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midday08-04-99's MIDDAY UPDATE

August 4, 1999

Worden Brothers

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Market Data as of 8/4/99, 12:59 PM ET:

o Dow Jones Industrial Average: 10,770.07 up 92.76, 0.87%

o Nasdaq Composite Index: 2,570.32 down 17.67, -0.68%

o S&P 500: 1,319.62 down 2.56, -0.19%

o TSC Internet: 499.70 down 19.37, -3.73%

o Russell 2000: 431.85 down 4.43, -1.02%

o 30-Year Treasury: 88 06/32 up 18/32, yield 6.109%

In Today's Bulletin:

o Midday Musings: Market Enjoys a Bounce, However Shaky
o Herb on TheStreet: Why Daytraders Are More Like Gamblers Than Investors

Also on

Wrong! Dispatches from the Front: Betting the 30-Year Bond Is Not Really Betting at All

The trader describes an opportunistic trade and makes a call for readers' journal entries. Even the VCs Are Jittery

Tech stocks tumble, and yes, America's venture capitalist elite worries too. But only in private.

Biotech/Pharmaceuticals: Leukosite Has Big Hopes for New Cancer Drug

Will Campath do for Leukosite what Rituxan did for Idec? The company's bulls are betting on it.

Bob Gabele: Report Card Time

Gabele reviews past columns to see how successful he was in forecasting specific stocks.

Today's Polls: Take Our Poll: Name a Possible Replacement for Union Carbide in the Dow


wants your thoughts on which company should enter the 30-stock index if Union Carbide leaves it.

Dear Dagen: Dear Dagen: The Frequently-Asked-Questions File

Dagen answers popular questions on Ryan Jacob's new whereabouts and starting your own fund. Plus, more on short-selling.

Midday Musings: Market Enjoys a Bounce, However Shaky


Eileen Kinsella

Staff Reporter

A technical bounce still counts as a bounce, as far as this market is concerned.

A morning upswing in some indices was a welcome relief, as news of a major merger and a general sense that stocks are oversold chipped away at some of the interest-rate fears dogging the market in recent days. But by midsession some of the early gains were already beginning to fade.


Dow Jones Industrial Average

shot up this morning on news of a $9.3 billion merger between component

Dow Chemical

(DOW) - Get Free Report

and Dow component

Union Carbide


, but by midday, the index was handed back much of its earlier, more-than-130-point jump. It was up 112, or 1.1%, to 10,789.

In initial trading hours, people were optimistic. "The market feels OK for a change," said Phil Marber, head trader at

Cantor Fitzgerald

. "The Dow was getting oversold and was due for a technical bounce. Chemical stocks are up on the merger and other cyclicals are also doing well. The next thing you'll see is the Internet stocks recovering."

But by late morning that prediction was wishful thinking as struggling technology issues depressed respective indices. The

Nasdaq Composite Index

was down 16, or 0.6%, to 2572, while Internet Sector

index was down 17, or 3.2%, to 502, nagged by






, among other Internet issues.

"The Nasdaq has been extremely weak and is still under pressure due to a lot of margin selling, particularly in the Internet stocks," said Peter Cardillo, chief strategist at New York-based

Westfalia Investments


Aside from the clouds in technology skies, Cardillo's outlook was generally sunny. "You've got a very strong Dow but we also have bonds coming down and that's adding some relief to market worries about rates," said Cardillo, who added the market is in the process of discounting another rate hike. "We could see another day of bashing but today I think we'll move higher and end up on the plus side," predicted Cardillo.

On the Big Board, decliners were leading advancers 1,598 to 1,164 on 447 million shares. On the

Nasdaq Stock Market

2,344 decliners were outpacing 1,247 advancers on 545 million shares. New 52-week lows were leading new highs 114 to 26 on the NYSE and 96 to 34 on the Nasdaq.

The bond market was in positive territory after the

Treasury Department

announced plans to abandon the November auction of 30-year bonds and said it might buy back Treasuries. The benchmark 30-year Treasury was up 20/32 to 88 9/32, its yield easing to 6.11%. (For more on the fixed-income market, see today's early

Bond Focus.)

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.


When's the last time you saw a Dow stock that wasn't


(IBM) - Get Free Report

move like Union Carbide is today?

