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midday09-24-99's MIDDAY UPDATE

September 24, 1999

Market Data as of 9/24/99, 2:01 PM ET:

o Dow Jones Industrial Average: 10,294.21 down 24.38, -0.24%

o Nasdaq Composite Index: 2,728.18 down 21.65, -0.79%

o S&P 500: 1,277.45 down 3.32, -0.26%

o TSC Internet: 613.58 up 1.93, 0.32%

o Russell 2000: 416.44 down 3.77, -0.90%

o 30-Year Treasury: 102 00/32 up 6/32, yield 5.987%

In Today's Bulletin:

o Midday Musings: Jangled Nerves Remain in Control of Battered Market
o Herb on TheStreet: Has Nascar Ditched Action Performance in Favor of Disney as Its Internet Partner?

"" on the Fox News Channel

Scott Reamer of SG Cowen will cover Internet and new media companies with this week's "Stock Drill" team of Jim Cramer and Herb Greenberg. And our "Chartman" team, Gary B. Smith and Adam Lashinsky experience the "thrill of victory and the agony of defeat" this week as they go over past calls and predictions. Plus, this week's "Word on TheStreet" will take a look at market averages. Averages are up for the year, but a closer look reveals that more stocks are down than up in calendar year 1999.

"" on the Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. EDT and Sundays at 10 a.m. EDT.

FNC is Fox's 24-hour cable news channel. 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).

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TheStreet Recommends Community

Check out the latest addition to the message boards -- Helene Meisler! In her latest column, the Chartist says that yesterday's big late-day selloff stemmed from more than just Steve Ballmer's comments about Microsoft. Share your thoughts on our newest message board:

Helene Meisler: Can We Have Some Fear and Panic, Please?

Then join the discussion on our other great boards:

James Cramer: The Top 10 Internet Myths

Long Gone Capital Management: TSC Looks at LTCM's Painful Lessons

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Brokerages/Wall Street: Grasso's Not Greener on the Other Side, NYSE Boss Tells Members

The Big Board's chief steers the exchange through its roughest challenges yet.

Fixed-Income Forum: Who Needs a Mortgage-Backed Securities Fund?

If you're a long-term investor with little tolerance for credit risk in your bonds, perhaps you do.

Midday Musings: Jangled Nerves Remain in Control of Battered Market


Thomas Lepri

Staff Reporter

9/24/99 1:15 PM ET

Stocks were showing significant shrinkage at midday.

All the proxies were solidly lower. The

Dow Jones Industrial Average

was off 61 to 10,257; the tech-swathed

Nasdaq Composite Index

down 39 to 2711; and the

S&P 500

was sagging 9 to 1272. Internet Sector

index was sinking 5 to 606, while the small-cap

Russell 2000

was 5 lower to 415.

All the standard reasons for the market's recent weakness were operating today. Fears about a coming interest-rate hike. Fears about the yen's resurgence against the dollar. Fears about third-quarter earnings preannouncements. And, especially after yesterday's off-the-cuff reference to


tech valuations by




Steve Ballmer

, more than a little fear about how much higher this market can go.

Taken together, those fears are turning more than a few into amateur technical analysts. "It's momentum now," said Brian Belski, chief investment strategist

George K. Baum

in Kansas City, Mo.

Indeed, lately we've heard a lot about momentum, and the technical damage that the market has sustained. The S&P 500 futures have blown through the neckline on a head-and-shoulders pattern. The Dow has blown through key support at 10,500. The S&P 500 has blown through its 200-day moving average.

Which leads one to wonder, when will all this blowing be through?

Like every other honest person in the market, Belski doesn't know. But his recent conversations with clients haven't been suggesting that it'll happen anytime soon. "We're not close to a washout, because the fear factor isn't peaking yet," he said. "The bulk of my calls yesterday were, 'What do I need to buy, Brian?' That doesn't usually coincide with a market bottom.

Selling peaks when people are begging you to tell them what to sell."

Concurring was John Bollinger, president of


, who noted that he hadn't seen any of the sentiment indicators that he watches change significantly lately. "That suggests to me that there's some further pain to come," he said.

