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midday08-16-99's MIDDAY UPDATE

August 16, 1999

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Market Data as of 8/16/99, 1:28 PM ET:

o Dow Jones Industrial Average: 10,974.92 up 1.27, 0.01%

o Nasdaq Composite Index: 2,634.92 down 2.89, -0.11%

o S&P 500: 1,325.71 down 1.97, -0.15%

o TSC Internet: 536.16 up 7.75, 1.47%

o Russell 2000: 432.86 down 1.19, -0.27%

o 30-Year Treasury: 10 016/32 up 5/32, yield 6.093%

In Today's Bulletin:

o Midday Musings: Wall Streeters Satisfied With Meandering Session
o *Extra* Sitting Pretty, and Comfortably, on a Cash Cushion

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Midday Musings: Wall Streeters Satisfied With Meandering Session


Thomas Lepri

Staff Reporter

8/16/99 1:14 PM ET

Stocks were holding up fairly well at midday against a


crunch of economic data.

With Friday's

Producer Price Index

behind it and tomorrow's

Consumer Price Index

ahead, the major proxies were all hanging close to break-even at midday. The

Nasdaq Composite Index

which had been leading to the upside, was off 2 to 2636 after a recent stumble.


Dow Jones Industrial Average

was up 7 to 10,981, led by



, which was up 4.3%. Indefatigable



was also driving the Dow, lately up 3.3%.


S&P 500

was off 1 to 1327, while Internet Sector

index remained up 9 to 537. The small-cap

Russell 2000

was off 1 to 433.

No one was complaining. "It's a real quiet day," said Phil Marber, head trader at

Cantor Fitzgerald

. "Actually, it's a really good day, considering the move on Friday. The market's not giving up much" of those gains.

"We're seeing a little bit of a continuation of Friday's enthusiasm," said Peter Cardillo, chief strategist at

Westfalia Investments

. "But I think we'll see some profit taking later in the session, and basically end up with a flat day."

The market's gotten a bit carried away with its concerns that incipient signs of inflation will force the


to raise rates again after its Aug. 24 meeting, Cardillo continued. "We just need confirmation of that before the bull run starts all over again."

Cardillo sees the market reacting favorably to an in-line figure tomorrow, though not necessarily with the vigor of Friday's rally. Economists are expecting a 0.2% increase in consumption costs vs. the previous month's unchanged reading.

Not everyone was focused on the CPI. To Marber, the data have already been prefigured by last week's softer-than-expected PPI. "What, the CPI's going to come out and be terrible? It's not a big deal."

Others were less interested in tomorrow's data itself than the bond market's reactions to it. "It's not the CPI but the bond market that matters," said Rao Chalasani, chief investment strategist at

Everen Securities

in Chicago. "If bonds go to 6%, the market will rally."

The 30-year Treasury still has a bit to go in that direction. It was lately up 8/32 to 100 19/32, its yield falling to 6.08%. (For more on the fixed-income market, see today's early

Bond Focus.)

Volume was moderate, with 336 million shares traded on the

New York Stock Exchange

while 462 million shares changed hands on the

Nasdaq Stock Market


Breadth was not inspiring. Decliners were beating advancers 1,612 to 1,182 on the NYSE, where there were 35 new 52-week highs against 79 new lows. In Nasdaq action, decliners were beating advancers 1,902 to 1,649, with 83 new highs and 40 new lows.

Monday's Midday Watchlist

By Tara Murphy
Staff Reporter

Waste Management


was up 11/16 to 24 1/4 despite saying the

Securities and Exchange Commission

and the

New York Stock Exchange

plan to examine insiders selling stock prior to its July 6 profit warning. According to a 10-Q filing, the SEC will "formally investigate" the company's financial statements and accounting policies and will conduct an "informal inquiry" into insider trading activity.

