midday08-31-99

Author:: Daniel Ranieri
Publish date:: Aug 31, 1999 1:36 PM EDT

TheStreet.com's MIDDAY UPDATE

August 31, 1999

http://www.thestreet.com

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Market Data as of 8/31/99, 1:04 PM ET:

o Dow Jones Industrial Average: 10,826.11 down 88.02, -0.81%

o Nasdaq Composite Index: 2,681.77 down 30.92, -1.14%

o S&P 500: 1,311.74 down 12.28, -0.93%

o TSC Internet: 542.89 down 8.91, -1.61%

o Russell 2000: 424.23 down 3.13, -0.73%

o 30-Year Treasury: 100 18/32 down 10/32, yield 6.082%

In Today's Bulletin:

o Midday Musings: Inflation Fears Slap Stocks, Bonds Lower
o Herb on TheStreet: Why the ICO Bankruptcy May Not Be Good for Globalstar

Also on TheStreet.com:

Wrong! Dispatches from the Front: NorTel and the Humbling Reality of Trading

I'm sure glad my wife isn't here to hit me over the head with her cast.

http://www.thestreet.com/comment/wrong/778918.html

IPOs: August's Woes Augur More Worries in the IPO Market

IPOs have been postponed with some regularity, and those that come off often bear reduced sizes and prices.

http://www.thestreet.com/stocks/ipos/778707.html

Networking: Looking to Secure Repeat Sales, ISS Group Will Acquire Netrex

ISS is buying Netrex Secure Solutions for stock worth $57 million in a pooling-of-interest transaction expected to be announced early Tuesday.

http://www.thestreet.com/tech/networking/778750.html

Dear Dagen: Dear Dagen: How Much Is Too Much Company Stock in a 401(k)?

Loyalty is one thing, but there are dangers in investing too much in your company.

http://www.thestreet.com/funds/deardagen/778839.html

Midday Musings: Inflation Fears Slap Stocks, Bonds Lower

Justin Lahart

Senior Writer

8/31/99 1:11 PM ET

What had looked like a good market got knocked down after the inadvertent release of the

National Association of Purchasing Management's

August

Purchasing Managers' Index

The NAPM report, which was set for release tomorrow, was mistakenly sent out in a broadcast fax late-morning. The Purchasing Managers' Index came in at 54.2 -- in line with economists forecasts. But earlier in the morning, the

Chicago Purchasing Managers' Index

came in lighter than expected -- suggesting that the NAPM, too, might come in lower. Furthermore, several NAPM components -- employment, prices, new orders -- showed unexpected strength. These wage and pricing pressures imply that the

Federal Reserve

may not be done hiking interest rates this year.

Stocks and bonds, slogging through a basically good day up to then, turned tail quick.

"It shocked the bond market and the stock market just got whacked down with it," said Dan Mathisson, head stock trader at

D.E. Shaw Securities

. Coming on top of the last three day's decline, he said, this "is starting to be a real down move. If we get the momentum players to start dumping stock, this could turn ugly."

The

Dow Jones Industrial Average

was down 102, or 0.9%, to 10,812. The

S&P 500

was off 13, or 1%, to 1311 and the

Nasdaq Composite Index

was down 33, or 1.2%, to 2680. Meanwhile, the benchmark 30-year Treasury was down 12/32 to 100 15/32, its yield rising to 6.08%.

Internet stocks, were getting hurt.

TheStreet.com Internet Sector

index was off 9, or 1.6%, to 543. "That's just a function of when people see downward momentum, they start whacking the Internet stocks," said Mathisson.

The small-cap

Russell 2000

was off 3, or 0.7%, to 424.

Market internals were weak. On the

New York Stock Exchange

, decliners were beating advancers 1,764 to 1,041 on 450 million shares. There were 65 new 52-week lows against 16 new highs. In

Nasdaq Stock Market

action, decliners were topping advancers 2,129 to 1,326 on 522 million shares. There were 60 new lows and 37 new highs.

Not the kind of stuff that makes technicians very happy.

"What really bothers me is the advance/decline line, which hit a two-year low yesterday," said Robert Dickey, managing director of technical analysis at

Dain Rauscher Wessels

in Minneapolis. "That means the majority of stocks have been declining, especially over the last two months or so. This is an even more narrow market than we had last year." Dickey thinks it's only a matter of time before the major indices -- heavily skewed toward the biggest stocks -- catch up on the downside.