Hey, it could be worse. Rao Chalasani, chief investment strategist at

Everen Securities

in Chicago, was able to find some positives within the market's general weakness: "Long-term interest rates have dropped -- that increases fundamental support for the stock market. Financial stocks, which have been getting slammed, seem to be stabilizing, which is good for the market. And in the technology area, we're seeing some strength in the Internet, which has gone through a substantial correction in the April-August period."

Indeed. The 30-year Treasury was lately holding firm after yesterday's gains, up 2/32 to 101 28/32, its yield easing to 5.99% -- a number that, in not-so-distant past, has been a rally signal for stocks. Financial stocks, meanwhile, were having one of their strongest sessions in a while, the

Philadelphia Stock Exchange/KBW Bank Index

was lately up 11.2%.

In terms of the Net, most notable on the plus side was

America Online


, up about 7.3%.

No 'Waterfall Decline'

Dick Dickson, technical analyst at

Scott & Stringfellow

in Richmond, Va., described today's action as "moderately good."

Moderately good?

"We're not getting a waterfall decline here," he explained. "You might have anticipated that today, but that's obviously not happening."

Dickson wishes it would. "Straight down from here would be great, because that would wash the selling out and be done with it."

But in the absence of such a washout, the market will face some important tests in the near future. "I'm looking for some kind of a test of the breakdown level," said Dickson, "rallying up to 10,400 or 10,500 for the Dow and 1290 for the S&P 500. If that rally is weak -- with continued weak breadth, basically a case of the tech stocks bouncing back -- that to me would suggest more of the same, that the market is still on very weak legs and likely to take out whatever lows we establish here."

Breadth was certainly weak today. Decliners were leading advancers 1,928 to 870 on the NYSE, where there were a mere 9 new 52-week highs against 189 new lows. In Nasdaq action, decliners were beating advancers 2,432 to 1,141, with 22 new highs and 113 new lows.

Volume was decent. On the

New York Stock Exchange

, 525 million shares had traded, while 703 million shares changed hands on the

Nasdaq Stock Market


Friday's Midday Watchlist

By Eileen Kinsella
Staff Reporter


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


MCI WorldCom fell 4 5/16 and Sprint added 2 to 53 1/8 after

The Wall Street Journal

reported the two companies have been chatting about a merger. The newspaper said that although Sprint has held talks with a few telecom titans, negotiations with MCI have recently picked up. The


story also said that significant roadblocks remain, which could sink a deal.

Security First Technologies


lost 1 3/8 to 36 7/8 after saying it would buy privately held


for $166 million in stock. Security First provides Web-based services for banks and brokers, while VerticalOne organizes personal account information on the Internet.

Rite Aid's


woes continue as

Lehman Brothers

cut its 2000 earnings estimate to $1.28 a share from $1.56, and 2001 earnings estimates to $1.49 from $1.88 a share. Amid a lawsuit and flagging share price, the company said it would cut 330 jobs in a corporate downsizing it hopes will result in after-tax savings of $20 million a year. The stock, which was one of the most actively traded issues on the NYSE this morning, seems to have already absorbed most of the bad news, lately edging down 3/16 to 11 13/16.

Mergers, acquisitions and joint ventures

Regency Realty


added 1/16 to 20 and

Federal Realty


climbed 1/16 to 20 11/16 after the two companies called off talks about Regency's possible acquisition of Federal's shopping center assets.

Earnings/revenue reports and previews



dropped 4 7/8, or 15.6%, to 26 7/8 after warning it expects lower operating earnings due to higher catastrophe losses. The company said it expects third-quarter operating earnings of 50 cents to 55 cents a share, which would miss both the 13-analyst estimate of 78 cents and the year-ago 76 cents. Allstate said it expects to post earnings Oct. 20. The company also said depending on developments in the weather, fourth-quarter operating earnings could come in at 65 cents to 73 cents a share, which would fall well below the 13-analyst estimate of 81 cents and below the company's year-ago operating earnings of 78 cents.



climbed 3/16 to 44 7/16 after last night saying third-quarter earnings could come in slightly above or below analyst estimates, and would reflect workforce reductions. Goodyear said it expects earnings of 50 cents to 56 cents a share in the third quarter. The current seven-analyst estimate is for 51 cents a share.