Dow component Union Carbide was going through the roof on news that Dow Chemical will buy it for a cool $9.3 billion in stock. Though the companies have billed the combination as a merger, Union Carbide stockholders, who will get 0.537 Dow shares for each share of Union Carbide, will have a 25% stake in Dow after the deal. Union Carbide was lately up 10 1/2, or 21.5%, 59 5/16. But Dow Chemical was looking rather droopy, off 7 1/8, or 5.7%, to 117 9/16, although

Brown Brothers Harriman

reiterated its short-term buy rating on Dow Chemical after the acquisition was announced.

Of course, the prospect of Union Carbide's acquisition raises the question of what might replace it in the Dow Jones Industrial Average. Let us know

what you think.

Mergers, acquisitions and joint ventures

American Greetings

(AM) - Get Free Report

was up 7/16 to 29 1/4 on news that it has signed a 5 1/2-year, $100 million deal with

America Online


to provide online greeting cards on AOL Web sites. The new deal is an expansion of a previous three-year, $10 million alliance between the two companies. AOL wasn't escaping the general malaise under the Internet sector was laboring; it was down 1 5/8 to 87 3/16.

Health Care Property Investors

(HCP) - Get Free Report

was up 5/16 to 44 3/16 after it set plans to buy fellow health care real estate investment trust

American Health Properties


for about $700 million in stock. American Health Properties was moving up 3/4, or 4.17%, to 18 3/4 on the news.

Live entertainment promoter

SFX Entertainment


was dumping 3 1/16, or 7%, to 40 7/8 after last night agreeing to acquire U.K-based entertainment service

Apollo Leisure

for $254 million in stock and debt.

Earnings/revenue reports and previews

McDermott International

(MDR) - Get Free Report

was falling 1/4 to 28 7/16 after it posted first-quarter earnings of 33 cents a share, a nickel shy of the four-analyst estimate and down sharply from last year's $1.88. McDermott blamed the shortfall on slack sales in its marine construction segment, a lull that CEO Roger Tetrault said is likely to continue for the next two quarters.

CNA Financial

(CNA) - Get Free Report

was shedding 5/16 to 35 3/8 after it posted second-quarter operating earnings of 23 cents a share, ahead of the four-analyst estimate of 21 cents but down from the year-ago 33 cents.



5/16 to 24 15/16 after it released second-quarter earnings of 49 cents a share, besting of the two-analyst estimate of 41 cents but down from the year-ago 52 cents.



was up 1 3/8, or 6.1%, to 24 1/16 after saying that it expects fiscal 1999 earnings will exceed current estimates. The single-analyst forecast calls for the company to earn $2.17 in fiscal 1999. The company expects to announce the results in early September. Meanwhile, Salton also said it has postponed a planned offering of 2.9 million shares of stock, citing market conditions.


(SYY) - Get Free Report

was lately nudging up 3/16 to 31 1/2 after releasing fourth-quarter earnings of 35 cents a share, two cents above the 13-analyst consensus and up from the year-ago 29 cents.


was off 3/4, or 5.8%, to 12 3/16 after it last night posted a second-quarter loss of 27 cents a share, narrower than the three-analyst prediction of a 32-cent loss and up from the previous year's negative $1.65 a share.

Offerings and stock actions

The Net IPO show must go on. ADRs of Internet service provider

Internet Initiative of Japan

(IIJI:Nasdaq ADR) were lately up 5 15/16, or 25.8%, to 28 15/16 in their trading debut.

Goldman Sachs

had priced the offering at $23 an ADR, above the expected pricing range of $18 to $20 an ADR.

Analyst actions


(CVS) - Get Free Report

was plunging 3 3/16, or 6.5%, to 46 3/16 after

Merrill Lynch

cut it to near-term accumulate from near-term buy.

Web site management firm



was falling 2 9/16, or 15.8%, to 13 3/4 after Merrill started it with a cool near-term accumulate and long-term buy. Merrill also set a 12- to 18-month price target of 20 for the stock.



was sinking 1 1/2, or 5.5%, to 25 11/16 after Merrill cut it to near-term neutral from near-term accumulate.


