TheStreet.com's MIDDAY UPDATE
August 12, 1999
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Market Data as of 8/12/99, 1:19 PM ET:
o Dow Jones Industrial Average: 10,897.98 up 110.18, 1.02%
o Nasdaq Composite Index: 2,582.88 up 17.90, 0.70%
o S&P 500: 1,312.91 up 10.98, 0.84%
o TSC Internet: 517.79 up 15.43, 3.07%
o Russell 2000: 429.63 up 1.44, 0.34%
o 30-Year Treasury: 86 29/32 down 5/32, yield 6.202%
In Today's Bulletin:
o Midday Musings: Stocks Strengthen as Wall Street Weighs Rally's Reality
o Wrong! Dispatches from the Front: Discipline and the Stocks Everyone Loves
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Also on TheStreet.com:
Internet: As ISPs Shift Their Business Models, MindSpring's Got Access Pricing on the Brain
Loyal customers aside, the company needs to act fast to keep up with service providers offering free access to the Internet.
Biotech/Pharmaceuticals: Jam Session: SafeScience Makes Juicy Claims but Cancer Drug Isn't Yet Ripe
A rising stock and sunny press releases obscure the fact that the drug, derived from fruit sugar, hasn't been proven effective.
Under the Hood: Despite the Flow of Red Ink at Fund Firms, Think Twice Before Bailing Out
Remember that last year's summer selloff was followed by a runup of more than 40%.
Dear Dagen: Dear Dagen: Navigating the Securities Industry's Arbitration Process
It's quicker than the courts in resolving disputes, but it's not cost-effective unless you have a large claim.
Midday Musings: Stocks Strengthen as Wall Street Weighs Rally's Reality
8/12/99 1:26 PM ET
On Wall Street's trading floors, the same question keeps popping up: Head fake, or the last, best chance to buy this market until October?
The latter case got a bit of support this morning, after July
came out. Although the headline number came in above economists' forecasts, excluding autos sales gained less than people expected. And the June number was revised downward. All in all, it was a benign report, easing investor fears that the
Federal Open Market Committee
will keep on tightening after its expected quarter-point rate rise Aug. 24.
Stocks chopped around on the positive side through the first part of the day -- pretty impressive given the gains they put up yesterday. But gains have been capped by nervousness about what the next big economic report, tomorrow's
Producer Price Index
, might bring. Economists think the July PPI will come in pretty strong, but some worry that it will come in above even those expectations. They point to increases in energy prices and the drought that's hit the country this summer. They note a big gain in
The Journal of Commerce's
index during the PPI reporting period.
The other side of that equation, though, is that if the PPI comes in well, it could be off to the races. Anecdotally, there's been a lot of talk about institutional money shying away from the market for fear of the data. If tomorrow's numbers don't upset things, many fund managers, remembering the way the market rallied through the June
meeting, will want to put cash to work.
But for all the talk of possible rallies, there's plenty of skepticism out there.
"We think it's too early to build positions," said Chris Callies, U.S. investment strategist at
Credit Suisse First Boston
. "We don't think the correction's over. It's not going to be finished until interest rates come down, and we don't think that's going to happen anytime soon."
Though recovery has been a good thing for the countries that last year saw their economies slipping toward the abyss, it has not been very good for Treasuries, thinks Callies. Foreign money that was invested in the safety of the Treasury market is getting repatriated to best take advantage of the global economic upswing.
The departure of foreign assets, along with continued inflation worries, has Stanley Nabi, chief investment officer at
Donaldson Lufkin & Jenrette Investment Management
, thinking that the recent rally won't be around for long. He sees a final bottom coming around the Oct. 5 Fed meeting, when he thinks rates will get raised again, shaking out weak holders and setting the stage for a year-end rally. "If we get two increases in interest rates, I think that will clear the decks," setting the stage for a year-end rally, he said.
"We're rallying in a pretty good correction," agreed Bill Allyn, head block trader at
. "The increase in commodity prices tells you that inflation is on the way. A lot of that is in the market, because it's come down drastically, but I think it could maybe trade at 9800."
