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midday08-17-99's MIDDAY UPDATE

August 17, 1999


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Market Data as of 8/17/99, 1:12 PM ET:

o Dow Jones Industrial Average: 11,024.94 down 21.85, -0.20%

o Nasdaq Composite Index: 2,642.07 down 3.21, -0.12%

o S&P 500: 1,331.31 up 0.54, 0.04%

o TSC Internet: 548.10 up 6.98, 1.29%

o Russell 2000: 433.15 down 0.67, -0.15%

o 30-Year Treasury: 10 113/32 up 30/32, yield 6.029%

In Today's Bulletin:

o Midday Musings: Market Drags Through Mixed Session After Early Pop
o Herb on TheStreet: Catching Up on Stewpid Chatter, the Iridiots and Others

Also on

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There are other problems for the techs, including fears that Dell and AMAT will disappoint.

Internet: Excite@Home, AT&T Gain From FCC's Battle to Overturn 'Open Access' Policy

In a legal brief filed Monday, the government agency argues it should retain responsibility for determining broadband policy.

Software: Baan Gears Up for a Comeback

Some analysts believe the company has shaken its past woes and is ready to grow again.

Nothing but Net: A Relatively Tame CPI Report Helps Boost Net Stocks in Early Trading

Also, Deutsche Banc Alex. Brown issues a report that shows daily Internet stock transactions for online brokerages are up.

Dear Dagen: Reader Advises Hiring a Lawyer for Securities Disputes

Don't go into arbitration without one, he says. But another reader points out that some disputes can be settled with a few well-worded letters.

Midday Musings: Market Drags Through Mixed Session After Early Pop


Brian Louis

Staff Reporter

8/17/99 1:21 PM ET

Stocks look much like a non-exercising pack-a-day smoker attempting to run a marathon.

The runner/smoker's looking good early on in the race --

very early

-- strong, confident. But it's not long after the starting gun is fired that the runner/smoker starts confronting a bit of trouble, the breathing becomes a little more labored, there's a little bit of burn in the lungs.

Not long after that, the runner/smoker can be seen doubled over and kneeling on the side of the race course, wheezing violently, and threatening to dry-heave.

And that's about where stocks are right now. Out of energy. Out of gas. An early-session pop faded and early this afternoon major market averages were in the red. Meanwhile, the 30-year Treasury bond was flying.

The initial pop the stock market enjoyed came compliments of the

Consumer Price Index

, which came in right in line with expectations. The

Labor Department

said the overall CPI rose 0.3% in July, while the core CPI, which excludes food and energy prices, rose 0.2%, both figures exactly matching the forecast of economists polled by



The CPI data helped soothe inflation fears and jitters that the


will hike interest rates more than once as part of its effort to keep inflation in check. The CPI release -- as has been the case with other big economic reports of late -- has been anxiously anticipated as market players fret about the direction of interest rates. Many analysts expect


and his pals to raise short-term rates by 25 basis points when they meet next Tuesday.


Nasdaq Composite Index

was down 4 to 2642, after trading as high as 2680.00.


Nasdaq 100

was down 0.3% to 2305, off its intraday peak of 2346.55. Among other tech barometers, the

Morgan Stanley High-Tech 35

was off 1%, while the

Philadelphia Stock Exchange Computer Box Maker Index

was down 2.1%. The

Philadelphia Stock Exchange Semiconductor Index

was off 1.9%.



was getting thumped after rallying late last week and yesterday ahead of its earnings release, which hit after the close yesterday. It was the biggest drag on the

Dow Jones Industrial Average


As for the blue-chip average, it was down 19 to 11,027, after trading as high as 11,111.69 earlier.

Elsewhere, the

S&P 500

was up a fraction to 1331. The

Russell 2000

was off less than a point to 433. Internet Sector

index was up 7, or 1.3%, to 548. The DOT has traded as high as 558.10.


was steaming ahead, pacing the DOT on the upside, up 5.4%.

"We've had a pretty good rally off the lows," said Louis Todd, head of equities trading at

J.C. Bradford

, pointing out the Dow is at the top end of its recent range of roughly 10,600 to about 11,000. Todd said the blue-chip average was running into some resistance up there at the high end of the range. He thinks the market will back and fill until September.

