VIX from similarly low levels was attended by that summer's notorious selloff. "I'm not sure how far to take all this." He said the Dow could go as low as 10,500, the Nasdaq to 2,400. "It'll take two-to-three weeks to wring the tree out. If the indices broke under those levels, I'd get worried. But I'm not expecting that."

The extreme thinness of the few and short-lived rallies the market has put together lately don't help its prognosis. "Advance/Decline lines have been generally unsupportive of the market," Dickey said. "Transports and utilities have been in poor shape. These are all red flags."

However, the latter were faring better thus far today; the

Dow Jones Transportation Average

was up 0.1% and the

Dow Jones Utility Average

was higher by 0.4%.

Decliners were topping advancers 1,828 to 984 on the

New York Stock Exchange

with 432.8 million shares changing hands. There were 21 new 52-week highs against 62 new lows. In

Nasdaq Stock Market

action, advancers were trailing decliners 2,409 to 1,204 on 463.9 million shares. There were 47 new highs and 44 new lows.

Meanwhile, the

S&P 500

futures market was giving off mixed short-term signals. "The market held when it needed to this morning," said

Kevin O'Brien

, a futures trader at

Prudential Securities

. He noted that the September contract bounced off the 1353.10 level before hitting resistance in the 1364 area. If it breaks through that level, he said, the futures could see the low 1370s.

But O'Brien still likes the short side for now. "I've been telling people, don't cover a hedge if you're short. We haven't hit a bottom yet." He listed 1345 as major support.

Monday's Midday Watchlist

By Heather Moore
Staff Reporter

Host Marriott Services

(HMS)

was flying 5 13/16, or 59.6%, to 15 9/16 on word Italy's

Autogrill

is acquiring the company for $529 million in cash. Late Friday, Host Marriott posted second-quarter earnings of 19 cents a share, a nickel above the three-analyst

First Call

estimate and above the year-ago 17 cents.

Mergers, acquisitions and joint ventures

Cable & Wireless Communications

(CWZ)

was off 1/2 to 54 5/8 after agreeing to sell

CWC ConsumerCo

, its consumer cable telephone, Internet and TV operations, to

France Telecom

(FTE)

-backed

NTL

(NTLI)

. France Telecom, which was up 3 5/16 to 73 1/2, has agreed to invest a total of $5.5 billion in NTL, which was down 2 3/4 to 96 1/16.

Shire Pharmaceuticals

(SHPGY)

was down 2 1/16, or 7.8%, to 24 1/2 after agreeing to buy

Roberts Pharmaceutical

(RPC)

in a deal valued at $1 billion. Roberts was up 1 3/8, or 5.5%, to 26 3/8.

Earnings/revenue reports and previews

Seacor Smit

(CKH) - Get Report

was down 3 1/4, or 6.1%, to 50 1/2 after late Friday posting second-quarter earnings of 53 cents a share, including special items. The six-analyst forecast called for operating earnings of 85 cents vs. the year-ago $1.58.

In other earnings news:

Analyst actions

Goldman Sachs

lifted

Circuit City

(CC) - Get Report

to market outperformer from performer. The stock did neither, remaining relatively flat for much of the morning. Lately, it was up 5/16 to 45 1/16.

Commerce One

(CMRC)

was slipping 4 3/16, or 7.5%, to 51 3/8 even after

Credit Suisse First Boston

initiated coverage of the start-up with a buy and

U.S. Bancorp Piper Jaffray

started coverage with a strong buy.

E-Loan

(EELN)

was down 3 1/16, or 5.7%, to 50 9/16 even after

Morgan Stanley Dean Witter

upgraded it to outperform from neutral and two other analysts initiated coverage. Goldman began coverage with a market outperformer and

Donaldson Lufkin & Jenrette

began with a buy.

Expeditors International of Washington

(EXPD) - Get Report

traveled to strong buy from neutral at U.S. Bancorp Piper Jaffray, and lately was up 1 3/8, or 5.1%, to 28 1/2.

