Skip to main content

midday08-27-99's MIDDAY UPDATE

August 27, 1999


E*TRADE offers trades as low as $4.95 with rebate through Power E*TRADE-our exclusive FREE service for active investors.

Market Data as of 8/27/99, 1:10 PM ET:

o Dow Jones Industrial Average: 11,174.70 down 23.75, -0.21%

o Nasdaq Composite Index: 2,780.96 up 6.34, 0.23%

o S&P 500: 1,358.74 down 3.27, -0.24%

o TSC Internet: 578.64 up 2.19, 0.38%

o Russell 2000: 434.13 down 1.89, -0.43%

o 30-Year Treasury: 10 218/32 down 19/32, yield 5.939%

In Today's Bulletin:

o Midday Musings: Cautionary Tones From Greenspan Dampen None-Too-Crisp Session
o Herb on TheStreet: Will Pacific Gateway Raise Its Much-Needed Cash on Time?

"" on the Fox News Channel

Ever wonder what happened to the "lost episode" of ""? Wonderno more! This week's "Stock Drill" guest is Ken Schapiro, president ofCondor Capital and the first ever "Stock Drill" participant. writers as they drill Schapiro about his favorite stock picks.

And TSC's own "Chartman," Gary B. Smith, tells us what makes a chart say"buy" and what makes it say "sell."

The show airs Saturday at 10 a.m. ET and again on Sunday at 1 p.m. ET. Formore info and how to find Fox News in your area, please see our TSC on Foxpage, at

Also on

Wrong! Dispatches from the Front: Indexing the Red Hots

This weekend, Cramer unveils his new index, a measure of this crazy market's temperament.

Consumer Products: Gimme Filter: P&G Set to Acquire the Maker of PUR Water Pitchers

In its second surprising move this month, the company plans to buy Recovery Engineering.

Mutual Funds: Market Is Negative for Market-Neutral Funds

Poor performance and a strong market have limited demand for this hedging strategy.

Stock Strategies: Market Pundits Walk Fine Line Between Hot and Has-Been

And when their crystal ball cracks, we just find a new guru.

Midday Musings: Cautionary Tones From Greenspan Dampen None-Too-Crisp Session


Brian Louis

Staff Reporter

8/27/99 1:18 PM ET

Today you can call him

Al "Buzzkill" Greenspan


Sometimes beloved, sometimes an irritant to traders, today the


chief is playing the role of soggy sock. Major stock proxies tumbled from their slight early-session highs after the release of the

prepared text of Greenspan's speech before a

Kansas City Fed

symposium in Jackson Hole, Wyo.

Granted, the buzz the stock market was feeling early on was less than breathtaking, but it was a buzz nonetheless.

"Central bankers, in particular, are going to have to be able to ascertain how changes in the balance sheets of economic actors influence real economic activity and, hence, affect appropriate macroeconomic policies," the Fed chairman said.

"He's obviously not comfortable where the stock market is," said Mario DeRose, fixed income strategist at

Edward Jones

, of Greenspan's remarks. DeRose added, however, that there was "not much meat there" in the speech.

DeRose said he doesn't think the stock market's going to dictate policy, but it's something that's on Greenspan's radar. The fixed-income strategist said a nice little market correction would go a long way toward getting Greenspan to rest easier.

The blue-chip

Dow Jones Industrial Average

was off 24 to 11,175.

American Express


was having the biggest negative effect on the Dow.



, thanks to positive talk from a

Merrill Lynch

analyst, was the most positive influence on the average.


S&P 500

was down 3 to 1359.

Peter Green, director of technical research at


, said if the Dow closes below 11,100 today, the Dow could retest the area around 10,880 to 10,875 next week. He said the close below 11,100 suggests that people are selling into strength as opposed to holding onto positions.

The technician is also keeping a close eye on the S&P, which he said has a potential head-and-shoulders top in place.


Nasdaq Composite Index

was up 6 to 2781. The

Nasdaq 100

was up 0.3%. The small-cap

Russell 2000

was off 2, or 0.5%, to 434. Internet Sector

index was up 2 to 579.

In the world of financials, the

Philadelphia Stock Exchange/KBW Bank Index

was down 0.3%, while the

American Stock Exchange Broker/Dealer Index

was down 2.2%.

