midday09-10-99

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TheStreet.com's MIDDAY UPDATE

September 10, 1999

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Market Data as of 9/10/99, 1:24 PM ET:

o Dow Jones Industrial Average: 11,115.81 up 36.41, 0.33%

o Nasdaq Composite Index: 2,889.22 up 37.20, 1.30%

o S&P 500: 1,356.73 up 9.07, 0.67%

o TSC Internet: 629.17 up 17.43, 2.85%

o Russell 2000: 440.02 up 2.25, 0.51%

o 30-Year Treasury: 101 11/32 up 30/32, yield 6.022%

In Today's Bulletin:

o Midday Musings: Bonds Lead Stocks Out of Morning Stupor
o Herb on TheStreet: Trying to Keep Up With Action's Changing Performance

TheStreet.com on the Fox News Channel

This week's "Stock Drill" guest is Christopher Vroom of Thomas Weisel Partners. Our writers will be drilling Vroom -- who's covered major retailers such as Home Depot(HD:NYSE) and Staples (SPLS:Nasdaq), and major e-tailers such as Amazon.com (AMZN:Nasdaq) and Drugstore.com (DSCM:Nasdaq) -- about his favorite stockpicks.

Plus, Cramer revisits his Red Hot Index. What are the Red Hots? Where are they now? And what do you need to know about them to make money in today's market? Check out the index at http://www.thestreet.com/comment/wrongtactics/778760.html and then make sure to catch this week's show for some red hot insight.

The show airs Saturday 10 a.m. ET and again Sunday 1 p.m. ET. For more info and how to find Fox News in your area, please see our TSC on Fox page at www.thestreet.com/tv.

Don't get Fox News Channel? Check out clips of the show on our TSC on Fox page Saturday afternoon.

Also on TheStreet.com:

Wrong! Dispatches from the Front: The Net Selloff Is Over

You heard it here first. Cramer says it's time to buy the Net.

http://www.thestreet.com/comment/wrong/782373.html

SiliconStreet.com: Piles and Piles of VC Cash

Silicon Valley venture capital firms are raising big money in record time, and handing it out just as quickly. It's a good time to be an entrepreneur in America.

http://www.thestreet.com/comment/siliconstreet/782185.html

IPOs: As Internet IPO Lockups Expire, Shares May Flood the Market

A share glut could mean falling prices. But for Internet executives, selling out so soon could be bad policy.

http://www.thestreet.com/stocks/ipos/782183.html

Fixed-Income Forum: Why Were My Preferred Shares Falling?

Also, choosing between bonds and bond funds, and more closed-end fund info on the Web.

http://www.thestreet.com/funds/bondforum/782293.html

Midday Musings: Bonds Lead Stocks Out of Morning Stupor

By

Thomas Lepri

Staff Reporter

9/10/99 1:29 PM ET

A somewhat tentative session firmed up a bit by midday. A softer-than-expected core

Producer Price Index

and a surging bond market had major proxies sitting squarely in positive territory, with tech gauges leading again.

Bumped up by higher energy prices, the headline PPI gained 0.5% in August, surpassing the 0.3% increase forecast by economists polled by

Reuters

. But the core rate, which excludes food and energy costs, fell unexpectedly by 0.1%. Economists had been expecting a 0.1% gain.

The market focused on the core number. Stocks ran higher at the open, and after showing signs of weakening in midmorning trading, finally took the bond market's enthusiasm as confirmation that the first course was the wiser.

The 30-year Treasury was lately up 31/32 to 101 11/32, its yield falling to 6.03%.

At midday, the

Nasdaq Composite Index

was up 29.18, or 1%, to 2881.20 and on pace to establish a new record.

Led by

American Express

(AXP) - Get Report

-- lately up 2% -- the

Dow Jones Industrial Average

was up 32.93, or 0.3%, to 11,112.33. The

S&P 500

was up 7.55, or 0.6%, to 1355.21. The

Russell 2000

had advanced 1.95, or 0.5%, to 439.72, while

TheStreet.com Internet Sector

index was up 15.75, or 2.6%, to 627.51.

"We still have a pretty firm undertone here on the market," said Lou Todd, head of equities trading at

J.C. Bradford

. "Despite the wall of worries being built for it, the market's climbing well."

The fact that the market is rallying so well on what's generally considered to be a clear second-fiddle to the

Consumer Price Index

in terms of

Federal Reserve

policy is testament to the market's need for confirmation inflationary pressures are under control. Sure, a

Reuters

poll taken after last Friday's weak jobs report shows 23 of 30 primary dealers of government debt are confident the Fed won't touch interest rates for the rest of the year. But others aren't so sure.