Miscellany

IBM

(IBM) - Get Report

was down 1/2 to 124 5/16 after unveiling

IBM Enterprise Storage Server

(code-named "Shark"), a new generation of enterprise disk storage systems.

Herb on TheStreet: More CHS Capers and the Lack of Courage Among Analysts

By

Herb Greenberg

Senior Columnist

Mondayne:

CHS Capers:

So

CHS Electronics

(HS)

issues this press release Friday saying that it has patched up its differences with

Network Associates

(NETA)

and the two are heading forward, arm in arm, as partners. The actual words: CHS said that "certain business issues related to the European market" with Network Associates "have been substantially resolved."

Huh?! What business issues? Who ever mentioned

business issues

? All we know is that last week, before the Friday release, Network Associates disclosed the need to take a $31.8 million charge related to the possibility of getting stiffed by CHS, one of its customers.

So, does this new partnership mean Network Associates will no longer need the reserve? A CHS spokeswoman says to ask Network Associates. A Network Associates spokeswoman says (drumroll, please) the reserve "still stands."

Which suggests to me that that "substantially resolved" might not mean

actually

resolved.

No guts, no glory

: Sharon Dale, an art history professor at the Behrend College in Pennsylvania, writes she wishes she'd see more of the kind of gutsy analyst calls made by Richard Leza of

John G. Kinnard

, who initiated coverage of

Sunrise Tech

(SNRS)

Wednesday with a "neutral" and -- with its stock in the

mid-teens -- an initial price target of 3 1/2. To which I say: Sharon, don't hold your breath. Most don't and most won't because they're too worried about losing potential investment banking business or access to company management.

Then there's the issue that putting the equivalent of a sell on a stock with a low price target doesn't make much money for anybody. True, while it may not make money for anybody, tough calls like that, if they're right, can save money for everybody.

Take a reader who emailed me this weekend. The subject was "Help" and the letter read: "I really need your advice. I know you are not allowed to give out that information but I have no choice but to ask you. I have put my tuition money into Sunrise a few days back and I have lost over 80% of it. I haven't sold my position but am willing to settle for half of it. (Accumulated between 15 and 16).

"If this is all I can recover (less than 4) then I know to bail out now. But I am hoping that I can recover at least half of my tuition money if it goes to 7 or 8, otherwise I am in trouble and I know it. Do you see this possibly bouncing or is it straight down from here? Even if I recover 20%, it is better than zero. Fall quarter begins Sept. 29 and I may be able to plan accordingly."

Sorry, but there's no way to accurately predict what will happen to Sunrise's stock, though pros might tell you to cut your losses, not look back and use this as an expensive lesson. Your story should serve as a warning to all investors NOT to buy a stock if they don't fully understand the risk.

If you feel you must buy a stock, and you don't really know much about investing, ask yourself two questions: What is my risk? Once I hand over the money, can I sleep at night? If you don't know the answer to No. 1, and aren't sure about No. 2, avoid the temptation. Go with a diversified mutual fund.

Reader revolt

: An early Friday email from reader

Pat Steccato

, which was staccato in nature, said: "You don't know what you're talking about you LOSER."

A short time later from reader John Bray

:

"I was once a rookie investor, who did not like to read what you had to say. But now I read your column every day.

"Just hope no stocks that I own ever show up in it! Hahahaha."

Moving on ...

And the winner is:

In our last

stupid poll -- a direct rip-off of the

Padinha Poll

-- nearly 1,100 readers responded to the question: Who is more lovable, the Iridiots, IDT-iots, Lernahooligans, Iomegans or, none of the above? The winner, by a landslide, was none of the above, followed by the Iomegans and the Iridiots.

Speaking of which, what should we call the Sunrise hostile reactors?

Skip Higgins

suggests Sunsetters. I like that! And how do we label readers of

TheStreet.com

?

Penny Sieffert's

suggestion: Streetaholics. I

love

that!

Now for today's ripoff of the Padinha Poll:

Why should Herb be glad he's no Padinha?

Herb doesn't live in Wyoming

Herb isn't an economist

Herb's brain is somewhat sane

Herb will move back to California one day

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.

Mark Martinez assisted with the reporting of this column.

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