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midday08-02-99's MIDDAY UPDATE

August 2, 1999

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Market Data as of 8/2/99, 1:00 PM ET:

o Dow Jones Industrial Average: 10,755.83 up 100.68, 0.94%

o Nasdaq Composite Index: 2,657.28 up 18.79, 0.71%

o S&P 500: 1,339.78 up 11.06, 0.83%

o TSC Internet: 556.56 up 0.47, 0.08%

o Russell 2000: 444.79 up 0.02, 0.00%

o 30-Year Treasury: 88 09/32 down 1/32, yield 6.107%

In Today's Bulletin:

o Midday Musings: Gains Moderate but Stay in Place as Fed Picture Clears a Bit
o Herb on TheStreet: Checking Back on Cree and More Trampling on Just for Feet

Also on

Wrong! Dispatches from the Front: Intel's Coattails

When things are going right for Intel, you can speculate on a PC's innards.

Silicon Babylon: Thom Weisel, the Man Behind the Man in the Yellow Jersey

When Lance Armstrong was chugging up the mountains of France, the San Francisco investment banker was right behind him.

Mutual Funds: H&Q Enters the Not-So-Crowded Field of IPO Funds

Hambrecht & Quist's quant-driven portfolio will be only the second pure-play IPO fund.

IPOs: With GreatFood, Hambrecht Serves Up Another Niche IPO, an online specialty food retailer, is the latest in W.R. Hambrecht's line of niche initial public offerings.

Dear Dagen: Dear Dagen: Fund Companies Making It Harder to Say a Quick Goodbye

Funds and fund supermarkets are imposing more redemption fees.

Midday Musings: Gains Moderate but Stay in Place as Fed Picture Clears a Bit


Thomas Lepri

Staff Reporter

At midday, with the mercury reading a relatively mellow 84 degrees in Lower Manhattan, the market, too, was trying to break out of the stagnant pattern it's been tracing during this summer's dog days. And if today's action thus far is any indicator, investors aren't expecting a repeat of last year's August performance this month.

The indices were all solidly higher at midday. The

Dow Jones Industrial Average

was up 101 to 10,756, helped along by outperformers

American Express


, up 2.2%, and

Hewlett Packard


, which had gained 3%.

The tech-flecked

Nasdaq Composite Index

was 19 higher to 2657 on strength in its big tech bellwethers, especially chip king



, up 5.1% after a couple of analyst actions (see below).


S&P 500

had advanced 11 to 1340, Internet Sector

index was up a fraction to 557 and the small-cap

Russell 2000

was unchanged at 445.

All that positivity, though less robust than earlier, is a far cry from last year, when the Dow and the Nasdaq each dumped 1.1% on the first trading day of August. You'll remember that by the end of that month, amid the collapse of one highly leveraged hedge fund and one highly leveraged G8 country, those indices had shredded 15.1% and 19.9% of their total value, respectively.

No Russia or

Long Term Capital Management

this time. Driving today's upswing is the

National Association of Purchasing Management's

July survey, which came in at a softer-than-expected 53.4, below the 56.1 that economists expected and down from the June reading of 57. The report's suggestion that the economy might be slowing -- but not contracting, since any reading above 50 shows expansion in the economy -- came as welcome news to the market.

Charles Crane, chief market strategist at

Key Asset Management

, said the NAPM statistics were "offsetting some rather nerve-wracking numbers that came across the tape last week," referring to the hot readings on Thursday's

Employment Cost Index and Friday's

Chicago Purchasing Managers' Index.

From his office in Maine -- and, we might add, in a very relaxed voice -- Crane mused on the implications the NAPM number has for the market's unceasing


watch. "On any given day, there's a continual tug-of-war between those who think the Fed will tighten when it meets on Aug. 24 and those who think it won't. Today the numbers are supporting those who think it won't," he said.

"My intuition is that the Fed will take back one more of the easings that they put in last fall. Whether on Aug. 24, or beforehand, or after -- flip a coin."

A lot of today's rally can also be explained as a simple snapback from last week's damage. "The selling over the past couple days was a little overdone," said Pete Boockvar, equity strategist at

Miller Tabak Hirsch


Boockvar was cautious about the cool NAPM number, noting that the hot Chicago Purchasing Managers' number itself implied a higher NAPM the one reading released today. "We have to wait until Friday for more evidence on where the economy's going," he said. "It would be premature to say the economy's slowing while other data contradicts that and with other economies around the world picking up."

Low summer volume was making it hard to gauge the rally's conviction, Boockvar added. "The thinness of the trading is exaggerating the moves in both directions," he said. "But for today, it's definitely a nice relief rally."