"Right now the market has no idea on the Fed," said Tony Dwyer, chief market strategist at

Ladenburg Thalmann

. Stocks are laboring under "a combination of inflation fears, interest rate fears, earnings fears, the declining dollar and high valuations," he continued.

"High valuations can be ignored in a low inflation environment. We're not certain about inflation right now, so we're at a key inflection point."

The vicissitudes of the financial sector today illustrate that uncertainty nicely.

"I expected the financials to be a lot stronger," said Dwyer, and he wasn't the only one. After shedding 11.2% since Aug. 24 amid interest rate and currency fears, a soft core PPI and a

Bank of Japan

intervention seemed just what the sector needed to rebound.

Not necessarily. After surging at the opening bell, the big banks found themselves tarred by the brushes of two brokerage houses that cut earnings estimates on

Chase Manhattan

(CMB)

(see below). By midmorning, financials had turned tail, following Chase, lately down about 1%, into the red.

Moreover, any upside support the banks may have gotten from the BOJ's intervention overnight was threatened by the dollar's fading strength. The greenback was lately quoted at 108.87 yen after trading above 110 in the immediate reaction to the intervention.

However, the persistence of the bond market's rally had turned things around for the financial sector. The

Philadelphia Stock Exchange/KBW Bank Index

was back in positive territory, up 0.9% to 783.56 after trading as low as 772.94.

Depending on how the Chase story develops, that sector's weakness may end up weighing on the broader market somewhere down the road. "These aren't mom and pop banks," said Pete Boockvar, equity strategist at

Miller Tabak

. "These are major, major banking companies, so it makes people pause somewhat."

In other sector news, tech continued to outperform, with the

Morgan Stanley High-Tech-35

up 1.3%. Profit taking in oil stocks had the

American Stock Exchange Oil & Gas Index

down fractionally.

Volume was solid as 462.1 million shares had traded on the

New York Stock Exchange

, while 630.2 million shares changed hands on the

Nasdaq Stock Market

. Activity, not to mention long positions, may drop off a bit later in the day, with people leaving work early ahead of Rosh Hashana, the Jewish new year, which begins at sundown.

Breadth was positive. Advancers were topping decliners 1,487 to 1,194 on the NYSE, where there were 53 new 52-week highs against 78 new lows. In Nasdaq action, advancers were beating decliners 1,911 to 1,539, with 158 new highs and 40 new lows.

Friday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

Chase Manhattan Bank edged down 11/16 to 76 13/16 after

Warburg Dillon Read

and

Goldman Sachs

cut third-quarter and 1999 earnings estimates. Citing lower investment banking fees, trading revenues, and private equity gains, Warburg cut third quarter earnings per share to $1.28 from $1.33, and 1999 estimates to $5.40 a share from $5.55 a share, but kept its strong buy rating on the stock. Goldman cut third quarter and year estimates by five cents to $1.36 and $5.60 respectively, citing wider spreads and lower liquidity.

Mergers, acquisitions and joint ventures

Broadcom

(BRCM)

dropped 2 3/16 to 123 1/8 after the

The New York Times

reported that an investment group led by president and CEO Henry T. Nicholas III was close to inking a letter of intent to acquire the

Anaheim Angels

and

Mighty Ducks

from

Disney

(DIS) - Get Report

for between $400 million to $500 million. Disney was off 3/4 to 28.

Illinois Tool Works

(ITW) - Get Report

got hammered 5 7/8, or 7.3%, to 74 1/4 despite a hand from

ABN Amro

, which raised its price target to 100 from 93 and maintained its buy rating on the stock. Last night ITW said it would acquire

Premark International

(PMI)

in a $3.4 billion deal. Shares of Premark soared 16 15/16, or 49.5%, to 51 3/16.

Old Kent Financial

(OK)

slipped 3/8 to 39 after it announced plans to buy

Grand Premier Financial

(GPFI)

lately up 3/4, or 5%, to 15 13/16, in a deal valued at $394 million. Old Kent said it would assume a one-time charge of $30 million.

Merrill Lynch

(MER)

added 7/8 to 76 after it unveiled plans to take a 14.3% interest in the electronic trading system,

Archipelago Holdings

.

The Wall Street Journal

reported that Archipelago will start executing orders in Big Board-listed stocks.

Earnings/revenue reports and previews

Dow Chemical

(DOW) - Get Report

slipped 1/8 to 114 3/16 after CEO William Stavropoulos said he was comfortable with third-quarter earnings estimates, despite pressure from rising costs for raw materials. The 14-anlayst estimate calls for earnings of $1.32 a share.

GenCorp

(GY)

added 7/16 to 21 1/8 after posting third-quarter earnings of 53 cents a share, beating both the five-analyst estimate of 52 cents and the year-ago 42 cents.