The low volume, too, irks Dickey. While some traders tend to believe down days on low volume don't count for much, he remembers the grinding down, low-volume markets of the mid-'70s.

"That is a bearish signal, because things don't stop going down until they trade heavy volume," he said. "What we're looking for is a climax. You're not going to see a correction low until you see your billion-plus day again."

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter

(

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

IBM

(IBM) - Get Report

was up 9/16 to 123 13/16 after it agreed to supply

Cisco

(CSCO) - Get Report

with network technology, components and computer services in a five-year deal valued at $2 billion. IBM will sell Cisco its patents and intellectual property for network equipment and expand the sale of custom computer chips for Cisco equipment. Shares of Cisco were up 1/16 to 66 13/16.

Office Depot

(ODP) - Get Report

was unchanged at 10 1/2 (having yesterday skidded in late composite trading from a New York close of 13 3/4) after it said it would miss earnings estimates for the rest of the year due to lower sales and tighter profit margins. The company also said it would take third-quarter charges and buy back $500 million of its stock. The retailer expects second-half earnings of 30 to 40 cents a share, well below the analyst estimate of 50 to 52 cents a share. Estimates do not include a $28.3 million third-quarter restructuring charge.

PaineWebber

downgraded the stock to neutral from attractive and cut its earnings per share estimates.

Mergers, acquisitions and joint ventures

American Bottling

, which is 40% owned by

Cadbury Schweppes

(CSG)

, is close to buying

Dr. Pepper Bottling

for $300 million,

The Wall Street Journal

reported. Shares of Cadbury were off 3/8 to 25 1/4.

AT&T

(T) - Get Report

was slipping 1 3/16 to 44 3/4 after it forged a five-year deal with

Net2Phone

(NTOP)

, supplying the online telephone service company with networking services. AT&T said the transaction would add more than $100 million in revenue over the next five years, increasing Net2Phone's business to 17 countries. Shares of Net2Phone were up 1 1/4 to 73 3/4.

Union Planters

(UPC)

was up 3/16 to 41 3/4 after it said it would buy a wholesale mortgage origination franchise from

Colonial BancGroup

(CNB)

to bolster its presence in the Southeastern U.S. Colonial Bancorp was up 3/16 to 12 1/2.

British Sky Broadcasting

(BSY)

was up 1/2 to 56 1/2 after it said it was paying $21.9 million for a 9% stake in

Leeds Sporting

, parent company of England's premier league soccer club,

Leeds United

eBay

(EBAY) - Get Report

and

America Online

(AOL)

introduced their co-branded Web site today. In a joint statement, the companies said the joint site gives AOL members a door to access eBay's page, which is presented in AOL format. Shares of eBay were down 1 3/4 to 117 11/16, while AOL was falling 3 9/16 to 89 9/16.

Exodus

(EXDS)

was up 5/16 to 76 7/16 after it said it would purchase network capacity from

Global Crossing

(GBLX)

unit

Global Crossing USA

for $105 million. The transaction also calls for Global Crossing to offer additional network capacity support in the future, connecting Exodus Internet data centers in Europe, Japan and the U.S. Shares of Global Crossing were off 5/8 to 26 3/8.

HSBC Holdings

pulled the plug on its $900 million bid to acquire

SeoulBank

following disagreements over debt. The setback hampers efforts to reform Korea's troubled financial industry and also leaves HSBC looking for another way to expand in Korea, where it operates four branches.

Nokia

(NOK) - Get Report

was up 3/4 to 82 3/8 after it unveiled plans to team up with

Deutsche Bank

to develop a mobile banking service based on the Wireless Application Protocol technology. Nokia will provide a WAP server and its 7110 media phone as well as consultancy services.

Reader's Digest

(RDA)

was off 3/4 to 31 after it agreed to buy privately held

Books Are Fun

for $380 million.

Sun Microsystems

(SUNW) - Get Report

was up 2 1/8 to 77 3/4 after it said it is buying

Star Division

, which makes an office application that competes with

Microsoft

(MSFT) - Get Report

, as Sun seeks to move office applications beyond the personal computer. Also,

Merrill Lynch

analyst Steve Milunovich placed the stock on its Focus One list, raising its price target to 95 from 90.

