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TheStreet.com's MIDDAY UPDATE

July 28, 1999


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Log on and see why National Discount Brokers was awarded the top rating in both Barron's and Money Magazine's online broker surveys:


Market Data as of 7/28/99, 1:27 PM ET:

o Dow Jones Industrial Average: 11,009.11 up 30.07, 0.27%

o Nasdaq Composite Index: 2,701.74 up 22.41, 0.84%

o S&P 500: 1,368.02 up 5.18, 0.38%

o TSC Internet: 578.21 up 7.40, 1.30%

o Russell 2000: 446.58 up 0.10, 0.02%

o 30-Year Treasury: 89 13/32 down 3/32, yield 6.019%

In Today's Bulletin:

o Midday Musings: Greenspan Gives All Clear But Market Internals Lack Cheer
o Herb on TheStreet: More From the Analyst Who Was Right on Sunrise

When Funds Collide

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. Find out how here.

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Midday Musings: Greenspan Gives All Clear But Market Internals Lack Cheer


Heather Moore

Staff Reporter

Technology, still something of a pilot in this market, pulled itself out of this morning's pit and, come lunchtime on Wall Street, was leading a mild follow-through from

yesterday's broad rally.

During an otherwise dry day, those long can praise the words of

Alan Greenspan

for the small, futures-driven rebound.

Last week, Greenspan

addressed the

House Banking Committee

as part of his


testimony. Today it was the same speech, but this time delivered to the

Senate Banking Committee


Today's question-and-answer period -- the senators, for good or bad, are permitted to ask different questions -- failed to reveal much new about the central bank's attitudes toward inflation risk. Most of the Q&A session was comprised of the usual drivel on tax cuts in this awakened political season.

But while it's safe to say not all investors, traders and strategists were glued to their TVs ("I really haven't been watching the market, been busy doing other things," one stock trader said) Bill Schneider, head of U.S. equity block trading at

SBC Warburg Dillon Read

in Stamford, Conn., said he was paying close attention to the


head with the help of his firm's economist.

"What I hear

Greenspan saying is his recommendation is that it's not a good time for a tax cut, that we want to cut when the economy is doing badly, not this well," said Schneider.

"He also said that it's not a good idea to get 'myopically focused' on the jobs numbers," the trader continued. "And I think the market will respond favorably to the answer to that. He's using the reasonable side of his brain. It's good to have someone like the chairman be reassuring and say, 'Harping on one number is the wrong way to go.' The market likes to climb this wall of worry, and now it doesn't have to be as worried. It's enough of a positive sign to the market that it's a reason to wade through and drop off a buy order."

Speaking about recent breadth, market losses and other short-term factors, Schneider said institutions raising cash to participate in new issues and secondary offerings have put a downward bias in the market. Moreover, recent trends are not necessarily indicators of an end to the summer rallying, the trader said. "I think we've reached some technical support here and we're looking for a bottom."

Schneider said he's seen recent strength, triggered by earnings news, in financial, tech, health care and drug stocks. "We rotate from darling one day to dog the next day. If we could only get them all to move

up on the same day... "

Buy orders were lifting the market's public face, the

Dow Jones Industrial Average

, off an earlier intraday low of 10,925.85 and lately was putting the blue-chip index up 12.66, or 0.1% , to 10,991.70. Along with





(IBM) - Get Report



(DD) - Get Report

was an upside standout, lately rising 1.9% on solid earnings.

The tech-laden

Nasdaq Composite Index

was up 18, or 0.7%, to 2698, off an earlier low of 2660.62. The

Philadelphia Stock Exchange Semiconductor Index

was up 2.5%, and

TheStreet.com Internet Sector

index was jumping 6.55, or 1.1%, to 577.

The broader

S&P 500

was up nearly 3, or 0.2%, to 1366, while the small-cap

Russell 2000

was down 0.22 to 446.26.

The 30-year Treasury was down 4/32 to 89 11/32, yielding 6.03%. (For more on the fixed-income market, see today's early

Bond Focus.)

Market internals, a source of some concern for otherwise bullish types of late, were weak again. On the

New York Stock Exchange

, decliners were leading advancers 1,517 to 1,229 on 394.4 million shares. And the downs had the ups 1,827 to 1,723 on 557.6 million shares in

Nasdaq Stock Market

activity. New 52-week highs were outpacing new lows 68 to 48 on the Nasdaq, but on the Big Board new lows had it 84 to 37.