Market breadth was slightly negative. Decliners were narrowly topping advancers 1,504 to 1,323 on the

New York Stock Exchange

with 351 million shares changing hands. There were 25 new 52-week highs against 119 new lows. In

Nasdaq Stock Market

action, decliners were edging out advancers 1,925 to 1,713 on 423 million shares. There were 70 new highs and 31 new lows.

The NAPM report sent the 30 year Treasury bond rallying back from early lows. The long bond was lately down 2/32 to 88 9/32, its yield at 6.11%.

Monday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

US Airways


was up 3 5/16, or 9.3%, to 38 15/16 as a major shareholder moved to shake things up at the airline.

Julian Robertson's

Tiger Management

hedge fund, which owns about 22.4% of the airline's common stock, said in a

Securities and Exchange Commission

filing that it is exploring "a variety of alternatives" to enhance shareholder value. Possibilities could include a merger, a sale or a recapitalization.

An outside Tiger spokesman couldn't comment further on a buyout price or the timing of any deal, except to say that management was definitely not in the doghouse. "Tiger has over the years been quite supportive of the management of USAir and still feels very much that way. They have great faith in

Chairman Stephen Wolf and his team." Tiger currently is not seeking seats on the US Airways board.

One hedge fund manager, a US Airways shareholder who did not want to be identified, said the airline's stock repurchase program is "a

leveraged buyout. By buying shares and reducing the share account, the company is buying back themselves on a creeping-basis, self-starting LBO. But it doesn't seem to be working fast enough" for Tiger's liking.


Erin Arvedlund

Mergers, acquisitions and joint ventures

Fidelity National Financial


edged up 3/4 to 18 3/16, while

Chicago Title


jumped 4 11/16, or 11%, to 47 7/16, after Fidelity said it would buy Chicago for $1.2 billion, or $52 a share in cash and stock. The $52 price for each Chicago Title share represents a 42% premium to the Chicago Title's closing price Thursday, the day before the companies announced they were holding talks.

Foster Wheeler


slipped 7/16 to 11 13/16 and



rose 7/8 to 34 3/4 after Foster won a $300 million contract from Pfizer to build a pharmaceutical plant in Ireland.



climbed 2 1/4 to 93 1/2 after it said it inked a $370 million supply pact with

China Eastern Airlines


for cellular equipment. China Eastern was up 11/16, or 6%, to 12 1/16.



gained 3 7/8, or 10.2%, to 41 3/4 after the company agreed to a sweetened $42-a-share takeover offer from Chicago-based

Amsted Industries


Earnings/revenue reports and previews



rose 1/8 to 15 1/16 after posting earnings from continuing operations of 21 cents a share, shy of the four-analyst estimate of 27 cents and up from the year-ago 11 cents. The company's board also decided to separate AutoNation's automotive rental division from the company and "is exploring various strategic alternatives" on the form of a separation. AutoNation's automotive rental division includes

National Car Rental


Alamo Rent-A-Car


CarTemps USA

. The board also authorized the repurchase of an additional $500 million of stock. The company announced that Michael E. Maroone, formerly president of AutoNation's

Automotive Retail Group

, has been named president and chief operating officer of AutoNation, succeeding John H. Costello, who has resigned.



gained 1 to 45 after it posted second-quarter income from continuing operations of 11 cents a share, matching the six-analyst estimate and up from the year-ago earnings of a penny a share.

Litton Industries


slipped 7/16 to 68 5/16 after it said its fiscal 1999 results, slated to be released Sept. 1, will be sliced by special fourth-quarter charges totaling $116.8 million pretax, or $77.4 million after tax. The company said it will depart the mainframe outsourcing and professional services businesses conducted at its

Litton Enterprise Solutions




tanked 5 7/16, or 27.2%, to 14 9/16 after warning it expects second-quarter earnings to be "significantly lower" than the current two-analyst estimate of 7 cents a share. The results will be released on or about Aug. 12, the company said.



lost 3/16 to 18 1/8 after it reported second-quarter earnings of 22 cents a share, in line with the 22-analyst estimate, but down from the year-ago 26 cents.

Offerings and stock actions

Acme Communications

, which operates network affiliate television stations of the

WB Network

, said it's planning a $115 million IPO.

Deutsche Bank Alex. Brown


Merrill Lynch


Morgan Stanley Dean Witter


CIBC World Markets

will underwrite the offering.

Analyst actions

AmeriSource Health


rose 1 1/16 to 29 1/16 after

Warburg Dillon Read

upgraded the stock to strong buy from hold.