Todd said a 25-basis-point rate hike is built into the market right now and he's not thinking the Fed will move beyond that.

Thanks in part to the surging Treasury market, financials rallied. The

Philadelphia Stock Exchange/KBW Bank Index

was up 1.7%, while the

American Stock Exchange Broker/Dealer Index

was up 2%.

In the Treasury market, the 30-year bond was lately up 27/32 to 101 9/32, yielding 6.03%. (For more on the fixed-income market, see today's early

Bond Focus.) Shortly before the CPI release, the long bond was up 1/32 to 100 15/32, yielding 6.09%.

Michael P. Ryan, senior fixed-income strategist at


, said he was a "a little surprised" that the Treasury market was making the move it was on the in-line CPI data. He did point out however, how oversold the Treasury market had become lately, battered by some strong economic data, and the recent glut of supply.

As for next week's FOMC meeting, Ryan's expecting the FOMC to hike 25 basis points and maintain its neutral stance.

Ryan said if the FOMC raises 25 basis points and it comes out with a neutral policy stance, he's not expecting the Treasury market to do a "whole hell of a lot" going forward. "Then we're back to looking at the data," he said.

The data he refers to, of course, are economic data. Market participants are going to be closely scrutinizing and reacting to each release in an effort to figure out what the Fed is going to do going forward -- if anything.

On the

New York Stock Exchange

, advancers were outpacing decliners 1,507 to 1,344 on 410 million shares. On the

Nasdaq Stock Market

, losers were beating winners 1,887 to 1,689 on 532 million shares.

On the NYSE, 61 issues had set new 52-week lows while 39 had touched new highs. On the Nasdaq, 62 issues had set new 52-week highs while new lows totaled 55.

Meanwhile, among other indices, the

Dow Jones Utility Average

was down 0.4%, the

Dow Jones Transportation Average

was down 1% and the

American Stock Exchange Composite Index

was down 0.1%.

On the Big Board,

America Online


was most active with 8.7 million shares changing hands. It was up 9/16 to 95 3/8.

On the Nasdaq,



was most active with 19.8 million shares changing hands. It was down 5/16 to 41 1/8. Dell is expected to report earnings after the close.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter



was up 1 5/8, or 6%, to 28 9/16 after it revealed plans to provided online trading after the close of the New York markets through


, an electronic brokerage service. E*Trade says the postclose trading service will be available by September, allowing individual investors to trade from 4:00 p.m. to 6 p.m.

JB Oxford Holdings


beat E*Trade to the punch when it announced last Friday that it would offer extended trading hours via Instinet.

Datek Online

also said plans are in the works for to offer postclose trades that would be processed through its own electronic system.

Mergers, acquisitions and joint ventures


CEO Sergio Marchionne told


the pending


alliance will not interfere in



hostile takeover battle for

Reynolds Metals


. Canada's



is acquiring algroup and French aluminum manufacturer



to form APA. Marchionne said the parties are focusing on their own pending deal. Reynolds was down 1/4 to 68 11/16 and Alcoa was unchanged at 66 7/8. Alcan was off 1/8 to 34 1/2, while Pechiney was down 3/16 to 30 1/8.



was up 1/4 to 63 1/4 after it said the

European Commission

is questioning the effect of its potential acquisition of Honeywell on a "limited number of aerospace products." AlliedSignal spokesman Thomas Craine said that it does not expect complications in completing the merger.



was up 3/8 to 38 1/2 after it invested $15 million in

and will invest an additional $40 million, subject to regulatory approval.

Global Crossing


was down 3/8 to 31 5/8 on news that it has chosen French telecommunications company



to build a South American part of Global's fiber-optic network in a $700 million deal. Shares of Alcatel were up 1/6 to 30 3/16.

World Access


, a telecommunications company, was up 3/8 to 14 1/8 after it announced plans to buy privately owned

FaciliCom International


Earnings/revenue reports and previews


Earnings estimates are from First Call




was off 1 5/8 to 36 despite reporting second-quarter earnings of 42 cents a share, ahead of the 12-analyst estimate of 41 cents and up from the year-ago 27 cents.

