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midday09-17-99's MIDDAY UPDATE

September 17, 1999

Market Data as of 9/17/99, 12:57 PM ET:

o Dow Jones Industrial Average: 10,839.41 up 101.95, 0.95%

o Nasdaq Composite Index: 2,851.21 up 44.49, 1.59%

o S&P 500: 1,333.21 up 14.73, 1.12%

o TSC Internet: 620.50 up 12.65, 2.08%

o Russell 2000: 433.51 up 3.26, 0.76%

o 30-Year Treasury: 101 00/32 up 13/32, yield 6.043%

In Today's Bulletin:

o Midday Musings: Stocks in the Pink as Floyd's Departure Lifts Spirits
o Herb on TheStreet: Has Wall Street Read Restoration Hardware's Latest SEC Filing? on the Fox News Channel


That's right, on the Fox News Channel is on the move. Check us out at our new times: Saturdays at 10 a.m. and 6 p.m. EDT and Sundays at 10 a.m. EDT

Michael Kagan, director of Salomon Brothers Asset Management and portfolio manager of the Salomon Brothers fund, will join James Cramer and Herb Greenberg for this week's "Stock Drill." Plus, Gary B. Smith and Adam Lashinsky will have at it in "Chartman" and get the "Word on TheStreet" from Cramer, Herb and Dave Kansas.

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To find the Fox News Channel in your area, call your local cable operator or see our TSC on Fox page at (look for the yellow box in the upper right hand corner). Community

You know's the place for great market commentary, but did you know it's also the place for intelligent investing discussion? Check out the great conversation going on on the following boards:

Cramer on Telecommunications Providers

eBay Bends Under Weight of New Auction Rival

Herb Greenberg on Delivering DSL

Check out the latest boards each day in the Community section at

Also on

Wrong! Dispatches from the Front: Expiration's Not a Game You Can Win

Cramer knows. He's tried obsessively to play it, and he urges you to learn from his attempt. Move Over Y2K, B2B Is Here

B2B, or business-to-business e-commerce, is the Next Big Thing. But watch out for the lemons.

IPOs: Some IPO Quiet Periods Are Louder Than Others

Sometimes good news just happens to crop up around the time of the pricing.

Fixed-Income Forum: Can I Buy Mexican Treasury Bills?

Yes, but you might consider going long peso futures, essentially the same transaction, or buying Argentine T-bills instead.

Midday Musings: Stocks in the Pink as Floyd's Departure Lifts Spirits


Thomas Lepri

Staff Reporter

9/17/99 1:07 PM ET

Expiration. A high put/call ratio. A weakened yen. A short-term oversold condition.

Hardly the Age of Aquarius, but what do you want from this market? A lot of factors aligned to put stocks in pretty good shape at midday.

The major proxies were all positive. The

Dow Jones Industrial Average

was up 104.80, or 1%, to 10,842.26, led by recently beleaguered financials

American Express



J.P. Morgan




Nasdaq Composite Index

was up 46.03, or 1.6%, to 2852.75, given lift by index heavyweights










Adobe Systems


was up 8.5% after its strong earnings report last night and the attendant analyst upgrades.

Net stocks were looking strong, with Internet Sector

index up 13.43, or 2.2%, at 621.28. Bucking that trend was



, lately off 4.6% on news that a group of companies -- including Microsoft,






-- will come together to form a competing online auction network.

The small-cap

Russell 2000

was 3.33 higher at 433.58. The broad

S&P 500

was up 15.46, or 1.2%, to 1333.94.

Let's begin with the dollar. Its recent slide against the yen has been troubling some in the market with fears that foreign capital might start thinking about parking itself elsewhere in the world. A frightening bear case unfolds from that point, and we don't want to

go there now.

But growing expectations of a possible coordinated currency intervention are making currency traders a little less ready to take long positions on the yen. Yesterday the

Nihon Keizai Shimbun

cited an unnamed senior

International Monetary Fund

official as saying that currency intervention will probably be a topic at the G7's Sept. 25 meeting. Today's news that

Bank of Japan

Governor Masaru Hayami was talking with

New York Fed

President William McDonough fueled speculation that a coordinated intervention was coming, and the dollar went as high as 107.27 yen in London this morning.

