TheStreet.com's MIDDAY UPDATE
October 4, 1999
Market Data as of 10/4/99, 1:25 PM ET:
o Dow Jones Industrial Average: 10,389.51 up 116.51, 1.13%
o Nasdaq Composite Index: 2,771.67 up 34.82, 1.27%
o S&P 500: 1,297.35 up 14.54, 1.13%
o TSC Internet: 653.95 up 6.83, 1.06%
o Russell 2000: 425.42 up 1.89, 0.45%
o 30-Year Treasury: 100 00/32 up 6/32, yield 6.117%
In Today's Bulletin:
o Midday Musings: Market Players Buy Boldly Ahead of FOMC Meeting
o Wrong! Rear Echelon Revelations: Make Way for Foundry Networks
Get a jump on the coming week by jumping on our message boards! There's enough intelligent investing discussion to keep you thinking about the week ahead and the entire month. Share your thoughts on the following:
Make Way for Foundry Networks
The Coming Week: Market on Edge Ahead of FOMC Meeting Tuesday
Drawbacks of a Diary and an October Chill
Also on TheStreet.com:
Wrong! Dispatches from the Front: Why Is the Smart Money so Wrong This Year?
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It makes sense to get out while the getting's good, but does that say something about the company's future?
Consumer Products: Chickening Out: Tricon Pins Hopes on New KFC Sandwich Line
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Dear Dagen: Dear Dagen: How Long Can My Old Employer Take to Cough Up My 401(k) Money?
The law isn't very specific, but in practice, it can take months.
Midday Musings: Market Players Buy Boldly Ahead of FOMC Meeting
10/4/99 1:10 PM ET
Sure the market's oversold. But is that any reason to load up the truck the day before
Federal Open Market Committee
It's an odd day to see a rally. Though even the most hawkish economists ascribe no more than an outside chance of the
raising its target rate tomorrow, there is some uncertainty over whether the Fed will stick to a neutral policy directive, or bias. About half the economists out there think the Fed will move to a tightening bias. That would keep Wall Street on rate watch for another month, and could throw a damper on stocks.
The move in stocks has got traders scratching their collective heads.
"I guess the one argument is that sentiment was so negative coming into October," said Ned Collins, vice president of equity trading at
Daiwa Securities America
. "Maybe it really did get overdone, and this is the rally that I thought we were going to get last week."
Collins was by no means alone in thinking stocks would see an oversold bounce last week -- it was a mantra that technically minded and fundamental folk alike were intoning pretty loudly. Reality got in the way, though. A rally in gold sparked stories of hedge funds caught short, and hardly was that done with before the market got to chattering about how Japan's
would come in strong today, and how that would in turn send the dollar skittering lower.
The tankan -- a measure of business sentiment -- did come in above consensus, but it was nothing like the blowout report Tokyo traders were talking about. The dollar put on a pretty good move against the yen, and that set the tone early on for a good morning in the U.S.
Dow Jones Industrial Average
was lately up 110, or 1.1%, to 10,383. The
was up 13 to 1296.
was up 30, or 1.1%, to 2767.
The Street.com Internet Sector
index was up 6, or 1%, to 654.
was up 2, or 0.5%, to 426.
Breadth, on modest volume, was pretty good. On the
New York Stock Exchange
, advancers were outpacing decliners 1,697 to 1,155 on 441 million shares. There were 33 new 52-week highs and 94 new lows. On the
Nasdaq Stock Market
, advancers were leading decliners 1,901 to 1,692 with 501 million shares changing hands. There were 57 new highs and 73 new lows.
Though tomorrow could sour things for stocks, John Manley, equity strategist at
Salomon Smith Barney
, doubts that there's much downside left in stocks.
"There's a lot of fear built into the market at this point -- we've had a bear market in almost two-thirds of stocks," he said. "There's too much fear in there right now to make the case that it's going to be a disaster." While he's not sure whether the next 5% move in stocks will be up or down, "if you ask me '10% up or down,' I'd go with up."