Applied Analytics


climbed 3/8 to 7 after

Lehman Brothers

cut its rating to neutral from outperform.



lost 1/8 to 13 1/16 after

Credit Suisse First Boston

initiated coverage with a hold rating.



lost 7/16 to 37 15/16 after

Morgan Stanley Dean Witter

downgraded the stock to neutral from outperform.

Intel jumped 3 1/2, or 5.1%, to 72 1/2 after

Salomon Smith Barney

reiterated a buy rating and set a price target at 95.


also reiterated its Intel rating, a strong buy.


King Pharmaceuticals


gained 1 1/8 to 28 3/4 after saying it bought the rights to sell

Eli Lilly's



antibiotic for $90.5 million plus sales performance milestones that, if achieved, would bring the total value of the deal to $158 million. Eli Lilly climbed 3/8 to 65 5/16.

Oregon Steel Mills


lost 1/8 to 12 after the company appointed Joe Corvin as the new CEO effective January 2000. Corvin replaces Thomas Boklund, who will remain chairman when he steps down in December.

Pitney Bowes


slipped 7/16 to 63 3/16 after saying it had reached an agreement with the

Postal Service

to resolve a postage-metering lawsuit filed by Pitney Bowes, under which Pitney Bowes will receive $51.75 million from the Postal Service.



gained 1 5/8 to 42 1/8 after it said it will cut up to 1,400 jobs at its headquarters by Oct. 31, in a move to trim expenses. The cuts will not affect the retailer's hardware or department stores.

Sun Microsystems


moved up 3 9/16, or 5.3%, to 71 7/16 after announcing it will disclose its plans for a microprocessor with a radical new architecture designed to handle complex graphics, voice and video, challenging Intel and other chipmakers in the fast-growing market for communications and media-processing chips, according to an article in

The Wall Street Journal


Herb on TheStreet: Checking Back on Cree and More Trampling on Just for Feet


Herb Greenberg

Senior Columnist

Mundayne (otherwise known as the summertime blahs, revisited):

Cree-d Off:

On a reread of my last column on

Cree Research


, I kicked myself for having left out something very important -- or at least not making a certain point more clearly. (

Click here to see what I'm talking about.) In the wake of the recent Cree-related emails (Creemails?) suggesting I don't know my own anatomy, let's get to what the point of the column was supposed to be: If any company winds up stuffing a distribution channel with too much merchandise, and that merchandise doesn't sell, future demand drops and the company that touted the high sales winds up suffering. Just take a look at

Network Associates





and a host of others that made their numbers via special deals with customers.


Go back and read this

column's item, from last May, on

Just for Feet


-- the one that quoted a short-seller as saying that the company, in turmoil for having too much obsolete merchandise, wasn't earning money on a real operating basis. His reason was that only the profitable goods were being sold, which would mean that at some point the company could be forced to dump that merchandise in future quarters. "And that," he said, "would be catastrophic because they'd be selling everything at below cost."

To which CEO Harold Ruttenberg replied: "Anonymous sources don't deserve a response. Anybody who is anonymous is not worth commenting on." When pressed about the short's contentions, Ruttenberg added, "it's not true."

Fast-forward to the company's press release of last week: Among other things, it disclosed that it's "experiencing lower net sales and gross margins, higher store operating expenses and higher interest costs which will result in a significantly higher net loss in the second quarter ending July 31, 1999 than the previously revised plan and a significant net loss for fiscal 1999."

In other words, another case of another CEO denying what was really going on. Oh, and Ruttenberg, while remaining chairman, is no longer running the joint. He's been replaced as CEO. (A last-ditch attempt, no doubt, to get the place back on its, uh, feet.)



recent item here recommended the


cover story "Recipe for Jail." That prompted

Lorraine M.

, from Canada, to write: "On the cover of my copy the article is called 'Lies, Damned Lies, and Managed Earnings.' Maybe it's a Canadianized version. Do you think it's because there's no point telling Vancouverites they'll go to jail for fraud? They all know better at the

Vancouver Stock Exchange


Nah, the difference is that you have a newsstand copy; mine was delivered to my home. Many mags,


included, use different covers for newsstands and subscriptions.

A new one to add to the list:


for those Cree investors who sent the

Hostile React-O-Meter

spinning in response to a few questions raised here.

And another new one to add to the list:


. That's what 38% of the readers of this column think they should be called following a

recent poll. But

Stephen Cronk

isn't so sure it's a good idea. "Carnivores eat meat," he says. "Omnivores eat meat and vegetation. Traditionally, herbivores eat vegetation, but in this new incarnation it would mean your readers eat you. Take that any way you want, but any way you take it is still pretty unappetizing. Your readers need to brush up on their etymology."

Pass the hot sauce, please.

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.

Mark Martinez assisted with the reporting of this column.

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