The Benjamins were lately quoted at 106.88 yen.

"Last week's pessimism may have gotten a little overdone," said Pete Boockvar, equity strategist at

Miller Tabak

, who noted that the yen's declines, along with

a dovish article by

The Washington Post's

John Berry, helped the bond market get off to a strong start today.

The 30-year Treasury was lately up 12/32 to 101, its yield falling to 6.052%.

The strength in bonds ratified stocks' quick jump out of the gates this morning, a jump that looked all the more emphatic because it was underpinned by the strong upside bias to today's triple-witching, which marks the quarterly expiration of stock options, index options and index futures.

The upside expiration bias was presaged by a large jump in the put/call ratio yesterday, according to Barthel. The total put/call ratio, which includes both stock and index options, closed yesterday at 0.80. "That's one of the better readings we've had this year," he said.

Boockvar was expecting the bias to stay positive: "Right now, from what we see, it should carry through the afternoon." He was basing that forecast on the large

S&P 500

buy programs he saw this morning. In Boockvar's experience, those programs are often followed up by

S&P 100

buys later in the session.

Another good sign in the market is on the technical level, something that's been looking rather bleak lately. Barthel was impressed by the Dow's rally yesterday afternoon after it broke through its Aug. 10 low of 10,665.

"When you break key support but don't flush it out coming down, that usually means that level was successfully tested," he said. "That, coupled with an upside expiration bias, a high put/call ratio and the strength in the dollar, gives a little bit of credibility to a relief rally. Is it the start of something big? I think not, ahead of the

Fed's Oct. 5 meeting. It just gives us some bargain-hunting, which is what we've become accustomed to."

In other sector news, the

Philadelphia Stock Exchange/KBW Bank Index

was up 6.3%, as financials were taking the yen's weakness as reason enough to bounce from their recent protracted declines. Strengthened DRAM prices were lifting the

Philadelphia Stock Exchange Semiconductor Index

11.29, or 2%, to 563.22.


Dow Jones Transportation Average

was lately up just 0.2%, hardly a convincing rally after yesterday's 3.2% bloodletting.

Meanwhile, the oil sector continued to consolidate after its recent run-up. The

American Stock Exchange Oil & Gas Index

was off about 0.3%.

Volume was moderate, and breadth was positive. A moderate 479 million shares had traded on the

New York Stock Exchange

, while 543 million shares changed hands on the

Nasdaq Stock Market

. Advancers were topping decliners 1,536 to 1,170 on the NYSE, where there were 26 new 52-week highs against 93 new lows. In Nasdaq action, advancers were beating decliners 1,979 to 1,413, with 67 new highs and 38 new lows.

Friday's Midday Watchlist

By Tara Murphy
Staff Reporter


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


eBay can expect some serious competition in its online auction business. High-tech behemoths including Microsoft, Lycos and Excite@Home have agreed to get together to create a new auction network, according to published reports. The news was reported in

The New York Times


The Wall Street Journal

. Shares of Microsoft were up 1 7/8 to 95 7/8, while Lycos was climbing 1 1/4 to 44 1/4. Excite@Home shares were up 7/16 to 37 13/16 and eBay was falling 7 to 144 3/8.

Adobe Systems was popping 8 1/16, or 8.2%, to 105 7/8 after it set a 2-for-1 stock split last night. The company also posted third-quarter earnings of 80 cents a share, ahead of the 11-analyst estimate of 74 cents.


upgraded Adobe to strong buy from market perform, while

J.P. Morgan

upped its rating to a buy from a long-term buy.

Mergers, Acquisitions and Joint Ventures


said that it has forged a pact with



to provide consulting services to the automotive retail channel in Europe. Shares of IBM were up 3/4 to 130 3/4.

Offerings and Stock Actions



was soaring 28, or 173%, to 44 3/16 in its trading debut.

Credit Suisse First Boston

priced the 3 million-share IPO above its $13 to $15 range at $16.

Earnings/Revenue Reports and Previews

Fort James


was sliding 7 13/16, or 22.2%, to 27 5/16 after it said earnings per share could be up to 20% below year-ago levels in the second half and 25% lower in the third quarter. Fort James attributed the earnings drop to significant systems and workflow changes as it merged two predecessor companies, and increased costs for distribution and warehousing.