Louis Todd, head of equities trading at

J.C. Bradford

, said the key word for the market now is catalyst -- and right now there isn't one. He said it's too early to worry about the Oct. 5 meeting of the

Federal Open Market Committee

and also it's premature to focus on third-quarter earnings.

However, the release of a couple of key economic reports next week might be at least a short-term catalyst to move bonds and stocks. The biggest release will be the August

employment report

, which will hit the market a week from today. The Fed, worried about the tight labor market, will have the opportunity to peruse two employment reports before its Oct. 5 meeting.

Online brokers were slumping after

Lehman Brothers







. E*Trade was off 7.4%, while Ameritrade was down 5.8%.

In the Treasury market, the 30-year bond was lately down 20/32 to 102 16/32, yielding 5.95%. (For more on the fixed-income market, see today's early

Bond Focus.)

Volume in the stock market, which was light overall, could exacerbate price movements in the market today, some market participants said.

On the

New York Stock Exchange

, decliners were ahead of advancers 1,574 to 1,123 on 337 million shares. On the

Nasdaq Stock Market

, losers were leading winners 1,884 to 1,605 on 496 million shares.

On the NYSE, 27 issues had set new 52-week highs while 15 had touched new lows. On the Nasdaq, 70 issues had set new 52-week highs while new lows totaled 36.

Meanwhile, among other indices, the

Dow Jones Utility Average

was down 0.2%, the

Dow Jones Transportation Average

was down 1.1% and the

American Stock Exchange Composite Index

was down 0.1%.

On the Big Board,

America Online


was most active with 6.4 million shares changing hands. It was a little softer on the day.

On the Nasdaq,



was most active with 15.8 million shares changing hands. It was off slightly.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter


Earnings estimates from First Call; earnings reported on a diluted basis unless otherwise specified


Mergers, acquisitions and joint ventures


Justice Department


AK Steel Holding


the green light to continue with its estimated $842 million acquisition of



. AK Steel said both companies' stockholders are set to render a verdict on the deal during their meetings on Sept. 29. The justice department approval gave way to AK Steel awarding


certain rights connected to a kind of stainless steel strip used in automotive exhaust systems applications. This would permit Wheeling-Nisshin, a joint venture between



Wheeling-Pittsburgh Steel and Japan's

Nisshin Steel

, to continue projects that began through agreements with Armco. AK shares were off 9/16 to 20 3/8, while Armco was up 3/16 to 6 13/16. Shares of WHX were up 1/16 to 8 7/16.

In a joint statement,



and America Online announced plans to connect, literally. CompUSA will install a button on its PCs that enables the units to link up with AOL's Internet service. CompUSA shares were down 1/16 to 7 1/16, while AOL was off 1 9/16 to 98 7/8.



was slipping 2 5/16 to 74 3/8 after it said it is buying

Xomed Surgical Products


for $800 million in stock. Shares of Xomed were jumping 5 3/4, or 11.2%, to 57 1/16.



was declining 3 3/16, or 7.6%, to 38 3/4 after it announced plans to acquire

Destia Communications


in a stock swap that values Destia at $18.63 a share. Destia was up 2 7/16, or 17.4%, to 16 3/8.

Earnings/revenue reports and previews



was up 9/16 to 25 13/16 after it posted third-quarter earnings of 79 cents a share, beating both the seven-analyst estimate of 70 cents and the year-ago 66 cents.

Offerings and stock actions

Rex Stores


was stumbling 3 7/16, or 8.1%, to 38 15/16 after it filed a 2.4 million common share offering with the

Securities and Exchange Commission

. According to the filing, 1.5 million of the shares are being offered by the company, while 900,000 are stockholders shares. The deal is being lead by underwriters

Salomon Smith Barney


Credit Suisse First Boston


Gerard Klauer Mattison

. Earlier today, Rex Stores posted strong second-quarter earnings of 48 cents a share, beating both the four-analyst estimate of 31 cents and the year-ago 20 cents.

Analyst actions



was up 1 7/16 to 63 5/8 after

Warburg Dillon Read

upped its price target to 75 from 65, maintaining its buy rating.

Ameritrade was down 1 9/16, or 6.9%, to 21 1/8 after

Lehman Brothers

downgraded to the stock to outperform from buy.