The economists at Salomon are among those that think the Fed may hike in November, but Manley's pretty sanguine on what that might mean for stocks. "I actually think the rate hike in November, if it comes, won't be a big deal," he said. The real issue for Manley is whether the Fed does anything beyond that. One more rate hike, and the Fed is just taking back the cuts from last year. More than one, and it gets harder to figure out where it stops.
"The difference between zero and one is nothing," said Manley. "The difference between one and two is enormous."
Monday's Midday Watchlist
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
fell 2 11/16, or 5.9%, to 42 3/4 after offering to buy
, with a bid that surpasses the buyout offer Sprint received from
, according to reports in
The Wall Street Journal
The New York Times
. Shares of Sprint rose 2 3/4 to 59 3/4, after hitting a trading high of 61, while MCI lifted 1 1/4 to 71 3/4.
was up 6 3/16, or 35.1%, to 23 13/16 after agreeing to be acquired by
, which plans to combine it with its
unit. Terms weren't disclosed, but the new, publicly traded Travelocity is expected to have more than 17 million members and more than $1 billion in sales. Sabre, up 4 7/8, or 11.2%, to 48 1/4, also said it agreed on terms with
for an extension of their existing contract. Yahoo! lost 1 1/2 to 174.
set a multiyear content and commerce pact with Travelocity.com, valued at up to $200 million. Under the deal, Travelocity.com will become the exclusive reservations engine integrated into the AOL service,
when the Preview-Travelocity merger is completed.
In other AOL news, the company's
unit reached a deal with
to offer a prepaid virtual calling card that will route calls over Net2Phone's Internet protocol network. Net2Phone gained 2 3/8 to 54 15/16. The announcement is the first in a series of initiatives under a four-year agreement between Net2Phone and ICQ.
Mergers, acquisitions and joint ventures
Clear Channel Communications
fell 1 3/8 to 79 after it said it was buying
, lately up 3 5/16, or 5.3%, to 67 1/4. Under terms of the deal, AMFM shareholders will receive 0.94 of a Clear Channel share for each AMFM share they hold on the record date of the deal, which is expected to be in the second half of 2000.
added 1 5/8, or 16.2%, to 11 11/16 and
slipped 1/16 to 47 13/16 after the companies unveiled plans to start a consumer health Web site.
climbed 5 1/16, or 13.3%, to 43 1/8 after Paul Allen's
said it would make a $1.65 billion investment in the telecommunications company. Allen is a co-founder of
inched up 3 /8 to 32 9/16 after saying it would buy
for $69.4 million.
edged up 3/4 to 59 7/8 after saying it plans to sell its bleached paperboard unit to
for roughly $625 million, in an attempt to concentrate on its core corrugated packaging business. Shares of Westvaco moved up 1/4 to 25 7/8. The deal is expected to be completed by the end of the year.
Earnings/revenue reports and previews
lost 1 3/16, or 8.1%, to 13 1/2 after the company said it expects third-quarter profits of 1 cent to 3 cents a share, after charges. Analysts had expected the company to report operating results of 11 cents a share.
dropped 1 1/2, or 9.9%, to 14 after warning second-half results will fall well below analysts' estimates due in part to higher catastrophe losses resulting from Hurricane Floyd.
shed 4 1/16, or 24.1%, to 12 13/16 after saying it expects third-quarter earnings to fall well below analyst estimates as its
educational software business takes larger-than-expected losses. The toy company said it expects to report earnings of 30 cents to 40 cents a share, well below the consensus estimate of 67 cents a share.