Material Sciences


was advancing 3/4, or 5.5%, to 14 3/8 after it posted second-quarter earnings of 28 cents a share, beating both the two-analyst estimate of 25 cents and the year-ago 13 cents.



was slipping 3 5/16, or 6%, to 51 7/16 despite posting first-quarter earnings of 70 cents a share, better than the 15-analyst estimate, and up from 56 cents a year ago. The company said a cost-cutting plan improved its bottom line despite flat revenue. Earlier today,

Morgan Stanley

raised its fiscal 2000 earnings estimate to $2.05 a share from $2.

wrote about Nike's earnings in a

story yesterday.



was declining 7 15/16, or 40.7%, to 11 9/16 after it said it plans to "pursue the sale or other dispositions" of its aviation and entertainment concerns and warned that it expects earnings for the third quarter will be "substantially below" expectations. The two-analyst estimate calls for the company to earn 64 cents a share.

Select Comfort


was skidding 1 1/14, or 16%, to 6 5/8 after it said that it expects to report a third-quarter loss and miss the four-analyst earnings estimate of 4 cents a share. The company will post results by Oct. 19.

Universal Health Services


was falling 4 7/8, or 15.8%, to 25 7/8 after it warned investors that that third-quarter results could be weak due to slowness in its Las Vegas and Amarillo, Texas, hospital businesses. The company said results could be off as much as 40% from the year-ago profit of 51 cents a share, greatly missing the consensus estimate of 58 cents a share.

Analyst Actions



was up 1 13/16 to 43 15/16 after


upgraded its shares to buy from attractive.

Agile Software


was jumping 3 7/8, or 7%, to 59 1/8 after

Deutsche Banc Alex. Brown

rolled out coverage of the stock with a buy rating.



was off 11/16 to 45 1/8 after

Lehman Brothers

cut its rating to neutral.

Blue-Square Israel


was unchanged at 15 after Lehman Brothers cut the stock's rating to neutral from buy, citing flat sales in a tough economic climate.



was climbing 1 to 43 1/8 after


upgraded it to hold from sell, following its annual profit report.

Warburg Dillon Read sliced its ratings on

Pharmaceutical Product Developement


, to hold from buy,

Mylan Laboratories


, to hold from strong buy, and on

ICN Pharmaceuticals


, to buy from strong buy. Shares of Pharmaceutical Product were off 3/4, or 5.9%, to 13, while Mylan was down 1/4 to 19 1/2. ICN shares were off 1/8 to 18 11/16.

Electro Scientific


was hopping 4 1/16, or 8.1%, to 52 15/16 after Warburg Dillon Read raised its rating to strong buy from buy.

First Industrial Realty


was slipping 1/8 to 25 5/16 after Warburg Dillon Read upgraded it to strong buy from buy.



was advancing 2 7/8, or 6.1%, to 49 3/4 after PaineWebber upgraded it to buy from attractive.

KLM Royal Dutch Airlines


was down 3/16 to 25 5/16 after Credit Suisse First Boston started coverage with a hold rating, saying the airline cycle had peaked and North American yields remain depressed, while fuel and operating costs have risen.



was sliding 3/8 to 32 5/8 after Morgan Stanley rolled out coverage with a neutral rating.



was skidding 3/16 to 31 after

Merrill Lynch

upped its rating to intermediate-term buy from accumulate.



was declining 1/4 to 28 3/4 after Merrill Lynch raised its rating to near-term buy from accumulate.



was off 1/2 to 53 1/8 after CSFB sliced the shares rating to buy from strong buy.

Research in Motion


was unchanged at 34 after CSFB began coverage with a hold rating.



was bouncing 2 7/8, or 7.2%, to 26 3/16 after

U.S. Bancorp Piper Jaffray

boosted its third-quarter earnings estimates to 31 cents a share from 29 cents a share and set a price target of 46.


CMS Energy


was up 5/16 to 37 1/4 after it said it discovered a sizable natural gas pool in its

Garrett 1701H

exploratory well outside of Midland, Texas. CMS said it is set to start oil production immediately and that a development well program for the reservoir has begun.


International Petroleum Exchange

tapped Richard Ward to serve as its CEO.