The market apparently likes Waste Management's announcement today that Rodney Proto, COO and president, has stepped aside, and John Drury, chairman and CEO, who is undergoing medical treatment, is also being replaced. Drury will remain on the board. Waste Management's board elected Ralph V. Whitworth chairman and Robert S. Miller president and CEO earlier this month.

The company also announced a new strategic plan, which includes disposing of "nonstrategic and underperforming assets." Also, Waste Management anticipates earnings, as adjusted, to be in the range of 90 cents to $1 a share for the six-month period ending Dec. 31. The

First Call

estimate calls for earnings of $1.14 for the period.

Mergers, acquisitions and joint ventures



was off 3/16 to 66 5/16 after it announced plans to launch a cash tender offer this week for

Reynolds Metals


at a price of $65 a share. Reynolds Metals' board unanimously decided in a special meeting yesterday that Alcoa's more than $4 billion offer to buy Reynolds was "inadequate for our shareholders." The board also said -- with the assistance of its financial adviser

Merrill Lynch

-- that the company "should explore all alternatives to maximize shareholder value," including selling the company. Shares of Reynolds were off 1/2 to 68 7/8.



was up 1/2 to 64 after it said is buying


, a privately held U.K.-based Internet technology group, for $55 million in stock.

E-commerce and communications provider



was up 19% to 3 on news that it forged a deal with






to sell its


. The company expects the computer to hit shelves in Minneapolis, Tampa, Fla., and Indianapolis by its fourth quarter this year.

Harrah's Entertainment


was up 1/2 to 22 3/8 after it announced plans to acquire

Players International


for $8.50 a share in cash. The deal has been approved by Players' board, and Players has given notice to terminate its existing merger agreement with

Jackpot Enterprises


. Players stock was up 1 7/16, or 22.1%, to 7, while shares of Jackpot were up 3/4, or 10%, to 8 1/4.

Nielsen Media Research


was soaring 4 3/8, or 13.3%, to 37 3/16 after


, a Dutch publisher, said it was buying the company for $37.75 a share in cash.



was up 1/4 to 9 15/16 after it confirmed that it was still in ongoing talks for a possible "significant transaction" with another company.



, a Swedish temporary employment company, was rumored to be courting Olsten as a possible take over target. Adecco told


that a takeover is planned, but would not confirm if it involved Olsten. ADRs of Adecco were at 70 7/8.



, was up 1/4 to 14 3/8 on news that it will sell off publisher

Supplemental Education Group


Ripplewood Holdings LLC

for $415 million. Profits from the sale will be used to reduce the company's debt. A Primedia spokesperson told Reuters that its long-term and other debt level was roughly $2.1 billion. The magazine publisher, which has



New York

under its label, said its setting its sights for the future on the Internet and television.

Earnings/revenue reports and previews



was up 1 7/8 to 59 7/8 after it reported a second-quarter loss of 81 cents a share, narrower than both the two-analyst estimate of $1.24 and the year-ago $1.56.

Offerings and stock actions

Hewlett-Packard was jumping 4 1/4 to 110 1/4 after its

Agilent Technologies

spinoff filed for a $100 million IPO.

Analyst actions

Boston Scientific


was up 9/16 to 35 1/2 after

ABN Amro

upgraded the stock to buy from hold.



was off 1 7/16, or 9.4%, to 13 7/8 after

Goldman Sachs

started coverage with an initial market outperform rating.

Engage Tech


was up 11/16 to 33 7/8 after Goldman Sachs initiated coverage at market outperform.

Gadzoox Networks


popped up 2 5/16 to 85 after lead underwriter

Credit Suisse First Boston

initiated coverage with a buy rating and set a price objective of 85 to 95.



was off 3 1/4 to 163 3/4 after

Morgan Stanley Dean Witter

initiated coverage of with a neutral rating, while Goldman Sachs stamped the stock as a market outperform.

The celebrated


was up 1 1/2 to 37 1/8 after CSFB, the IPO's lead underwriter, initiated coverage of the stock with a buy rating.