Applied Materials


was off 7/8 to 69 5/8 ahead of its postclose earnings report. The 29-analyst estimate calls for the company to earn 53 cents in the third quarter.

Cost Plus


was flat at 42 3/4 after it reported second-quarter earnings of 8 cents a share, a penny ahead of the 11-analyst estimate and up from the year-ago 1 cent.



was off 1 /716 after it reported third-quarter earnings of 29 cents a share, ahead of the 20-analyst estimate of 25 cents, but down from the year-ago $1.19.

Dell was down 5/16 to 41 1/8 ahead of its postclose earnings report. The 30-analyst estimate calls for earnings of 17 cents a share.

Eaton Vance


was up 1/4 to 35 3/16 after it posted third-quarter earnings of 70 cents a share, in line with the single-analyst estimate and up from the year-ago 36 cents.

Hewlett-Packard plunged 6 1/8, or 5.5%, to 104 3/16 despite yesterday's solid earnings report of 85 cents a share, ahead of the 21-analyst estimate of 80 cents and up from the year-ago 58 cents. This morning,

Lehman Brothers

raised its fiscal 2000 estimates for H-P to $4 a share from $3.95.



was flat at 44 13/16 after it posted second-quarter operating earnings of 26 cents a share, in line with the 19-analyst estimate and up from the year-ago 13 cents.



soared 3 1/2, or 7.5%, to 50 3/16 after it reported strong second-quarter earnings of 31 cents a share, ahead of the 15-analyst estimate of 24 cents and up from the year-ago 19 cents.

Offerings and stock actions

Mass email service provider

said it has filed with the

Securities and Exchange Commission

for an IPO. The company did not provide a possible price range or specific size for the potential offering in its preliminary prospectus, stating that the $57.5 million worth of common stock noted was a mere gauge to tabulate the SEC registration fee. Exactis has applied to trade on Nasdaq under the symbol XACT.

Thomas Weisel Partners


Dain Rauscher


Wit Capital

are underwriting the deal.


(SSSW:Nasdaq) had not made its trading debut by midday.

Morgan Stanley Dean Witter

priced the 3 million-share IPO after yesterday's close above-range at $16 a share.

Analyst actions

Carpenter Technology


was down 1/16 to 25 1/2 after

Goldman Sachs

downgraded the stock to a market perform from market outperform.

Deutsche Banc Alex. Brown

initiated coverage of

Insight Communications


with a buy rating. Insight was off 5/16 to 27 15/16.

CIBC World Markets


Kansas City Southern Industries


to hold from strong buy. Shares of Kansas City Southern fell 3 1/4 to 49 3/4 on the news.



was up 1/2 to 49 3/8 after Lehman Brothers upped 1999 earnings estimates to $1.90 a share from $1.88.

Tricon Global Restaurants


was off 1 to 39 3/16 after

Credit Suisse First Boston

initiated coverage with a hold rating.

Donaldson Lufkin & Jenrette

Web analyst Timothy Weller stamped


with an initial buy rating. Despite Weller's positive outlook, Voyager shares were down 3/4 to 10 3/4.


America Online was up 9/16 to 95 3/8 after it said worldwide membership of its AOL service has exceeded 18 million.

Herb on TheStreet: Catching Up on Stewpid Chatter, the Iridiots and Others


Herb Greenberg

Senior Columnist

8/17/99 6:30 AM ET

From the lessons-to-be-learned department:

Couldn't help but notice a letter in

Jen Howze


Jane Penner's

sizzling new

TSC Weekender column from reader

Rainer Ronsch

of Dresden, Germany, who wanted to know whether there's a "hard-and-fast rule" to how long short-sellers can damage an otherwise healthy company.

Short-sellers damage an otherwise healthy company? Rainy, my man, short-sellers don't damage companies; companies damage themselves.