Maytag

(MYG)

got socked 2 11/16, or 22.4%, to 43 7/8 after saying it expects third-quarter earnings to miss analyst estimates because of lower sales volume in its home appliances. The nine-analyst estimate calls for earnings of 99 cents a share. Maytag says it expects to report earnings of 84 cents a share.

National Semiconductor

(NSM)

tacked on 2 7/8, or 9%, to 34 7/8 after

Salomon Smith Barney

upped its 2000 earnings-per-share estimate and raised its price target to $55 from $35. Last night the company reported first-quarter profit of $57 million, or 25 cents a share, including a gain. The profit for the quarter ended Aug. 29 put the Santa Clara, Calif., chip concern ahead of schedule in returning to the black and reversed the year-ago loss of 63 cents a share. The 19-analyst estimate called for a loss of 14 cents a share. National Semi didn't release per-share figures excluding the gain, but said pretax profit excluding the gain was $1.2 million. Warburg also raised its earnings estimate for 2001 and 2001, while reiterating a buy rating on the stock.

Sprint

(FON)

slipped 1/16 to 47 5/16 after Warburg cut its 2000 earnings estimate to $1.90 from $2.05 citing higher dilutive effects in emerging businesses. Warburg maintained its buy rating on the stock.

Offerings and stock actions

Children's Place

(PLCE) - Get Report

iced plans for a 3 million-share offering by selling stockholders, citing a drop in its share price.

Analyst actions

eBay

(EBAY) - Get Report

jumped 9 3/8, or 6.5%, to 153 7/8 after

Wachovia Securities

rolled out coverage with a long-term buy rating and a price target of 208.

HealthSouth

(HRC) - Get Report

shed 1 13/16, or 23%, to 6 1/16 after

ING Barings

cut its rating to a hold from a buy. Yesterday, the company said it decided not to spin off its inpatient operations to shareholders and would instead keep its divisions under one business. HealthSouth also announced plans to restructure management at its outpatient services, a move that will result in charges of between $250 million and $300 million by the end of the year.

J.P. Morgan

also sliced its rating on the shares to a long-term buy from a buy.

MidAmerican Energy

(MEC) - Get Report

rose 13/16 to 30 1/16 after

Morgan Stanley Dean Witter

raised its rating to outperform from neutral.

Schumberger

(SLB) - Get Report

added 1/16 to 70 3/8 after

Salomon Smith Barney

analyst Geoff Kieburtz cut his 1999 earnings estimates to $1.05 from $1.10.

Petroleum GeoServices

(PGO)

slipped 15/16 to 20 3/4 after Salomon cut its 1999 earnings estimate to 65 cents from 75 cents.

TC Pipeline

(TCLPZ)

added 1/8 to 18 1/8 after

PaineWebber

upped its rating to buy from an attractive.

Tosco

(TOS)

edged down 3/4 to 27 1/4 after PaineWebber cut its rating to attractive from buy.

Ultramar Diamond

(UDS)

lost 7/16 to 26 after PaineWebber lowered its rating to neutral from attractive.

Union Pacific

(UNP) - Get Report

rose 1 7/16 to 53 3/16 after

Donaldson Lufkin & Jenrette

upped its rating to buy from accumulate.

Veritas

(VTS)

lost 1/4 to 20 3/4 despite an upgrade from Warburg to buy from hold. Warburg set a price target of 28.

Offerings and Stock Actions

American Power Conversion

(APCC)

added 11/16 to 20 11/16 after saying it will buy back up to 10 million shares of its common stock over the next two years.

Miscellany

Leasing Solutions

(LSN)

lost 5/16, or 45.5%, to 3/8 after saying it would be delisted from the

New York Stock Exchange

if it fails to meet the NYSE listing requirements.

Mallinckrodt

(MKG)

rose 1 1/4 to 33 3/16 after the company said it received

FDA

clearance for its

Oxismart

oxygen monitor.

Bank of New York

(BK) - Get Report

added 1/2 to 36 9/16 after a story in the

The Wall Street Journal

said wire transfer company

Torfinex

, which is connected to money-laundering investigation, seems to have operated illegally in the U.S., channeling millions of dollars out of Russia, according to law enforcement officials.

U.S. generic drug maker

Andrx Pharmaceuticals

(ADRX)

shed 2 3/16 to 69 3/4 after British drug group

Glaxo Wellcome

said it started legal action against it, alleging infringement of patents.

Potash

(POT)

fell 3 7/8, or 6.8%, to 52 7/8 after saying it would shut down two U.S. nitrogen fertilizer facilities and slice third-quarter earnings estimates in half. The plant closings in Clinton, Iowa and LaPlatte, Neb. along with three others announced on Aug. 12 will mean an estimated $37 million third-quarter write-off for the company. Potash said harsh market conditions in nitrogen and slowing trends in potash and phosphate would drive third-quarter earnings down to about a quarter of its $1.01 per share earnings for the same period last year. J.P. Morgan reduced the stocks rating to market performer from long-term buy.