Park Electrochemical


gained 1 5/16 to 29 3/8 after posting second-quarter earnings of 53 cents a share, beating the three-analyst estimate of 44 cents and the year-ago 2 cents.



tacked on 1/16 to 14 1/2 after reporting second-quarter earnings of 25 cents a share, beating the six-analyst estimate of 24 cents but down from the year-ago 41 cents.

Offerings and stock actions

Initial public offerings

Alteon Websystems

(ATON:Nasdaq) and


(ISPD:Nasdaq) were making tracks on their first trading day. Interspeed ran up 8 1/16, or 67.2%, to 20 1/16, while Alteon soared 31 1/4, or 165.1%, to 50 1/2.

Sylvan Learning Systems


added 1/16 to 15 15/16 after it announced plans to spin off its prometric testing unit.

Universal Forest Products


inched down 3/16 to 15 3/4 after the company said it recently repurchased 100,000 shares.

Analyst actions

Atmos Energy


lost 3/16 to 24 7/16 after

Deutsche Banc Alex. Brown

upgraded it to buy from market perform.



fell 3/16 to 31 1/4 and



added 5/16 to 87 5/8 after

Merrill Lynch

raised its rating on both stocks to intermediate-term buy from accumulate.



added 2 15/16, or 6.9%, to 45 7/16 after

Morgan Stanley Dean Witter

raised its rating to strong buy from outperform and set a price target of 74.



plummeted 10 3/8, or 40.5%, to 15 9/32 after

Warburg Dillon Read

sliced its rating to hold from strong buy.

Lehman Brothers


climbed 5/16 to 53 11/16 after Merrill Lynch upgraded it to near- and long-term buy from accumulate.



rose 3/8 to 35 7/8 after Merrill Lynch rolled out coverage with a near-term accumulate, long-term buy rating.



gained 5/16 to 84 after Merrill Lynch upped its rating to near-term buy from accumulate.



tacked on 1/4 to 8 1/2 after

Banc of America Securities

initiated coverage with a buy rating and set a price target of 11 1/2. Inc.


, publisher of this Web site, rose 1 1/2, or 8.1%, to 20 5/16 after

Prudential Securities

initiated coverage with a strong buy.




gained 3/16 to 11 15/16 after saying it tapped Michael J. Jackson to become its CEO.



added 7/8 to 67 1/8 after announcing, as expected, that it trimmed its management board to 14 from 17 members and that Thomas Stallkamp, the company's North American president, will leave the company by the end of the year.

General Motors


slipped 11/16 to 621/16 after saying it will raise its investment in its Arlington, Texas, truck assembly plant by $75 million, to more than $500 million.

Sky Financial


added 3/8 to 22 5/8 after it said chairman and CEO David Francisco will retire and the company will take a merger-related charge in the third and fourth quarters. Sky also said it authorized the repurchase of up to 3.5 million common shares.

The Heard on the Street column in the


said that in the wake of the devastating earthquake this week in Taiwan, some big hedge funds are going long the

Philadelphia Stock Exchange Semiconductor Index




added 1/8 to 26 3/8 after

Business Week's

Inside Wall Street column, mentioned the company as a takeover target. (

took a look at an item in the Inside Wall Street column on

Log On America


in a recent Truth Serum

story.) Shares of Dial soared in June on rumors it was a takeover target, but the stock has since cooled off as the takeover chatter chilled. The column cites an unidentified money manager who has been snapping up shares of Dial and says



, lately up 1/16 to 40 7/8 is interested in buying Dial. Meanwhile, Andrew Shore, an analyst at


, is quoted in the column as saying Dial is "vulnerable to a takeover," but he doesn't think anything will happen over the next six to nine months.



gained 9/16 to 14 after a bullish mention citing Brion Tanous, a senior analyst at

First Security Van Kasper

, who says the stock could soar to 34 in a year.


Blonder Tongue Laboratories


added 1/8 to 7 7/8 after also garnering positive mention in the column.