BP Amoco


was off 9/16 to 109 13/16, while

Shell Transport & Trading


was unchanged at 48 5/16 after

SG Securities

raised its price forecast for this year and next and repeated its buy recommendation on



Champion Enterprises


was up 3/16 to 9 1/8 after Warburg Dillon Read cut its 1999 EPS estimates to $1.60 from $1.93.

Superior Industries


was up 9/16 to 28 1/2 after

CIBC World Markets

boosted its rating to strong buy from hold.

E*Trade was sliding 2 1/16, or 7.4%, to 25 11/16 after Lehman downgraded its shares to outperform from buy.

Gilat Satellite


was jumping 3 1/16, or 7.2%, to 45 9/16 after

Banc of America Securities

upped its rating on the stock to strong buy from buy.

Hollywood Park


was up 13/16, or 5%, to 17 1/16 after Credit Suisse First Boston initiated coverage with a buy rating and a price target of 25.



was up 1 13/16 to 82 15/16 after

Morgan Stanley Dean Witter

increased its price target on the stock to 95 from 80.



was leaping 7 7/16, or 8.9%, to 90 after Credit Suisse First Boston upgraded it to strong buy from buy. The company late yesterday reported a fourth-quarter loss of 26 cents a share, better than the 11-analyst estimate of a 33-cent loss, but swinging from the year-ago profit of 3 cents.

Linens 'N Things



Bed Bath & Beyond


after Credit Suisse First Boston rolled out coverage of the stocks with strong buy and buy ratings, respectively. Linens was up 3/16 to 33 1/2, while Bed Bath shares were up 1/2 to 27 1/4.



was up 2 1/4 to 100 1/8 after

J.P. Morgan

initiated coverage with a buy rating.

Northwest Airlines


was off 2 9/16, or 8%, to 29 after

Donaldson Lufkin & Jenrette

hammered down the shares rating to a market perform from a buy.



was down 1 5/8 to 38 after Morgan Stanley downgraded to its shares to outperform from strong buy.



was falling 3 3/16 to 69 3/4 after


downgraded it to attractive from buy.

Union Carbide


was up 1/4 to 59 after

Brown Brothers Harriman

lowered its short-term rating to neutral from buy.



entertainment division president, Jamie Tarses, has resigned. ABC is owned by



, which was off 9/16 to 29.

An expanding number of analysts think



should buy

Occidental Petroleum


as a way of resolving a legal battle between the two companies, the Heard on the Street column in

The Wall Street Journal

reports. A few years ago Chevron lost a nearly $1 billion legal battle with Occidental and is now running out of appeals on the matter, the column said. Chevron shares were down 1/16 to 92 5/8, while Occidental was up 9/16 to 20 7/8.

General Motors


was down 1 1/16 to 66 despite a California judge hacking a product-liability judgment against the auto titan to $1.2 billion from $4.9 billion.

Merrill Lynch's

chief investment strategist, Charles Clough, who in recent years has been bullish on bonds but negative on stocks, recently told his supervisors he's leaving the firm at year's end and hopes to launch an investment boutique, the


reported. The


reported that Merrill and Clough said the move wasn't forced and that his supervisors tried to get him to stay on.

Philip Morris


was off 5/16 to 38 1/16 after lawyers said a federal judge permitted the family of the "Marlboro Man" cigarette ads actor David McLean to continue legal proceedings against the tobacco giant. The family has filed a wrongful death suit over the actor's lung cancer death. The court denied a motion to dismiss the proceedings on Aug. 13. Lawyers said the trial could begin in early 2000.

Toys R Us


was falling 1, or 6.2%, to 15 after CEO Robert Nakasone resigned over "differing views regarding the direction of the company." The toy company said its chairman and ex-CEO, Michael Goldstein, will act as CEO temporarily, until its board can find a permanent replacement.

The Inside Wall Street column in

Business Week

, penned by Gene Marcial, says some investors are excited over

Concord Camera's


prospects. The column says the company is poised to make a digital camera to be developed with



and that Concord will also introduce a product that can transmit pictures to a cell phone, a product that's being developed by a major European wireless-phone company. Hewlett-Packard was up 2 1/2 to 105 1/8 after Merrill Lynch was out with positive comments on its new CEO,



Middlesex Water


was up 1 3/8 to 31 after Charles LaLoggia, editor of

LaLoggia's Special Situation Investor

newsletter, said he is convinced it will attract one of the major water utilities to take it over, the column says.