Dow Jones Industrial Average
was up 103 to 10,891. The broader
was up 10 to 1312. The tech-infused
Nasdaq Composite Index
was up 17 to 2582 and
TheStreet.com Internet Sector
index was up 15 to 518. The small-cap
was up 1 to 430.
Advancers were leading decliners 1,572 to 1,291 on the
New York Stock Exchange
, with 458 million shares changing hands. There were 102 new 52-week lows and 47 new highs. In the
Nasdaq Stock Market
advancers led decliners 1,932 to 1,650 on 563 million shares. There were 52 new lows and 46 new highs.
Thursday's Midday Watchlist
Tara Murphy and
heard the sound of one hand clapping when it debuted yesterday at an offering price of $15 a share and ended the day unchanged. Lately shares were up 1 1/4, or 7.9%, to 16 1/4, with the stock finally breaking out of a tight 15-to-15 1/16 range around 11:45 a.m.
Market volatility and ho-hum receptions of recent IPO's are weighing on the next batch of up-and-comers, with two companies slashing the size of their offerings and a third shying away for the time being.
plans for an IPO came to an abrupt stop after the size of the offering had earlier been cut.
, an Internet consulting firm, lowered the number of shares it plans to offer, to 9 million from 12.6 million, and dimmed the price range to $10 to $11 from an earlier $11 to $13, said lead underwriter
Deutsche Banc Alex. Brown
, a maker of crushed stone, hammered down its offering to 5 million shares from 6.94 million, and chiseled the price to $15 from the original $17 to $19, according to lead underwriter Alex. Brown.
Mergers, acquisitions and joint ventures
added 1 1/2 to 83 3/4 on news that the Dutch insurer is acquiring the U.K. life insurance activities of
Guardian Royal Exchange
added 1/2 to 22 after it said that was at the starting block with another defense company, discussing a possible joint venture that would involve the propulsion operations of its Aerojet segment. GenCorp told
that both companies would have a near-equal stake in the newly formed entity.
added 1/16 to 82 9/16 after it announced plans but buy family-owned snack maker
. The acquisition would put
Nature Valley Granola Bars
Golden Graham Treats
under the General Mills label.
Veronis Suhler & Associates
is forging a deal to acquire
The health-care information systems developer was trading up 1 3/16, or 13.4%, to 10 1/16 on the news.
Chatter is again swirling on Wall Street that
, the nation's largest brokerage firm, is open to a merger deal either with
or another financial-services company, the Heard on the Street column in
The Wall Street Journal
says. The brokerage giant has been rumored to be in discussions with
American International Group
, the insurance giant, the column says. Merrill gained 4 9/16, or 6.8%, to 71 1/2.
added 11/16 to 24 5/8 and
rose 2 13/16 to 95 3/16 after the two said they are hooking up to integrate the AOL Instant Messenger service with Novell's directory software.
Earnings/revenue reports and previews
got bleached, falling 15 7/16, or 15%, to 87 13/16 despite posting fourth-quarter earnings of 96 cents a share, before charges, in line with the 12-analyst estimate and up from the year-ago 91 cents.
cut its rating to neutral from attractive and
cut its profit estimates for the year ending June 30 to $3.51 a share from $3.75.
, the Irish drug company with earnings whose accountant must be Samuel Beckett, was up 3, or 10.3%, to 32 on rumors that the
Securities and Exchange Commission
has sent a letter to the company saying it has a cleanish bill of health on its accounting issues. The rumor is the company will only have a 1-cent to 2-cent-per-share restatement of its earnings. This would be viewed positively, because the Street has been worried that the accounting problems were worse. Company officials in Ireland and New York weren't available immediately to comment.
gained 3/8 to 10 11/16 after it reported third-quarter earnings of 71 cents per share, ahead of the three-analyst estimate of 60 cents per share and up from 44 cents a share a year ago.
lost 7/16 to 38 after it reported second-quarter earnings of 22 cents a share, a penny ahead of the 18-analyst estimate and up from the year-ago 15 cents.