National Semiconductor


was up 1 7/16 to 29 11/16 on news that Warburg Dillon Read raised the stock's rating from to buy from hold.


American Home Products


was up 1/4 to 41 1/16 after it got the stamp of approval from U.S drug regulators for its short-term insomnia drug, Sonata. The treatment will compete with

Lorex Pharmecuticals




joint venture drug,





was up 1/8 to 49 3/8 after a federal court said the telecommunication services provider could use catchphrases like "you have mail" and "IM," which were coined by

America Online


. The Internet services company attempted to etch out competition by filing suit against AT&T last December.



was down 11/16 to 76 13/16 after announcing a recall on 1.4 million 1991-1993 model minivans. The company says the vans could have windshield wiper problems.



was off 1/16 to 38 3/16 on news that it set a streamlining plan and will take a one-time pretax restructuring charge of $85 million, or 33 cents a share, in the third quarter. The company plans to cut 1,400 jobs, about 15% of the bank's workforce, over the next 18 months.



was up 1 1/8, or 12.6%, to 10 after its board elected Dale W. Hilpert president and CEO, effective today. Hilpert was Venator's president and COO, a post the company said it has no present plans to fill. Venator also said it is getting out of eight noncore specialty businesses that operate nearly 500 stores altogether. *Extra* Sitting Pretty, and Comfortably, on a Cash Cushion


Adam Lashinsky

Silicon Valley Columnist

8/16/99 10:22 AM ET

One of the best moments in this past weekend's "" television

show on

Fox News Channel

was when

James J. Cramer

softballed fund manager

Bob Olstein

into comparing

Federated Stores


(which Olstein likes) and


(which Olstein doesn't). Cramer -- in his now-to-be-expected

review of the show -- paraphrased Olstein as saying, "One has oodles of cash, the other burns it (you figure which is which)."

Actually, it ain't exactly so.

According to easy-to-access figures at

Yahoo! Finance

, Amazon most recently reported having $1.4 billion in cash, or $8.94 per share, an amount equal to 9% of its market capitalization. Real-world retailer Federated has about $239 million in cash, or $1.14 per share, 2% of its market value.

What Olstein meant, of course, is that Federated


cash, while Amazon


it. As Cramer undoubtedly would remind investors, a good cash cushion may make for a good company even if it doesn't make for a great stock.

Healtheon vs. Mede America, Part 2



merger partner

Mede America


made up a tiny portion of its gap Friday after

this column pointed out that billing processor Mede is trading below the "collar" at which Healtheon must renegotiate its purchase price or risk cratering the deal. Healtheon's shares were up 1.5% to 34 5/8 (still below the 38 11/16 floor in the Mede America deal), while Mede's shares rose 2.5% to 20 5/8 (below the corresponding floor of 25 1/2).


Kevin Grehan

, a corporate lawyer from Mamaroneck, N.Y., wrote in with an important reality check for investors persuaded that investing in Mede now is an easy bet on Healtheon.

"I think you may have overlooked one scenario," Grehan wrote. "Healtheon does not have to renegotiate to get the better deal. If Healtheon does not 'top up,' Mede's board is faced with a very difficult decision -- close below the collar or call off the deal and risk having its stock fall some more. This happened with the





deal. Because of adverse developments in


for paired-share real estate investment trusts, Meditrust's stock fell below the collar and the company refused to top up. LaQuinta, however, didn't call off the deal, fearing an even lower value on its stock if the merger were called off. Just some food for thought as to why that $2 may not be akin to shooting fish in a barrel."

Good food. And in one additional comment, a different reader wants to know my long-term thoughts about Healtheon? "Say five years out..." Five years? Beats me.

But here's a question back atcha. Ask your doctor if he or she uses any form of electronic record-keeping, referral-processing or supplies-ordering now. Then ask the doc if they'd like to, especially if it could lower their costs without involving an HMO.

Then you be the judge.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

And the winner is.... Investment Challenge on ends August 20th! Who will be in New York with Jim Cramer for the opening bell?

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