In a final item, the column says some money managers believe

New Century Financial


is a takeover candidate. New Century shares were up 1/16 to 16 7/8.

Herb on TheStreet: Will Pacific Gateway Raise Its Much-Needed Cash on Time?


Herb Greenberg

Senior Columnist

8/27/99 6:30 AM ET

Fried-Day, and I stress the "fried" part:

Money watch:

Pacific Gateway Exchange


, a Burlingame, Calif.-based telecommunications company, disclosed in its recent 10-Q that a letter of intent to receive $200 million (from

Salomon Brothers


Goldman Sachs

) had lapsed without getting a firm commitment. The money was crucial to cover the company's own $160 mil in commitments for fiber cable required for a transoceanic line.

What happened, and where is Pacific Gateway going to get the money? CEO Howard Neckowitz told me that it was Pacific Gateway's choice not to accept the money. He adds the company is in the process of securing alternative forms of financing either through the high-yield market or something else. He wouldn't elaborate, and wouldn't say who he's talking to. "Everything is on track," he says.

It had better be. "Without it," Jefferies analyst Greg Miller says, "it's going to be really tough for them to pull off the execution of its strategy," which includes creating transoceanic telecommunications lines that compete with the likes of

Global Crossing



The last company to try that,



, also thought it had access to cash but never got it; earlier this year it filed for bankruptcy reorganization.


Oh, the Hostile React-O-Meter was spinning on this one; spinning outa control, I tell ya. But all you really need to know about what and who was behind the more-than-meteoric rise in



is laid out, as clearly as can be, in this email from reader

Richard Casanas


"No one cares about what your (sic) saying. They just need an excuse to daytrade the stock. I made 10k on NTOP less than 2hrs. How much did TSCM pay you to write the story...Maybe, $250. 10,000-250=9,750."

At least I don't have to worry about finding a chair when the music stops, which is the great risk for daytraders, especially those who play in stocks like Net2Phone or any stock -- yes, even


-- that rises that quickly.

Net2Phone, of course, is being billed as an Internet story. But 29% of its biz comes from phone-to-phone calls, some of which are actually over good old-fashioned telephone lines. The company discloses in its prospectus: "All of the telephone calls made by our customers are connected through local telephone companies and, at least in part, through leased networks."

What's more, the cost savings of Internet phone calls, from all competitors, isn't necessarily all they're cracked up to be.

"Considering the inferior sound quality of Internet-carried voice conversations, and the potential disruptions of faxes by Internet delays, it is astonishing that these services continue to attract so much attention," says an article in the August issue of

Business Communications Review

, a respected telecommunications trade publication.

The publication compared 22 Internet phone service providers (including Net2Phone's) with



Sprint Sense 10-cent-per-minute rate for a non-Internet call. What bargains it did find, aside from calls to developing countries, were modest, at best. (Net2Phone, since you're all so interested, was less than Sprint in this sampling on calls from the U.S. to Japan and Germany, but not to India or from state to state in the U.S.)

And speaking of Sprint: Lots of chatter about Net2Phone's recently announced deal for Sprint to test its service for use in Asia. (Hey, folks, it's just a test.) And



is loading Net2Phone on Compaq computers. (Doesn't mean everybody who buys a Compaq will use it; I never did use that phone or the long-distance service that came installed on my PC -- even though it was integrated into the keyboard.)

All this talk of Net2Phone reminds me of


(nee Tel-Save). Its stock soared on an exclusive arrangement to sell super-cheap long-distance service over

America Online


. The company bragged about how it was smarter than everybody else and how it would change the world. Oh, it changed the world, all right. Everybody else matched its rates. The rest, as they say, is history.

The Fox files: Don't forget to catch me, JJC, GBS, Lashinsky and Kansas (odd man out) on "" on Fox News Channel this Saturday at 10 a.m. EDT, with a repeat Sunday at 1 p.m. Let's see what crumpled up piece of research JJC pulls out of his pocket this time.

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.

We got style!

Spruce up your wardrobe, equip your desk. Visit our TSC Shop to check out stunning merchandise--hats, mugs, T-shirts and more. Buy stuff, look good, show your irreverence!

Copyright 1999,