Allegiance Telecom


was flying up 1 5/8, or 3.5%, to 48 after it said that

Vulcan Ventures

, the umbrella firm of


(MSFT) - Get Free Report

co-founder Paul Allen, will buy 1.5 million shares of Allegiance common stock from its existing private equity investors at $50 a share.

Herb on TheStreet: Why Daytraders Are More Like Gamblers Than Investors


Herb Greenberg

Senior Columnist

An item

here Monday mentioned my go-round with

G.B. Smith



show over daytrading. I said that for the most part it's gambling. He said it wasn't. I came back yesterday and said, again, that it was. (You think I'm going to let


off the hook, let alone have the last word?!)

That prompted the usual avalanche from readers, such as

Kimm Wanroy

, to write: "I guess my question is who cares if daytraders are gamblers? I trade from my house and make a very nice living ... I'm happily married, I've never collected unemployment, I've never been foreclosed on and I think you would be surprised to find I'm not the only trader to fit this profile."

Actually, I wouldn't. You're entitled to do whatever you want to do with your money, as long as it's legal. And daytrading is legal. But in this environment it's getting confused with investing and, no matter what you call it, one thing it's not is investing. Even

Rita Shugart

conceded that "it's gambling" in a daytrading column I wrote for


several issues ago. I picked Rita, an active daytrader, because she's not what you typically think of when you think of daytraders. The wife of Al Shugart, who used to run

Seagate Technology


, Rita runs a chain of dress stores in Silicon Valley and has been daytrading for just a few years. But I figured she's better at calculating risks than most: When she's not running the dress shops she's a world-class bridge player who is said to be pretty good at blackjack and craps. "Daytrading is like gambling," she told me.

So, what is gambling? According to


, it's "to bet on an uncertain outcome," or to "speculate." And many, if not most, of today's


wannabes don't speculate or bet on an uncertain outcome? At least Cramer, from what I can tell, makes sure the odds are in his favor -- with the help of a supporting cast of characters like


, seasoned traders and an on-staff analyst or two.

But to most daytraders, or at least those I hear from, it's a symbol, not a stock. A quarter here; a teeny there. Back when I was on


I would get anxious emails, shortly after my appearance, from viewers who wanted to know the symbol of the stock I just mentioned. (So they could put in a pre-market order, no doubt, without doing the slightest bit of research into what the company does.) With that kind of strategy you really oughta go to the track or Vegas. (G.B., I don't see


you can argue with that ... but I'm sure you'll find a way!)

How, then, does daytrading differ from hedge funds? (Or so wonders reader

Trey Mirenda

.) Depends on the hedge fund. Some sit on long and short positions for years; others actively trade, but even those that actively trade generally try to find ways to improve the odds by trying to understand what they're trading.

Gambling? "All of investing & trading techniques are odds plays, regardless of time frame," writes reader

Sean Phelan

. "Buffett makes long-term odds plays & professional stock traders make short-term odds plays. Both act on what has historically shown itself to work in the past. Both long-term and short-term investing/trading can be done poorly and both can be done exceptionally."

He adds, "Lumping Vegas weekend warrior 'gamblers' with professional stock traders who have made remarkably good livings for years doesn't make sense. No one can judge for themselves on your discussion, I'd suggest, until a definition of 'gambling' is established."

Thanks for the thoughtful comments, Sean, but what really disturbs me is the email I received not long ago from a buddy who is an attorney. A few years ago he was showing me the mutual funds he had put his kids' money into and wondered what I thought. He confessed he didn't really have the slightest idea how to assess the fund. (This is a guy who knew


about investing.) It was sold to him by a broker. Now he's writing me about how he's starting to daytrade, and how he watches


all day long. He conceded he was hooked, and hoped his wife didn't realize what he was doing.

If that's not gambling then sorry, G.B., I don't know what is.

Short Positions

Sabratek sues:




sued a short-seller who posts critical comments on message boards and the publisher of a newsletter on charges of illegally trying to knock down its stock.

Graveyard gossip:

Stewart Enterprises


hit yet another new low. That prompted one reader to suggest that Stewart investors who insist on testing my

Hostile React-o-Meter

be called



And this update on

Henry Schein

(HSIC) - Get Free Report

, the dental supply company, which fell more than 25% yesterday. Yep, drilled again: In an earnings release the company warned that earnings might prove disappointing in the third and fourth quarter.

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.

Copyright 1999,