TheStreet.com's MIDDAY UPDATE
August 24, 1999
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Market Data as of 8/24/99, 1:02 PM ET:
o Dow Jones Industrial Average: 11,292.48 down 7.28, -0.06%
o Nasdaq Composite Index: 2,759.11 up 39.54, 1.45%
o S&P 500: 1,364.50 up 4.28, 0.31%
o TSC Internet: 576.59 up 4.88, 0.85%
o Russell 2000: 437.07 down 0.18, -0.04%
o 30-Year Treasury: 10 207/32 up 9/32, yield 5.963%
In Today's Bulletin:
o Midday Musings: Market Takes Prelude to Fed Decision in Stride
o Herb on TheStreet: Was Nvidia Stuffing Its Distribution Channel With 'Anything That Wasn't Nailed Down?'
Also on TheStreet.com:
Wrong! Dispatches from the Front: Why Berko's Getting Fan Mail
Cramer says his partner's got the mental horsepower to make the right call.
Internet: AOL Picks Generals to Lead Its Brand Fleet
New hires and promotions aim to grab more ad revenue from a multifront strategy.
Taxes: Congress Dangles a To-Die-For Tax Break
A well-timed death could yield an estate tax bill of zero. But don't make plans yet: President Clinton will surely veto the measure.
Dear Dagen: Dear Dagen: Many Goals Could Add Up to Too Many Funds
Also, a word about personal trading by fund managers.
Midday Musings: Market Takes Prelude to Fed Decision in Stride
8/24/99 1:15 PM ET
Traders and investors seem for the most part to be sloughing off today's
meeting, the way
used to blow off his scheduled shows on Broadway.
Market players right now are just watching the ticks of the clock click off as they await the results of today's
Federal Open Market Committee
get-together in Washington. The FOMC is expected -- how many times you read this phrase lately? -- to raise short-term interest rates by 25 basis points. Results of the convocation are expected around 2:15 p.m. EDT.
While many expected the session to be mostly a sleeper ahead of the results of the gathering of
& Chums -- and in some ways they're right -- technology stocks were enjoying some solid improvement as the semiconductor sector was becoming bloated again with gains. The
Nasdaq Composite Index
was up 34, or 1.2%, to 2753.26.
-- the company with the biggest market cap of them all -- was enjoying a solid session thanks to a favorable appellate court ruling.
Semiconductor stocks, which this summer have acted like Gilligan in the
episode when he had that jet pack and was flying all over the place, were soaring. The
Philadelphia Stock Exchange Semiconductor Index
was up 2.5%. Positive analysts' comments have helped boost the sector. SOX component
was sporting a chunky gain of 7.6%.
was up 1.2%.
Computer makers were going the
route and fattening up. The
Philadelphia Stock Exchange Computer Box Maker Index
was up 1.5%. The
was up 1.2%. Heavyweights in the NDX other than Mister Softee and Intel --
-- were all higher, although the gains weren't dramatic.
As for the blue-chip
Dow Jones Industrial Average
, it was up 2 to 11,301. The
was up 2 to 1363. The small-cap
was off a fraction to 437.
was leading the
TheStreet.com Internet Sector
index higher, up 3.8%. The DOT was up 6, or 1.1%, to 578.
Financials were stepping back a bit from their recent highflying ways. The
Philadelphia Stock Exchange/KBW Bank Index
was up, but only fractionally, while the
American Stock Exchange Broker/Dealer Index
was down 0.9%.
While major stock proxies were mixed, the majority of stocks in the market were softer.
Dan Marciano, head of trading at
, said the market's slip was just a little correction and retracement from its recent rally.
One of the reasons for the market's rally was traders and investors pinning hopes on the conviction the Fed won't raise rates any more this year -- after today of course.
Marciano said he expects the Fed to raise rates today and that it's going to indicate a neutral stance on rates going forward. And he said he's not expecting the Fed to do anything for the rest of the year.