Merrill's Bernstein Sticks with Value

If the economy slows down thanks to a rate hike, it might make sense for investors to switch to growth names from value names, Rich Bernstein, chief quantitative strategist at

Merrill Lynch

, wrote in a research note yesterday. But Bernstein, who's recent struggles (perceived or actual) were detailed by

The Wall Street Journal

earlier this week, remains bullish on value, as he has been for almost three months.

"With the recent volatility in commodity prices, the Korean stock market, and value stocks in general, the most frequently asked question we receive these days is how long can the value cycle last?" Bernstein wrote. "We think there is a tradeoff: One can have very strong earnings, the Fed tightening, and a strong, but shorter value cycle. Or, one can have a more muted earnings cycle, less pressure for the Fed to tighten, and an extended value cycle. We think the second is more likely to occur..."

"The more sharply earnings growth accelerates," he continued, "the more likely it is that the Fed will aggressively tighten, which will ultimately lead to a shorter value cycle. However, if inflation remains benign, then the odds are that earnings growth will probably be muted relative to current expectations, but the Fed will be less inclined to raise rates sharply, and to take the punch bowl away from the party. The length of the value cycle, therefore, might be extended."

Wednesday'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.


Nothing's moving today like



. The online pharmacy firm was lately up 35 5/8, or 197.9%, to a stratospheric 53 5/8 in its trading debut. Lead underwriter

Morgan Stanley Dean Witter

priced the stock above-range at $18 a share

last night .

Either investors are getting


excited over the prospect of



moving production into East Asia, or

BancBoston Robertson Stephens

packs one helluva buy rating. The brokerage started coverage on Broadcom with a buy as the company said it's opening a manufacturing and design facility in Singapore that may manage about 60% of the company's worldwide revenues within a few years. Whatever the correlations or causes, Broadcom was lately shooting up 10 7/8, or 9.3%, to 127 1/4.

Mergers, acquisitions and joint ventures



was adding 7 11/16, or 10.4%, to 81 1/2 after yesterday signing a marketing agreement with


(AN) - Get Report

under which the online auto retailer will sell new cars through Priceline's Web site. AutoNation was lately down 11/16, or 4.3%, to 15 3/16.

Earnings/revenue reports and previews



was up 5/16 to 26 7/16 after posting second-quarter earnings of 18 cents a share, 2 cents ahead of the 13-analyst estimate, but down from the year-ago pro-forma 24 cents, before extraordinary items.

Dow component DuPont was moving up 1 3/8, or 1.9%, to 73 1/2 after reporting that its earnings from continuing operations were 78 cents a share in its second quarter, a nickel above both the 14-analyst view and last year's figure. DuPont also declared a 35-cent regular quarterly dividend.


(CVS) - Get Report

was advancing 3 13/16, or 8%, to 51 9/16 after posting second-quarter earnings of 40 cents a share, ahead of the 14-analyst estimate of 38 cents and above the year-ago operating earnings of 32 cents.

Internet service provider



was dumping 3 13/16, or 9.5%, to 36 3/8 after last night reporting second-quarter earnings of 11 cents a share, a penny above the 10-analyst prediction and up from the year-ago 5 cents.



was adding 3 9/16, or 19.5%, to 21 7/8 after yesterday posting first-quarter earnings from continuing operations of 28 cents a share, 6 cents above the seven-analyst estimate and matching the year-ago figure.

Mylan Laboratories

(MYL) - Get Report

was sinking 4 1/4, or 15.8%, to 22 5/8 after the company warned last night that its first-quarter earnings won't make the 12-analyst outlook of 33 cents a share because of lower net sales and higher operating costs.

Pharmacia & Upjohn


was lately off 1 3/4 to 56 1/8 after posting second-quarter earnings of 41 cents a share, in line with the 16-analyst estimate and up from the year-ago 36 cents, which excludes a one-time charge of 8 cents a share from the settlement of a lawsuit.