Herb on TheStreet: Has Nascar Ditched Action Performance in Favor of Disney as Its Internet Partner?


Herb Greenberg

Senior Columnist

9/24/99 6:30 AM ET

They used to be on the same team, but now

Action Performance




are looking more like they're racing against each other on the Internet.

This much we know: A year ago last June, Action, which makes Nascar die-cast collectibles, issued a press release touting how it had been hired to develop and operate a comprehensive electronic commerce system on Nascar's Web site, scheduled to debut last February. It was considered a big deal, so big that one analyst thought it would add as much as 55 cents per share to Action's annual bottom line. Since then, there's been little in the way of e-commerce on Nascar's site. Action, meanwhile, has built its own e-commerce Web site dubbed

. Action has been so focused on that it's in the process of taking public.

Now there are rumblings in the sports world and on Wall Street that Nascar and Action have gone separate ways. In fact, according to a Sept. 14 Nascar memo, former Action exec Joe Mattes has been retained as a consultant by the

Buena Vista Internet Group

"to assist them in managing and producing the Nascar online e-commerce store." Buena Vista Internet Group? That's



! Action losing the biz to Disney? Neither side would say, but the memo adds, "Joe will be working out of Nascar's licensing office in Charlotte, and will be contacting many of you about supplying product for the site." Officials of Disney couldn't be reached, and Mattes, contacted at Nascar's office by my associate,

Mark Martinez

, declined comment.

Action's spin? A spokesman says that Mattes, who had been pres of a company acquired by Action, was fired. Mattes doesn't dispute this, and neither side will provide details. Action also says that it believes it has a "longstanding, very positive relationship with Nascar, and we do not anticipate that changing."

He adds that Nascar's e-commerce site is just another way to sell Action's own merchandise. To be sure, according to the risk factor section in's IPO prospectus, Nascar "has a right to buy" some of Action's products for the Nascar Web site, which Action views as competition. In other words, presumably at wholesale prices rather than the more lucrative retail, which it would've been able to fetch in a shared site.

Either way, that leads to a bigger question for Action/ investors: Will Nascar fans go to Nascar's site or Action's site to buy stuff?

You be the judge.

Short Positions

That's entertainment:

An item

here earlier this week questioning whether

Hollywood Entertainment


is in talks to be bought by



was the focus of an internal research note at

Salomon Smith Barney

. The note only referred to "rumors" about such a deal but then pretty much went through a rewrite of everything that appeared in the column.

Salomon's analysis: If Blockbuster were to use debt to acquire all of Hollywood, "and incorporating no synergies," such a deal could immediately add 5 cents to 10 cents to Hollywood's annual earnings per share.

Something about Mary:

Gotta love that Mary Meeker,

Morgan Stanley Dean Witter's

Internet queen. (Never met her but I'm a longtime fan.) Writing in defense of


and a few other Internet names, she continues to consider their performances solid "in the typically weak summer months."

Typically weak summer months? Hello! Last year Amazon posted sequential rev growth of 33% in June and 33% in September. That compares with gains of 7% in June this year. The difference between last summer and this summer? Go back and reread Jeff Matthews' guest column

here a few weeks back. The difference is that Internet time has finally caught up with Amazon.

And by the way: Lots of analysts coming out with strong comments on Amazon, which presents Monday at the


-- uh, er,

Banc of America Securities

-- investment conference in San Francisco. Makes you wonder whether the company has been whispering sweet somethings to the privileged few.

Meeker couldn't be reached.


That's what you might have called


column yesterday on the 10 Internet myths. If you haven't read it, do.

Now. It's the single best piece explaining why most investors in the group, especially those who are buying dot-com for the sake of dot-com, won't know what hit them. Aside from his rantings and ravings, and regardless of whether you agree with him, it's easy to forget that JJC is also one of the country's brightest and most lucid (ok, also irascible) financial writers. (I may frequently disagree with him, but I still respect the heck out of him!) I've been doing this for 25 years and I still don't have a clue how he continues to churn it out the way he does. Excellent job, Jim.

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,