In the Treasury market, the 30-year bond was lately up 8/32 to 102 6/32, yielding 5.97%. (For more on the fixed-income market, see today's early
Christopher Rupkey, senior financial economist at
Bank of Tokyo-Mitsubishi
, said he expects the bond market to run up over the next two weeks thanks to pent up demand for Treasuries, a further extension of the recent rally and the fact that the August refunding is behind the market and the Fed meeting will be out of the way. Rupkey, however, sees his projected rally in the long bond yield stalling out around the 5.88%-to-5.75% level.
Market internals were poor. And, as one would expect on the day of a Fed meeting, volume was unimpressive.
New York Stock Exchange
, decliners were running ahead of advancers 1,704 to 1,110 on 375 million shares. On the
Nasdaq Stock Market
, losers were leading winners 1,942 to 1,613 on 559 million shares.
On the NYSE, 66 issues had set new 52-week lows while 39 had touched new highs. On the Nasdaq, 84 issues had set new 52-week highs while new lows totaled 47.
Meanwhile, among other indices, the
Dow Jones Utility Average
was up 0.3%, the
Dow Jones Transportation Average
was up 0.4% and the
American Stock Exchange Composite Index
was down 0.3%.
On the Big Board,
was most active with 10 million shares changing hands. It was down 7.1% after
cut its earnings estimates on the media giant.
On the Nasdaq, Dell was most active with 33.3 million shares changing hands. It was up 1 3/16 to 46 7/8.
Tuesday's Midday Watchlist
Earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified
was jumping 9 3/8, or 20.1%, to 56 1/8 after it unveiled a union with
to provide Internet telephony services to new Compaq Presario customers in certain countries. According to the deal, a button on the Presario keyboard would link Net users to a Compaq and Net2Phone joint Web site that includes free computer-to- telephone software, downloading instructions and Net2Phones rates. Compaq has started distributing the keyboards in Canada, Latin America, Japan and Asia-Pacific. Shares of Compaq were off 1/4 to 23 13/16.
Separately, Net2Phone appointed former
Bloomberg New Media
General Manager Jonathan Fram as its president. Earlier today,
Deutsche Banc Alex. Brown
started coverage of Net2Phone at buy.
Mergers, acquisitions and joint ventures
Cyprus Amax Minerals
is facing pressure from shareholders to break ranks with
on their pending get-together in light of
unsolicited bids to acquire Cyprus and Asarco for $2.7 billion in stock,
The Wall Street Journal
reported, citing people familiar with the situation. Shares of Cyprus were up slightly to 17 7/8, while Asarco was off 1/8 to 22 3/8. Phelps Dodge shares were off 1/8 to 59 15/16.
was up 9/16, or 9.3%, to 6 5/8 after it set a strategic partnership under which
will distribute Gentner's conference-calling services to its long-distance customers in Arizona, Colorado, Nevada, New Mexico, Oregon, Utah and Washington. NextLink shares were hopping 2 3/8 to 95.
was down 3/4 to 42 7/8 after it said it plans to buy
for an estimated $436 million in stock. Shares of Periphonics were climbing 2 3/16, or 8.7%, to 27 7/16.
Earnings/revenue reports and previews
was up 3/8 to 17 1/4 after it posted second-quarter earnings of 58 cents a share, beating both the single-analyst estimate of 54 cents and the year-ago 24 cents.
was down 1/16 to 8 after it reported second-quarter earnings of 27 cents a share, beating the two-analyst estimate of 25 cents but down from the year-ago 64 cents.
Just For Feet
was off 9/16, or 10.4%, to 4 13/16 after it reported a second-quarter loss of 83 cents, falling short of the five-analyst estimate of a 73 cent loss and the year-ago 25 cents gain.
