Skip to main content's MIDDAY UPDATE

August 3, 1999

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Market Data as of 8/3/99, 1:13 PM ET:

o Dow Jones Industrial Average: 10,643.75 down 2.21, -0.02%

o Nasdaq Composite Index: 2,575.24 down 48.39, -1.84%

o S&P 500: 1,318.83 down 9.22, -0.69%

o TSC Internet: 518.09 down 21.94, -4.06%

o Russell 2000: 434.42 down 8.21, -1.85%

o 30-Year Treasury: 88 01/32 down 3/32, yield 6.122%

In Today's Bulletin:

o Midday Musings: Net Stocks Endure Heavy Selling as Another Rally Is Dismantled
o Herb on TheStreet: Summer Re-Runs: Sabratek's Skid, Lernahooligan Alert and 4Kids Climbs.

Also on

Wrong! Dispatches from the Front: The Underpinnings Are the Underwritings

That's what is going to show us the bottom of the Net selloff.

IPOs: Market Grows Jittery but IPO Torrent Rushes Onward

A lackluster summer hasn't stanched deal flow, though some issues have failed to fulfill early promise.

Tech Savvy: Don't Yell 'Yahoo!' Quite Yet

A Yahoo!-Excite@Home linkup appears unlikely and, for the latter party, downright unwise.

Nothing but Net: Yahoo! Excitement Gives Way to Online-Trading Dejection

Trading-volume growth appears to be tapering off, a report says, and that means bad things for Net stocks.

Dear Dagen: Dear Dagen Wants More for Christmas Than Just Her Two Front Teeth

She has some ideas for funds-industry accountability, too.

Midday Musings: Net Stocks Endure Heavy Selling as Another Rally Is Dismantled


Brian Louis

Staff Reporter

Nice rally.

Yeah, about as nice as a surprise visit from

Slobodan Milosevic

for Sunday dinner.

After opening on the plus side, major stock proxies quickly reversed their upward trajectory, and amid the lunch hour on Wall Street they were mostly under water.

Arguably the weakest (or most horrid) action in the market was in the Internet sector. Internet Sector

index -- which opened solidly higher thanks to a

Business Week Online

report that said



is in talks to acquire


(ATHM) - Get Free Report

-- quickly tumbled from its early intraday peak and subsequently fell deep in the red. The DOT had traded as high as 553.42 and as low as 517.54. It was lately down 25, or 4.6%, to 515.

However, Excite@Home President George Bell was quoted on


this morning as saying there was "no truth to the story" on

BusinessWeek Online

. Excite@Home was down slightly while Yahoo! was off 5%.

As for the

Dow Jones Industrial Average

, it was down 22, or 0.2%, to 10,624.


(IBM) - Get Free Report


American Express

(AXP) - Get Free Report

were the biggest drags on the Dow. The Dow had traded as high as 10,727.97.

Elsewhere, the

S&P 500

was down 12, or 0.9%, to 1316. The S&P 500 peaked at the 1336.06 level. The

Nasdaq Composite Index

was down 58, or 2.2%, to 2565. The Nasdaq Comp traded as high 2649.21.


Nasdaq 100

was off 2.1%. Meanwhile, small-caps were getting hammered. The

Russell 2000

was off 8, or 1.9%, to 434.

Sector-wise, online brokers were getting shellacked after a Wall Street analyst released a report on online trading volumes. And the volumes weren't robust. On the news,

Charles Schwab


was off 9.3%;


(AMTD) - Get Free Report

was down 12.3%; while



was down 14.1%.

Gold stocks were soaring. The

Philadelphia Stock Exchange Gold & Silver Index

was up 4.1%.

In the Treasury market, the 30-year bond was lately down 5/32 to 88 2/32, yielding 6.13%. (For more on the fixed-income market, see today's early

Bond Focus.)

Volume was less than robust and breadth was -- as one would expect on a weak day -- was decidedly poor.

Despite the overall weakness, stocks are poised for a pop, according to some.

"I think we're probably ready for a rally," said Louis Todd, head of equities trading at

J.C. Bradford

, or "a bounce of some sort" in the major indexes -- the Dow, the S&P 500 and the Nasdaq Comp.

Todd said -- when the Dow was up about 60 points late in the morning -- that the average, which opened strong, sold off and then snapped back, "will close higher from here."

However, bonds weren't giving stocks much of a hand. Todd pointed out that stocks are competing with the yield on the long bond which "makes it tough for stocks."

Some of the blame for the selling into this morning's rally came from fears that interest rates are headed higher, according to some.

People are worried about the next

Federal Open Market Committee

meeting, Todd said, adding that there seems to be about a 60% belief that rates are going higher in the wake of

Federal Reserve


Alan Greenspan's



testimony. "That's got people worried," Todd said.

The FOMC is slated to meet Aug. 24.