Just take a look at what happened while I was away last week (a mere coincidence?). Four -- count 'em,


-- of this column's old faves confessed that their biz has gone bust or may be something less than what investors had believed. These weren't just


four. These were four whose followers sent this column's Hostile React-O-Meter spinning out of control, I tell ya, spinning

out of control!

We're talking about



, which filed for bankruptcy. We're talking

Family Golf Centers


, which said it may be forced to file for bankruptcy. We're also talking



, which just two weeks ago declared that a review of its financials showed no accounting irregularities. Last week it issued a terse statement saying that its second-quarter results would be delayed pending the outcome of a review with its independent auditors.

Sabratek didn't say what the new review was for -- audits usually don't occur until the fourth quarter. Company officials didn't return my call yesterday. (Ya don't think it involves any of those questionable quarter-end transactions that were recently

mentioned here, do ya?)

Then there's

Stewart Enterprises


, the operator of funeral homes and cemeteries. The Stewart saga started

earlier this year after

Service Corp.


issued the stunning warning that funeral industry fundamentals had taken a turn for the worse, in part because of the falling death rate.

Loewen Group


had already filed for bankruptcy, and short-sellers believed it would only be a matter of time before Stewart, buried in debt, would suffer along with its rivals.

Stewart, on the brink of issuing $250 million in stock, argued otherwise. In a hastily summoned conference call following Service Corp.'s warning, Stewart CEO Joseph Henican said that "the death rate is something that is irrelevant to us."

He also called the rise in cremations, which cut the costs of funerals (and the profits of mortuaries), an "

opportunity." And he said that Stewart's business opportunities were better than they'd ever been as a public company, calling the back-to-back troubles at Loewen and Service Corp. an "odd coincidence."

But as this column pointed out at the time, it's almost always a big red flag when a company in an industry claims it's immune from generic industrywide conditions.

Adding to the intrigue: In June, short-seller David Rocker was

quoted here saying that based on the prices Stewart had been paying for funeral homes -- coupled with the falling price of funeral homes being dumped by Loewen -- Stewart's stock wasn't worth much more than 4.

That caused Stewart's stock to stumble and prompted

J.P. Morgan

analyst Joseph Chiarelli, to reiterate his buy in a report headlined, "Overreaction to Internet Article Unwarranted."

Then came last week's news: Stewart warned that its third- and fourth-quarter earnings won't meet analyst estimates. It blamed, among other things, a rise in cremations and a rise in other forms of low-cost competition.

Didn't that same competition exist earlier this year? Wasn't the rise in cremations supposed to be "an opportunity?"

Stewart officials didn't return my call yesterday. Chiarelli, meanwhile, sliced his rating last week to market perform. And Stewart's stock, which had been in free fall, closed yesterday at 6 1/16. This note to anybody who ignored the warnings and bought into the January offering of about 14 million shares at 16 3/4: Don't go blaming your troubles on short-sellers.

Short Positions

Stop the presses -- two more blowups yesterday:

CKE Restaurants


, no stranger to this column, tumbled to a new 52-week low after warning that sluggish hamburger sales at

Carl's Jr.



would cause earnings to fall below analyst estimates. (And this time it didn't blame its trouble on the weather; seems the company finally ran out of excuses.)


CHS Electronics


, already reeling from a series of accounting and earnings debacles, reported lower-than-expected second-quarter earnings. It also said it's running low on cash and doesn't have enough to cover the costs of earlier acquisitions. It also said (in legalese) that it's in violation of terms of agreements with three lenders.

Accountants beware:

Thanks to

Adam Lashinsky


covering, in my absence, the


suit against

California Micro Devices


. This lawsuit, if successful, would serve as a warning to auditors of all public companies that they may be held responsible for failing to catch egregious accounting, not just making sure a company's financials are prepared according to generally accepted accounting principles.


Tried to get away from intensity of New York/New Jersey by taking a cruise on Celebrity's Zenith to Bermuda. Impeccably maintained ship. Food wasn't bad, either. But who was to know that 80% of the passengers on the overbooked boat would be from -- where else?! -- New York and New Jersey? Yikes. But Bermuda's South Shore beaches made up for it. Love that Horseshoe Bay.

Next time I think we'll fly.

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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