wrote about Gap in a story
was unchanged at 8 7/16, after it reported second-quarter earnings per share of a loss of 1 cent, better than the single analyst estimate of a 5-cent loss, and narrower than the year-ago loss of 13 cents.
was up 4 9/16, or 15.4%, to 34 3/4, despite reporting a second-quarter loss of 25 cents a share, wider than the three-analyst estimate of a 22-cent loss but narrower than the year-ago loss of 47 cents.
added 2 3/4 to 60 7/16 after saying it expects to report second-quarter earnings of 44 cents a share. The 22-analyst estimate currently calls for earnings of 39 cents. The company said it will post second-quarter results Tuesday.
rose 1/8 to 29 1/8 after it reported second-quarter earnings before a charge of 27 cents a share, 3 cents ahead of the 10-analyst estimate and up from the year-ago 22 cents.
rose 9/16 to 14 1/2 after it reported second-quarter income from continuing operations of 26 cents a share, a penny ahead of the 16-analyst estimate.
added 7/16 to 24 after the company reported second-quarter earnings per share of 64 cents, a penny better than the 11-analyst estimate and up from a pro forma 59 cents a year ago.
lost 1 3/8 to 33 1/8 after it posted second-quarter operating earnings of 32 cents a share, a penny ahead of the three-analyst estimate and up from the year-ago 27 cents, which excludes a charge.
was unchanged at 4 1/16 after it reported fourth-quarter pro forma earnings of 4 cents a share, lower than the two-analyst estimate. Year-ago EPS was 23 cents after a restatement.
Offerings and stock actions
Despite the nervousness,
(NTCT:Nasdaq) was faring well in its first trading day, climbing 1 1/2, or 13.6%, to 12 9/16 after being priced at 11 by Deutsche Banc Alex.Brown
added 1/2 to 51 5/16 after
Morgan Stanley Dean Witter
upgraded it to outperform from neutral.
slipped 3/16 to 18 7/16 even though
raised its rating to buy from long-term buy.
added 1/2 to 65 3/4 after Deutsche Banc Alex. Brown cut its rating to market underperform from market perform.
added 5/8, or 6.7%, to 10 after Credit Suisse First Boston initiated coverage with a buy rating and set a price target of 18.
added 3/8 to 72 1/16 after Credit Suisse First Boston reiterated its buy rating on
added 1 3/8 to 147 5/8 after Deutsche Banc Alex. Brown raised it's price target to 185 from 161.
rose 2 5/16, or 8.7%, to 29 after Merrill Lynch raised it to near-term buy from accumulate.
lost 1 3/8, or 23%, to 4 9/16 after saying it has defaulted on loans totaling more than $1.5 billion, bringing the company one step closer to bankruptcy and posing potential problems for backer
, which lost 1/2 to 92 1/4.
Wrong! Dispatches from the Front: Discipline and the Stocks Everyone Loves
James J. Cramer
8/12/99 10:06 AM ET
among Wall Street's most loved.
These are stocks that apparently make people insensitive to price. Investors just don't care about price issues with these guys. Periodically the market gets a bead on a couple of stocks and just doesn't let up. We saw it in
. We saw it in
. We saw it with
. And, of course, we saw it with
and that mob.
Understand the force behind this: mutual fund love. Sometimes it knows no bounds. A couple of funds will buy these stocks every day with every marginal dollar. They will build positions in them and gun them. That's how some of these funds play. (I am not including
, but don't email me. I see the mutual fund crush on those stocks, too.)
I like these companies, but I actually think about valuation. That's the worst mistake you can make in the short term, but it's quite logical in the long term.
Right now we're in the short term.
I am trying to modify my "mistake" by keeping small positions in these stocks and not getting shaken out by the 15- and 20-point up moves that happen for these. But talk about rough! The toughest thing in the world is to not blow out of an overvalued stock that is up 10.
That is the definition of discipline in this market.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Excite@Home, Juniper, Redback, Red Hat and Yahoo!. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at
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