The ugliness continues for


(REV) - Get Report

, which was plummeting 1 5/8, or 7.3%, to 20 5/8 after its second-quarter results failed to meet expectations yesterday. The company posted a second-quarter loss of 8 cents a share, though it said it would have earned 11 cents a share excluding a restructuring charge, versus a seven-analyst consensus of earnings of 31 cents a share and up from last year's 55-cent loss.

In other earnings news:

Offerings and stock actions

Some of last week's favored Net IPOs are deflating a bit today on no particular news. Online insurance services provider


(INSW) - Get Report

was giving back 3 3/4, or 12.1%, to 27 1/4 in the wake of last Friday's soaring initial public offering.

Gadzoox Networks


continued to shave off points since last week's hugely successful IPO, lately sliding 3, or 4.7%, to 61. And



, which operates an online catalog of life science research products, was lately fading 2 3/8, or 9.2%, to 23 3/8 after yesterday's first-day surge.

Analyst actions


(MCD) - Get Report

was up 1/2 to 42 11/16 after

Merrill Lynch

named it to its Focus One list with a 12-month price target of 53.

American Airlines




was lately off 1 1/8 to 67 5/16 after

Goldman Sachs

reduced it to market outperform from trading buy.


Gilead Sciences

(GILD) - Get Report

was moving up 5 3/8, or 9.2%, to 64 1/16 after the

Food and Drug Administration

yesterday granted a six-month expedited review of


, the anti-flu drug Gilead is co-developing with


. This morning the FDA approved


, the flu drug developed by Australian research group



Eric Gillin contributed to this report.

Herb on TheStreet: More From the Analyst Who Was Right on Sunrise


Herb Greenberg

Senior Columnist

Summertime blahs, redux:


Several items last week mentioned that

prescient (and very well-timed) call last week by

John G. Kinnard

analyst Richard Leza, who started coverage of

Sunrise Tech


with a "neutral" and a target price of 3 1/2. (At the time, you'll recall, the stock was in the mid-teens; it closed yesterday at 4 1/4.)

Turns out Sunrise wasn't Leza's first gutsy call. Shortly after he joined Kinnard a year ago, Leza (along with a partner) took on one of Kinnard's favorite stocks when he cut the rating on



. The twist to that story was that he cut the rating on the day Angeion got


approval for its implantable cardioverter defibrillators. (Talk about timing.) He was worried that despite the approval, the business outlook for the company would be limited, and he was immediately called by the company, whose CEO demanded an explanation. "They wanted to know why we downgraded the stock on what was supposed to be their biggest day," he says.

At the time the stock was around 3 (or 30 after a subsequent one-for-10 reverse split.) Today it's 2 3/32 (or, apples to apples, 21 cents had the split not been done).

But Leza isn't down on everything. He has a strong buy on

Staar Surgical

(STAA) - Get Report

, which makes implantable contact lenses. It's currently working on a glaucoma treatment that could put an end to surgical treatment for eye disease. Clinical trials are expected to be complete at the end of this year. (Leza's firm doesn't have an underwriting relationship with any of the companies mentioned here.)

Leza is also high on

Ocular Sciences

(OCLR) - Get Report

, a contact lens company that was

mentioned here last year as the favorite of some short-sellers who thought its prices would be pressured by giant

Johnson & Johnson

(JNJ) - Get Report

. Leza says the pricing pressure never occurred, and now proudly -- and I do mean


-- he boasts the Street's highest earnings estimate. (Leza has a buy rating on the stock.) "They've got 20% earnings growth," Leza says, "and they're trading at 10 times earnings."

A good combination if fundamentals stay in focus.

Reader roundup:

An item

here earlier this week included one reader's sad tale of how she lost nearly her entire college tuition in Sunrise Tech. That prompted reader Jeff L. to offer this reminder: "Equity investing should be limited to risk capital (i.e. long-term money), not monies that are intended to be used in the short term." Can't say that enough.

Then there were a few "write in" answers to this column's most

recent rip off of the


poll -- the one that asked, "Why Herb should be glad he's no Padinha?" "Because you aren't ashamed to show your face!" wrote Mark Scheer. Along those lines, Greg Starks writes, "The real reason Herb is glad he's not Padinha: His mouth is visible." (All too visible, some would say!)

And John Smith from Indiana, responding to



kind comments over the weekend regarding this column, said, "I like your column. Great lessons to be learned. But does that make me a '


' or a '



Depends on the 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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