Herb on TheStreet: Trying to Keep Up With Action's Changing Performance

By

Herb Greenberg

Senior Columnist

9/10/99 6:30 AM ET

Can't help wonder what's really going on at

Action Performance

(ACTN)

, which makes model cars for

Nascar

racing enthusiasts, and with the imminent spinoff/IPO of its

goracing.com

sub. Our story starts June 23, when

Dow Jones

ran a story about how Action's stock had tumbled after rival

Racing Champions

(RACN)

warned that its growth had hit a speed bump. The story quoted Action CEO Fred Wagenhals as boasting that Action had met or beaten earnings estimates for the past 22 straight quarters, and was on target to do the same in the upcoming June quarter.

No reason not to believe him; he's the boss and the quarter was almost over. So you would think. But the very next day -- buried in the third paragraph of a press release to announce the IPO of goracing.com -- Action warned that (oh, by the way) investments in its Internet operation would cause the company to miss its quarter by 6 cents.

They didn't put it exactly that way, but judging from the way the stock reacted, they might as well have, in what was just the latest in a series of issues that have attracted serious short-sellers to Action. Earlier this year a story by my colleague

Suzanne Kapner

questioned whether Action had stuffed its distribution channel with too much merchandise.

The company insisted it hadn't, but Action's receivables have been on the rise, which brings us to the latest chapter in the Action story: Rising receivables are always troubling, because they suggest distributors are buying more product than they can readily sell. But they're especially worrisome at Action because most of its business is for cash. With the exception of sales to retailers like

Wal-Mart

(WMT) - Get Report

and

Kmart

(KM)

, which accounted for a mere 6% of sales last quarter, Action sells most of its merchandise to club members, its distributor network, trackside, through catalogs to members of its own

Racing Collectables Club of America

and, to a very limited degree, online.

According to Action's own Web site, anybody buying trackside must pay with cash or a credit card; club members must prepay (just say charge it!) and distributors are required to pay with cash, checks, money orders or credit cards. There's nothing about special terms offered by the company -- the kind of terms that would result in receivables, which are unpaid bills from customers.

Special terms are only issued to the Wal-Marts of the world. But according to one short-seller, who has spent months dissecting Action, the biz Action does with mass merchants is too small to account for anything but a small part of the receivables.

So, if the company doesn't offer terms, why have receivables been rising? The company couldn't be reached.

But, wait, there's more:

Several weeks ago, an outfit in North Carolina advertised a "company closeout" liquidation sale of merchandise that looked suspiciously like it came from Action. However, Action CFO David Husband told me at the time that the merchandise wasn't Action's. (No story, I figured, so I never wrote anything.)

Lo and behold, a week or two later Action itself started advertising a special one-day-only "Motorsports Merchandise Extravaganza," slated for tomorrow, at the Phoenix warehouse of its collectors' club. This is believed to be the first time ever the club or Action has ever held a warehouse sale. Why is it holding the sale now, and not eight weeks later -- in November -- when there will be a major Nascar race in Phoenix? Hard to say, but attention sports fans: The fiscal year (and audited quarter) for Action

and

goracing.com ends Sept. 30.

It just so happens goracing is in the process of going public, after which it will be controlled by Action. And coincidence of coincidences: A few months ago, the operations of its collectors' club were shifted from Action to goracing.

This is where the plot starts to thicken:

Here we have Action trying to cash in on the Internet boom by taking public a newly created offshoot. However, a look at goracing's prospectus hardly tells the tale of an online speedster. A big part of goracing is a virtual mall called

SpeedMall

. It boasts increased Web traffic and a robust order rate. But a closer look at the numbers suggests goracing's order rate, after a fast start, has stalled and actually lagged, and that it was most sluggish at the height of the racing season. Based on current numbers, and a calculation done by the short-seller, the online operation is on track to do annual sales of around $18 million, not the $40 million to $50 million projected by an analyst back in August.

There also are some subtle but important changes from the original prospectus to an amended prospectus. For example, originally the company said online orders from its collectors' club accounted for 50% of all collector club orders placed in May; the figure was dropped in the amended document, without explanation, to 43%.

Not good for a company that is trying to sell itself to Wall Street as a life-in-the-fast-lane e-commerce story.

SFX Revisited

This column believes in fair and equal treatment, so if a company doesn't believe its opinions have been adequately covered, this space will more than gladly print what the company believes is its side of the story as soon as it has been received. Comments from

SFX Entertainment

(SFX)

Chairman Robert Sillerman rolled in yesterday afternoon, and were published as an "extra" to this column. If you missed it,

click here.

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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