Earnings/revenue reports and previews

CompUSA

(CPU)

was sliding 7/16 to 6 1/4 after it said yesterday it was cutting half of its 3,600-member commercial sales force as part of an effort to cut costs in the face of competition and price pressure. The company also said its fourth-quarter loss widened to 70 cents a share, from 57 cents a share in the year-ago period.

Fruit of the Loom

(FTL)

was declining 1/16 to 7 1/16 after it said it expects results for the remainder of 1999 to fall significantly below analysts' expectations due to continued production and customer service difficulties. The company also said CEO William Farley stepped down.

Neiman Marcus

(NMG)

was up 11/16 to 22 1/4 after it posted fourth-quarter earnings of 6 cents a share, beating the five-analyst estimate by a penny, but down from the year-ago 33-cent gain.

Republic Services

(RSG) - Get Report

was off 3/16 to 10 15/16 after it warned 1999 earnings would miss analysts' estimates due to a delay in integrating the assets of

Waste Management

(WMI)

. Waste Management was unchanged at 21 3/4.

US Liquids

(USL) - Get Report

was plummeting 10 7/8, or 61.2%, to 6 7/8 after it said it anticipates disappointing third and fourth quarter results as the

FBI

investigates allegations that the company illegally disposed hazardous material at its Detroit facility. US Liquids expects to post third-quarter earnings of 21 cents to 23 cents a share, lower than the analyst estimate of 33 cents a share, and 19 cents to 21 cents a share in the fourth quarter, below the estimated 36 cents.

Offerings and stock actions

Email services company

EGain

has filed with the

Securities and Exchange Commission

for an initial public offering of 5 million common shares, pricing in an estimates range of $9 to $11. The deal will be underwritten by

BancBoston Robertson Stephens

Donaldson Lufkin & Jenrette

and

Volpe Brown Whelan

Analyst actions

Acxiom

(ACXM)

was down 1, or 5.4%, to 17 3/8 after

U.S. Bancorp Piper Jaffray

cut its rating to a buy from a strong buy and lowered its price target to $21 from $33.

Calpine

(CPN)

was increasing 1 9/16 to 90 15/16 after PaineWebber upped its 2000 price target to $110 to $106 and took estimates to $3.55 a share from $3.35.

Com21

(CMTO)

was up 5/8 to 18 1/2 after

Warburg Dillion Read

initiated coverage of the shares with a buy rating and a $25 price target.

Coulter

(CLTR)

was slipping 2 1/2, or 10.7%, to 21 after

Lehman Brothers

sliced its rating to a neutral from a buy, cutting it price target to $24 from $40.

Dycom

(DY) - Get Report

was declining 3 9/16, or 8.8%, to 36 5/16 despite

Banc of America Securities

raising its fiscal 2000 estimate to $1.85 a share from $1.75.

Eclipse Surgical Technologies

(ESTI)

was up 11/16, or 5.1%, to 14 1/16 after Warburg Dillion Read rolled out coverage of the shares with a strong buy rating.

Fatbrain

(FATB)

was hopping 4, or 26.6%, to 19 after

BancBoston Robertson Stephens

analyst Tom Courtney upped his rating to strong buy from buy.

Idec Pharmaceuticals

(IDPH)

was sinking 6 to 121 3/4 despite Lehman Brothers raising its 2001 estimates to $3.54 a share from $3.33 and its price target to 155 to 103.

Internet Capital Group

(ICGE)

was up 1/2 to 59 5/16 after Banc of America Securities rolled out coverage of the stock with a market perform rating. Yesterday, Merrill Lynch started coverage with a near-term accumulate and long-term buy, while

Deutsche Banc Alex. Brown

stamped it as a buy.

JDS Uniphase

(JDSU)

was down 1 5/8 to 104 1/8 after

SG Cowen

started coverage of the shares with a strong buy rating and a 130 price target, reflecting on powerful optical trends in telecommunications.

National Computer Systems

(NLCS)

was off 1/2 to 38 after Warburg Dillon Read rolled out coverage with a buy rating and a $43 price target.

Nextel Communications

(NXTL)

was up 1/8 to 56 5/16 after PaineWebber raised its price target to $83 from $73.

Pinnacle West

(PNW) - Get Report

was off 1/4 to 38 3/8 after

Credit Suisse First Boston

sliced its rating to a hold from a buy and lowered its price target to 43 to 44 from 45 to 46.