Traders also have their eyes on Friday's release of the July

employment report


On the

New York Stock Exchange

, decliners were outpacing advancers 1,920 to 939 on 413 million shares. On the

Nasdaq Stock Market

, losers were beating winners 2,647 to 1,032 on 579 million shares.

On the NYSE, 100 issues had set new 52-week lows while 23 had touched new highs. On the Nasdaq, 76 issues had set new 52-week lows while new highs totaled 45.

Meanwhile, among other indices, the

Dow Jones Transportation Average

was down 1.1%, the

Dow Jones Utility Average

was up 0.2% and the

American Stock Exchange Composite Index

was down 2%.

On the Big Board,

America Online


was most active with 27.1 million shares changing hands. It was down 5 1/8, or 5.6%, to 87 3/4.

On the Nasdaq,


(INTC) - Get Free Report

was most active, with 20 million shares changing hands. It was down 5/8 to 70 11/16.

Tuesday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Yahoo! lost 6 3/4, or 5% to 125 9/16 and Excite@Home slipped 11/16 to 42 1/4 after Excite@Home President George Bell denied a

Business Week Online

story which reported the companies had held talks over the last six weeks about a possible merger. Yahoo! reportedly would buy Excite@Home for some amount greater than its market value of $17 billion.

Mergers, acquisitions and joint ventures

America Online shed 5 1/8, or 5.6%, to 87 3/4 and

Radiant Systems


jumped 4 1/16, to 19 15/16 after the companies announced a retail services pact. AOL said it would make an unspecified investment in Radiant.

British American Tobacco

(BTI) - Get Free Report

moved up 1/16 to 9 3/8 after it agreed to buy the 58% of


that it does not already own for roughly $6.8 billion.

Earnings/revenue reports and previews



lost 1 1/16 to 35 11/16 after posting second-quarter earnings of 57 cents a share, a penny shy of the 10-analyst estimate of 58 cents and up from the year-ago 54 cents.


(EQ) - Get Free Report

fell 2 1/8 to 62 1/8 after it posted second-quarter after-tax operating earnings of $1.22 a share, ahead of the nine-analyst estimate of $1.14 and up from the year-ago operating earnings of 98 cents.

Global Crossing


lost 2 7/16 to 37 5/16 after posting a second-quarter loss of a penny a share, in line with the single-analyst estimate and narrower than the year-ago loss of 58 cents.

Global Telesystems


rose 2 1/16 to 34 1/2 after reporting a narrower-than-expected loss of 66 cents a share, compared with a five-analyst estimate of a loss of 69 cents, but wider than the year-ago loss of 34 cents.


(HRC) - Get Free Report

moved up 1/2 to 12 3/4 after posting second-quarter earnings of 27 cents a share, in line with the 11-analyst estimate but down from the year-ago 28 cents.


(LC) - Get Free Report

slipped 7/8 to 52 1/2 after it posted second-quarter operating earnings of 68 cents, ahead of the one-analyst estimate of 65 cents but down from the year-ago operating earnings of 76 cents.

Mylan Laboratories

(MYL) - Get Free Report

edged up 5/16 to 23 after it reported first-quarter earnings of 25 cents a share, a penny shy of the eight-analyst estimate and down from the year-ago 28 cents.

PE Biosystems

(PEB) - Get Free Report

ascended 5 1/or 10.2% to 59 1/4 after it reported fourth-quarter earnings of 85 cents a share, better than the eight-analyst estimate of 42 cents, and up from 57 cents a year ago. The company had a 2-for-1 stock split July 26 but reported fourth-quarter earnings on a pre-split basis.



moved up 1 3/8 to 13 15/16 after reporting fourth-quarter earnings of 26 cents a share, in line with the five-analyst estimate and up from 11 cents a year ago.

Offerings and stock actions

BigStar Entertainment

(BGST:Nasdaq) was down 1 15/16, or 19.4%, to 8 1/16 in a poor first day of trading.

Prudential Securities

late yesterday priced 2.5 million shares at $10 each, cut from a planned 3.1 million shares at $12 to $14 each.

(FLWS) - Get Free Report

was wilting in its public debut, down 1 1/2, or 7.1%, to 19 1/2.

Goldman Sachs

last night priced 6 million shares at $21, above the expected range of $16 to $18.

(QUOT:Nasdaq), was down 1 1/16, or 9.7%, to 9 15/16 in early trading, after being priced top-range at $11 a share yesterday by

Hambrecht & Quist


Analyst actions


(CI) - Get Free Report

lost 5 3/4, or 6.4%, to 83 3/4 after

Merrill Lynch

downgraded the stock to near-term accumulate from near-term buy.


(DISH) - Get Free Report

rose 4, or 6.2%, to 68 1/2 after

Banc of America Securities

upgraded the stock to buy from outperform.