Perry Ellis International
was up 3/4, or 6.2%, to 13 5/16 after it posted second-quarter earnings of 23 cents a share, ahead of the two-analyst estimate of 17 cents and up from the year-ago 15 cents.
was up 1/2 to 19 15/16 after it posted fourth-quarter earnings of 32 cents a share, which excludes nonrecurring items, in line with the six-analyst estimate and up from the year-ago 27 cents.
was down 15/16 to 28 5/8 after it posted first-quarter earnings of 15 cents a share, missing the three-analyst estimate of 18 cents but up from the year-ago 14 cent-loss.
Offerings and stock actions
was soaring 5 1/8, or 8.3%, to 66 7/8 after its board approved a 2-for-1 stock split.
was up 3/8 to 45 1/16 after
upped its rating on the shares to a buy from a hold and set a new price target of $51 to $53.
was off 3/16 to 7 15/16 despite
starting coverage of the stock with a buy rating.
was up 1/8 to 20 1/4 after Merrill Lynch initiated coverage of the stock with a near-term accumulate and a long-term buy.
was up 19/16 to 57 3/16 after
Morgan Stanley Dean Witter
upgraded the stock to a strong buy from outperform.
was advancing 3 3/8, or 8.6%, to 42 1/2 after
Banc of America Securities
upped its rating to strong buy from buy.
was off 15/16, or 8.9%, to 9 9/16 after Banc of America analyst Susan Silverstein cut her rating on the stock to a market perform from a buy.
was down 11/16 to 41 1/16 after Deutsche Banc Alex. Brown cut the stock to market perform from buy.
was down 7/16 to 18 1/4 after Morgan Stanley Dean Witter downgraded it to neutral from outperform.
was unchanged at 11 after
U.S. Bancorp Piper Jaffray
initiated coverage of the stock with a strong buy and a price target of 20.
was increasing 2, or 8.5%, to 25 1/2 after
Credit Suisse First Boston
initiated coverage of the stock with a buy rating and put a price target of 29 on the stock.
ING Barings gave
a boost, raising its rating to a buy from a hold. Despite the upgrade, shares of Ocean Energy were off 1/2 to 11 at the midday.
Procter & Gamble
was climbing 2 1/16 to 100 5/16 after
upgraded it to attractive from neutral.
was off 1 to 37 1/4 after Banc of America lowered its rating on the shares to market performer from buy.
was up 7/8, or 17.9%, to 5 13/16 after Deutsche Banc Alex. Brown started coverage with an initial buy rating.
was popping 2 1/4, or 7.5%, to 32 3/16 after PaineWebber initiated coverage of the stock with a buy rating.
Time Warner was falling 4 5/8, or 6.9%, to 61 9/16 after Merrill Lynch slashed its 1999 earnings estimates to 35 cents a share from 48 cents and its 2000 view to 80 cents from 82 cents.
was off 1/16 to 34 3/4 after ING raised its rating on the shares to a strong buy from a buy.
was down 1/8 to 21 3/8 after
upped it's the stocks rating to a strong buy form a long-term buy. Yesterday,
said it plans to acquire Triangle for $608.4 million in stock. Centura shares were down 3/8 to 49 1/2.
was up 1 to 30 3/4 after Deutsche Banc Alex. Brown initiated coverage of the stock with a strong buy rating.
said it would extend its marketing agreement with
to include a subscription-free British service by AOL unit Netscape. The pact calls for Verio to advertise its e-commerce features, which include Web site set-up and maintenance on the free Netscape service. The latest deal expansion increases the companies established relationship involving ventures in the United States and the AOL UK and CompuServe UK units. Shares of Verio were hopping 2 3/4, or 7%, to 39 3/4, while AOL was up 1 5/16 or 100 3/8.
was jumping 3 1/2, or 15.3%, to 26 3/8 after it said its new flu remedy is both safe and effective, reducing the Influenza A virus in patients tested in preliminary Phase II trials.