Offerings and stock actions
added 1 11/16 to 43 7/16, after the
reported it is considering issuing several tracking stocks in an effort to increase shareholders' return. Under one proposal, Ma Bell would issue three stocks that would track AT&T's wireless division, its cable and Net undertakings and its outsourcing unit for businesses.
fell 1 3/4, or 5.2%, to 32 1/8 after it filed with the
Securities and Exchange Commission
to offer 3 million shares of common stock.
added 1 7/8, or 5.3%, to 37 3/8 after it set a 3-for-2 stock split.
cut the size of its planned IPO to 5 million shares from 7.75 million and lowered the expected price range to $8 to $10 a share.
added 1/2 to 24 after
reinstated coverage with an intermediate-term accumulate rating and long-term buy rating.
rose 1 1/8, or 9.9%, to 12 5/8 after
Morgan Stanley Dean Witter
upped its rating to outperform from neutral.
slipped 1/8 to 22 3/8 after
Credit Suisse First Boston
lowered its third-quarter earnings estimate to 5 cents a share from 9 cents and its fourth-quarter estimate to 22 cents from 34 cents. CSFB also cut its estimate for fiscal 2000 to $1 from $1.25.
Hospitality Properties Trust
lost 3/8 to 22 3/8 after Merrill Lynch sliced its rating to accumulate from buy.
jumped 2 3/4, or 5.8%, to 50 3/8 after Morgan Stanley upped its rating to strong buy from outperform.
inched up 1/2, or 6%, to 8 7/8 after
Warburg Dillon Read
rolled out coverage with a buy rating.
lost 1 11/16, or 14.1%, to 10 5/16 after Warburg Dillon Read cut its rating to hold from buy.
added 9/16 to 77 7/8 after saying it launched a wireless service that will enable customers to shop through Amazon using wireless access devices, including
Palm VII. Shares of 3Com rose 9/16 to 29 11/16. Amazon said it also acquired privately held
for $20 million, in connection with its wireless service plans. Convergence makes Internet access software.
rose 1 1/16 to 43 15/16 after the
reported the company's plans to restructure its customer-finance division in order to enhance its jet-leasing service and increase its profits. The reorganization effort helps put Boeing in closer competition with leasing firms that purchase its planes, the newspaper reported.
climbed 1/4 to 43 7/8 after the company said it would combine all of its U.S. grocery and food service businesses into a single $5 billion "megacompany" with a base in Pittsburgh.
Wrong! Rear Echelon Revelations: Make Way for Foundry Networks
James J. Cramer
10/4/99 7:47 AM ET
Make room for
! From the moment Foundry started trading, we knew that it would have to join the
Cramer's Red Hots: Tell us what you think on our
Message Boards. You can't have some $8 billion behemoth that everyone knows is kicking tech butt not be in the index. But we have determined that the index should only have 20 players. That means somebody has to go.
, the keeper of the index, who notes that it declined 3% last week -- a brutal period -- has given us a list of four Red Hots that are expendable. We thought that you should choose which one gets booted to make room for Foundry.
Here are the candidates for removal:
- Copper Mountain (CMTN) : Provides DSL solutions in a highly competitive space, although it seems to be winning business faster than the others.
Extreme Networks (EXTR) - Get Report: This one is the most similar to Foundry in the Red Hots. Extreme makes complex networks that are simpler to use and manage. (Its market is technically known as Layer 3 switching solutions.)
Net2Phone (NTOP) : Here's my choice for deletion simply because it is too promotional for my tastes, but boy does it have adherents. Net2Phone brings voice to the Internet. NTOP has an exclusive relationship with
America Online (AOL) to be integrated into the
Netscape Browser and
UCQ Instant Messenger.
Gadzoox (ZOOX) : Certainly not the fashion retailer. This company is in the fiber channel hub arena and competes with recent IPO
Vixel (VIXL) . Both companies are trying to move into the fiber channel switch business which is currently dominated by
Brocade (BRCD) .
What we will do is chat this one up on the boards for two days and then post a ballot, which will allow you to vote which stock you want deleted. Let's have some terrific discourse -- no name calling as I have seen on the Net2Phone boards on
-- and try to figure out which of these four Red Hots is too cool for the index.
Going to the Red Hot graveyard?
Copper Mountain Networks
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!, America Online, Vixel, Juniper Networks and Redback Networks. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at
Copyright 1999, TheStreet.com