Johnson & Johnson

(JNJ) - Get Free Report

rose 2 1/8 to 94 1/16 after

J.P. Morgan

upgraded the company to buy and set a price target of 110.

Wells Fargo

(WFC) - Get Free Report

lost 1/2 after Banc of America Securities upgraded the stock to buy from market perform.




sank 13 3/4, or 57.6%, to 10 1/4 after an announcement last night that the

Food and Drug Administration

had not approved a cancer painkiller.



gained 2 13/16, or 12.3%, to 26 after the company reported results from an early trial phase of a tumor-shrinking drug.

St. Paul


lost 1/16 to 32 1/8 after it announced a cost-cutting plan under which the company expects to eliminate 1,000 jobs.

Herb on TheStreet: Summer Re-Runs: Sabratek's Skid, Lernahooligan Alert and 4Kids Climbs.


Herb Greenberg

Senior Columnist

Tuesday Triumph:

Sabratek, the plot thickens:



, no stranger to

this column, issued a stranger-than-usual press release early yesterday. Buried deep down, somewhere toward the end (almost as afterthought) came the disclosure (oh, by the way) that Sabratek's second-quarter profits will be "significantly" lower than expected. The stock responded by tumbling 30% to 14 9/16.

Sabratek didn't say why it would miss the quarter by so much, but this much is clear: Sabratek will miss the earnings even after the company engaged in several questionable quarter-end deals -- previously

reported here -- that should've


the quarter.

Lernahooligan alert (or the games people play):

One of the market's few winners yesterday was this column's old friend (friend?!)

Lernout & Hauspie


. Investors cheered the company's announcement that


(MSFT) - Get Free Report

had given the company a "new multimillion-dollar contract" to translate various Microsoft software products to other languages.

Short-sellers, however, scoff that the announcement is a sign of desperation. "It's not a new deal," says one, who points out that Lernout has been doing translation business for Microsoft for a number of years.

"The best they can say is that they didn't lose the contract," says one longtime Lernout short, who concedes that Microsoft's translation biz with Lernout, on a rev basis, is growing. This year, based on quarterly rev, it could be as much as $28 million, up from $18 mil last year. However, he quickly adds, no analyst raised revenue or earnings estimates on the news. "Either that means it's a nonmeaningful contributor of new revenue," the short figures, "or analysts must've thought that this replaces other business."

What's more, this agreement is "nonspecific" in details, which means it's unclear whether it includes a licensing deal or is merely grunt work. "You don't pay a tech multiple for a service company," the short says.

Giving credit where credit's due:

Missing from this column's recent

report card was the fab call

here back in May by Jordan Kimmel, of

Magnet Investment Group

in Randolph, N.J., and the author of the recently published

Magnet Investing.

Relying on a combination of charts, technical indicators and fundamentals, he was quoted here several months ago singing the praises of

4Kids Entertainment


. While 4Kids has licensing rights to

World Championship Wrestling

memorabilia, that's not what's making the stock soar: It's 4Kids ownership of the worldwide licensing rights to the use of the


character, including trading cards and the Saturday morning TV show (though not the



The stock has more than doubled since then, hitting Kimmel's target of 40. Yet he says he hasn't sold a share. "Everybody is still telling me it's a fad, but they're completely underestimating what 4Kids is all about," he says.

When will he sell? "When a handful of people grab me on the street and tell me to buy it," he says. Despite the stock's rise, he says that "as far as I'm concerned, money managers and the public are still not aware of it."

Another favorite, along those lines, is

Jakks Pacific

(JAKK) - Get Free Report

, which licenses the rights to

World Wrestling Federation

memorabilia and


replicas. "When I run my spreadsheet, it's coming up as my No. 1 stock," he says.

On the downside, he says that



is still his No. 1 short. "There's still tremendous debt, margins are decelerating and insiders own little stock," he says. "I think it will absolutely implode."

Remember, this is the guy who told me (and I chose not to print because I couldn't verify any trouble at the time) the same thing about


(MCK) - Get Free Report



That's the name I gave

Cree Research

(CREE) - Get Free Report

investors who feel they must blast this column for

raising questions. Several readers, including

Keith Luckenbach


Jon Cullis

, thought


was more appropriate and accurate. (Well, I was trying to be polite, but Cree-tins it is.)

Speaking of Cree: Best email of the day from

Boris Syiek

, who writes:

I am a Cree investor and I like your articles. Keeps everyone on their toes. I look for the long term. If the short-term investors can't take the heat, they shouldn't be in the kitchen. Good muckraking! Keep it up, I say. And if you are right, then the company should fix the problem. If you are wrong, then it's a buying opportunity for the rest of us.

Finally, someone who gets it!

Gambler's anon:

G.B. Smith

and I clashed on last week's

Fox show

about daytraders and whether they're gamblers. I said they are. He said

they're not. To which I say, "Gary, nonsense. Are too!"

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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