In a 9-2 vote, an


advisory committee, questioning the effectiveness of



breast-cancer treatment, suggested that the FDA deny the drug marketing approval. Shares of Liposome were plummeting 8, or 49%, to 8.

Investors who bought stocks 18 months ago in companies that fix Y2K problems have gotten pounded and would've been better off shorting those stocks, the Heard on the Street column in

The Wall Street Journal

said. The column mentions a bunch of stocks that money managers and analysts like as Y2K plays, among them:




Siebel Systems









Infinity Broadcasting



Clear Channel Communications



Micron Technology



Shares of Whittman-Hart were down 1 3/4, or 5.4%, to 30 7/8 and Oracle was up 1 1/4 to 43 3/8, while Siebel shares were advancing 2 to 72 5/16. EMC was hopping 2 1/2 to 70 1/4 and shares of Infinity were jumping 1 1/8 to 28 5/16, while Clear Channel was up 2 5/8 to 79 1/2. Micron shares were off 2 1/16 to 75 1/2.

Separately, Taiwan said it would slap a 61.85% antidumping tax on Micron for selling what it said were poor-quality DRAM computer chips that had hurt the local semiconductor industry.

The Inside Wall Street column in

Business Week

, penned by Gene Marcial, is all about takeover talk. Companies mentioned as buyout targets in the column this week are







Rite Aid


. Shares of ZDNet were jumping 3 5/8, or 23%, to 17 3/8, while Chiron was advancing 1 15/16, or 5.8%, to 35 1/4. RiteAid shares were up 3/4 to 18.

Herb on TheStreet: Has Wall Street Read Restoration Hardware's Latest SEC Filing?


Herb Greenberg

Senior Columnist

9/17/99 6:30 AM ET

From the scene of a flooded basement:

Restoration Hardware hassles:

Never mind the recent losses at

Restoration Hardware


. The company's recently filed 10-Q included interesting reading to anybody who cared to scan the


document, including several amendments. Seems the company went back to its bankers in August to revise the terms of its loan covenants. The most significant change is for the company to lose no more than $3.4 million before tax for the quarter that ends in October; that's revised up from $1.5 million.

Why the change? "Our intention was for the bank to support our working capital needs for the balance of the year," said CFO Tom Low.

Would it be fair to assume that the company went back and re-evaluated the situation and decided that it needed more wiggle room for the third quarter? He declined comment.

Whatever, the key point: Most analysts are expecting a loss of just $400,000 to $700,000 for the quarter, after tax. The covenants are pretax.

Either way, kind of a big difference, don't ya think?


Whenever one company has problems, you always have to wonder what the trickle effect will be. Take



, for example, which makes self-service coin counting machines. The other day it warned that earnings for its third quarter would be below expectations, thanks largely to penny hoarding by retailers and consumer interest in saving the newly minted "state" quarters. (Really, that's what they said.)

Coinstar said it will continue to install new machines (at the likes of supermarkets) at a record pace. However, just in case it cuts back on buying new machines, keep an eye on



, which provides design, manufacturing and testing services to the electronics industry. Plexus, which dropped 8% yesterday after several analysts trimmed estimates, had the good fortune of recently acquiring


, which makes Coinstar's machines. Coinstar represents around 4% to 8% of Plexus revs.

Not large, but large enough to cause analysts to trim numbers.

Plexus officials didn't return my call.

Getting trampled:

Just when you didn't think the news could get any worse for

Just for Feet


, the company filed with the SEC earlier this week that it would delay its 10-Q because it's in the process of putting the final touches on a new credit facility to replace its existing one. The zinger: "Consummation of the new credit facility, which is expected within three days, will have a material impact on the discussion of the company's liquidity." No elaboration, but a material impact on the company's liquidity? Let's just say this: If they're getting more debt, that's



And this note: At a

Donaldson Lufkin & Jenrette


investor conference yesterday, the head of


, who isn't known as a loose cannon, told a roomful of analysts that he had heard that a "major vendor" has cut off Feet as a customer.

Feet officials didn't return my call.

As for the basement:

Pass the bucket. California, here we come!) And hail to Lou from



, who


return my call and will be out first thing this morning to start sopping up the water.

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.

Copyright 1999,