Staples

(SPLS)

was stumbling 2 3/8, or 10.8%, to 19 5/8 after PaineWebber cut its rating to attractive from buy.

Terayon Communication Systems

(TERN)

was down 1 11/16 to 35 3/8 after Warburg Dillon Read started coverage with a hold rating, believing that the cable modem maker should be acquired by a large communications equipment infrastructure player to increase profitability.

Telefonos de Mexico

(TMX)

was down 1 7/16 to 74 1/8 even though

J.P. Morgan

initiated coverage of the stock with a long-term buy and a price target of 90.

Miscellany

American Home Products

(AHP)

was off 3/8 to 41 5/8 after it said that its

Wyeth-Ayerst Laboratories

division is set to recall a heart stimulant found in insect sting and food allergy kits, discovering some batches of the drug subpotent, and possibly harmful to users. AHP said quality control tests found some doses of the stimulant

Epinepherine

to be discolored, while some were subpotent.

The product can be found within

Derm/Buro's

"Insect-Sting Treatment Kit" and

Bayer's

Anaphylaxis Emergency Treatment Kit, Hollister Stier, Ana-Kit and Ana Guard kits. The recall will cover hospitals, pharmacies, physicians and consumers.

SEC officials are expected to work out an agreement with the NYSE about its self-policing unit --one of the stickiest issues in the Big Board's plan to go public,

The New York Times

reported. Under the proposed public structure, the unit would face the possibility of investigating and disciplining its own shareholders.

Herb on TheStreet: Why the ICO Bankruptcy May Not Be Good for Globalstar

Herb Greenberg

Senior Columnist

8/31/99 6:30 AM ET

Tuesday thud (a short one today):

Satellite silliness:

Last week's Chapter 11 bankruptcy filing by

ICO Global Communications

(ICOGF)

, an

Iridium

(IRIDQ)

competitor in the satellite phone biz, caused some investors to think that bad news for ICO is good news for

Globalstar Telecommunications

(GSTRF)

, the industry's

other

big player. But as one of this column's best sources on Iridium -- who is short a little Globalstar -- put it: That couldn't be further from the truth.

"The way I read it," he says, "is that the capital markets are closed to this concept." Yet investors are valuing Globalstar, with a $2.1 billion market cap, as if it's a given that it'll get its system up and running -- and that it'll get it up on schedule. Whether it does or doesn't, he believes it'll have to raise more cash, and raise it sooner rather than later. Which brings us back to the capital markets being closed to the concept. Can't raise cash if nobody'll give it to you.

Internet telephoney:

Last thing I'm sure you want to read anything about anymore, in the

wake of last week's frenzy over

Net2Phone

(NTOP)

, is Internet telephony. But

Jefferies

analyst Greg Miller, whose firm

doesn't

have an investment banking relationship with either

IDT

(IDTC)

or Net2Phone, is a former IDT bull but a nonbeliever of Net2Phone. In light of the recent mania, he republished a report called, "Internet Telephony, the Great Myth." Miller's bottom line, as it pertains to

all

Internet telephone stocks: Whatever cost advantage they may have over regular phone service will soon be eliminated. (How long will it be before

AT&T

(T) - Get Report

Sprint

(FON)

and

MCI WorldCom

(WCOM)

take their price war overseas?)

Message board melee:

To follow up on

G.B. Smith's

commentary from

yesterday on Internet message boards: Some of these boards are making a mockery of the first amendment. (Just take a look at the

Yahoo!

(YHOO)

boards on

TheStreet.com

(TSCM)

or any stock mentioned, in a not-so-positive light, in this column!) Last time I checked freedom of speech didn't cover libel, defamation and securities fraud -- or encouraging securities fraud. Regulators can deal with the fraud; attorneys will deal with the rest. (Why folks who post don't realize that their identities are traceable is beyond my feebleness.)

Internet time:

Jeff Matthews's measured comments

here yesterday on

Amazon.com

(AMZN) - Get Report

sparked considerable reaction. Most were like

Don Burnstein

, who wrote, "I was wondering when someone would get a handle on Amazon. Looks like Jeff nailed it." Time will tell if he did, but in the meantime, do you believe that Internet time is no longer on Amazon's side?

Is Time Still on Amazon's Side?

Yes

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

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

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