Johnson & Johnson
is developing the flu fighting neuraminidase inhibitor. If approved, BioCryst stands to reap undisclosed future royalties on the drug's sales.
was up 15/16 to 125 1/8 after the online auctioneer responded to protests by reduced a new fee and suspended plans to change bidding policies for some items, the
was unchanged at 51 after it announced plans to launch telephone-service "bundles," aiming to compete with similar packages planned by
Graphics computer maker
was sliding 1 3/8, or 11%, to 11 1/16 after acting CEO Richard Belluzzo resigned to accept a position at another company.
wrote about the situation in a story
was off 7/16 to 23 after the company named Donald R. Chappel CFO.
Herb on TheStreet: Was Nvidia Stuffing Its Distribution Channel With 'Anything That Wasn't Nailed Down?'
8/24/99 6:30 AM ET
The last time this column
mentioned graphics chip maker
, the issue was whether
purchase of Nvidia customer,
, would put a crimp in Nvidia's sales.
The S3/Diamond deal came on the heels of
, another Nvidia customer. Nvidia's response: No big deal. And judging by the 46% jump in Nvidia's stock since then, investors apparently agreed. Easy to understand why, based on last week's report of a 543% increase in revs for Nvidia, with an equally impressive spike in earnings.
Until you take a little closer look at the numbers.
Remember what this column said recently about how quality of earnings is more important than quantity of earnings? Nvidia is a classic.
According to a post-earnings report by
Hambrecht & Quist
analyst David Wehner, at quarter's end Nvidia had 15 days of inventory on hand, "far below the company's target of 30 to 45 days." Days outstanding of receivables, meanwhile, were 59 days, "higher than the company's target of 45 days, indicating a heavily back-end-loaded quarter due to new products shipping in the last several weeks."
Hello! Sharply lower inventories and higher receivables? Last time I heard a company explain away high receivables to late shipments of new products was by
-- just before its earnings, and stock, blew up!
Wehner didn't appear alarmed by the numbers. (Can ya' blame him? His firm is one of Nvidia's underwriters.) But short-sellers are having a field day with them, and one went so far as to tell me it smacked of a company stuffing the distribution channel with merchandise. "This is a heads-you-win, tails-you-win situation," the short-seller says. "The head of the coin shows that days receivables were too high, which means they stuffed the channel. The tail is that they shipped everything off the loading dock that wasn't nailed down."
This short's own analysis, using Wehner's published figures, is that if Nvidia's inventory and receivables had been in line with the company's own targets, earnings would've been more like 12 cents per share, not 19 cents, as reported, which actually beat Wall Street estimates by a penny.
Nvidia officials couldn't be reached.
Delta ... looking more like a disaster?:
The plot continues to thicken at
, the subject of two items here. Last week this column
pointed out how the subprime lender had failed to issue a press release about how, out of the blue, it had disclosed in an
filing that it had reached a new "global settlement" with not only the New York attorney general, but -- oh, by the way -- also with the
U.S. Justice Department
and New York's banking department. (The company had announced the attorney general settlement a few weeks earlier, but Delta never mentioned it was also under scrutiny by the Justice and banking departments.) The company hailed the agreement as good news, because it puts to rest charges of questionable lending practices.
Apparently Delta's financial VP Marty Cohen spoke too soon: Late last week the New York attorney general decided that instead of joining in the "global" settlement, it would sue Delta. According to
The New York Times
, the Attorney General said it didn't believe Delta would ever live up to a court order to stop making bad loans. In a news release, Delta responded that that Attorney General's action was "unfortunate." Yesterday Delta slipped 1, or 16%, to close at 5 3/8.
How low can it go?:
Can't help but wonder when it comes to
no stranger to this column -- which blew up
yesterday, plunging another 57% to 2 3/4 after it released another barrage of bad news. Reminds me of a conversation I had a few weeks back with CEO Shan Padda, who asked me what he could do to get rid of the short-sellers. "Perform," I said. Apparently that wasn't an option. Yesterday the company disclosed he's stepping down.
Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at
email@example.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
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