TheStreet.com's MIDDAY UPDATE
October 7, 1999
Market Data as of 10/7/99, 1:14 PM ET:
o Dow Jones Industrial Average: 10,551.30 down 37.04, -0.35%
o Nasdaq Composite Index: 2,877.54 up 20.33, 0.71%
o S&P 500: 1,323.11 down 2.29, -0.17%
o TSC Internet: 729.84 up 21.10, 2.98%
o Russell 2000: 428.79 down 0.97, -0.23%
o 30-Year Treasury: 99 08/32 down 3/32, yield 6.166%
In Today's Bulletin:
o Midday Musings: Mixed Session Reflects Wall Streeters' Jitters
o Herb on TheStreet: The Real Wall Street Story Behind the Maker of Toy Story
TSC community is nuts for the Net today! Join Adam Lashinsky and Jim Seymour on the Webvan board. Then, join Cramer's latest discussion on the DOT.
Webvan Stakes Its Claim in Net Groceries Business
James Cramer: Connecting With the DOT
And make sure to check out a chip chat with Marcy Burstiner:
Semiconductor stocks have been on a yearlong rally since bottoming on Oct. 8, 1998. To review the events of the past year in semiconductor stocks like Intel and Rambus, and to discuss where the sector is heading, Marcy Burstiner will host an informative chat on Yahoo! today at 5 p.m. EDT. Register for Yahoo! Chat at chat.yahoo.com. It's free!
TheStreet.com on the Fox News Channel
You're not gonna believe the stocks guest money manager Frank X. Curzio of F.X.C. Investors says you should buy. We'll put those picks to the test on "Stock Drill."
And, do brokerages treat you like a second class citizen? Find out what you can do about it on this week's "Word on TheStreet."
"TheStreet.com" on the Fox News Channel airs Saturdays at 10 a.m. and 6 p.m. ET and Sundays at 10 a.m. ET.
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Also on TheStreet.com:
Wrong! Dispatches from the Front: Singing the Praises of Gary B. Smith
Since Cramer started taking Gary's advice to avoid that first selloff, it's begun to pay off.
Internet: Expanding Beyond Consumers, AOL Sets Its Sights on Business-to-Business Services
The content giant mulls working with other companies on a plan to offer products and services on local Web sites, a la Digital City.
Internet: Stiff Competition Could Worsen PlanetRx's Favorable Prognosis
Although PlanetRx.com wants to be a pure Internet firm, its competitors are busily linking up lucrative partnerships.
Dear Dagen: Dear Dagen: Enhanced-Index Funds Are Neither Enhanced Nor Index Funds
These funds try to improve on index returns by adding active management.
Midday Musings: Mixed Session Reflects Wall Streeters' Jitters
10/7/99 1:26 PM ET
Who's afraid of the big bad
? Judging from today's market activity, lots of nervous investors who think Tuesday's move toward a tightening bias may be a prelude to
blowing the market down with a future interest-rate hike.
But market movers aren't putting all them blame on the Fed. Earnings and gold are doing their fair share to deflate yesterday's gains, as skepticism returns to the Street.
"We're looking for the market to pull back considerably with every economic report putting volatility into the market," said Ronny Kraft, CEO of
Gotham Capital Management
. "People are excited with third-quarter numbers," he said, referring to
strong report. "But last quarter, 65% of companies gave positive earnings surprises and 42% of them traded down after they reported, and that's when we saw the selloff. In the first quarter, we had 68% report positive earnings surprises and only 25% trade down. That's nearly twice the amount."
Gold is continuing to bring increasing woes to the market, as money managers struggle to rid themselves of short positions. "Movement in gold can bring a financial blow-up and the reason be behind it is that there is an outrageous short position out there," Kraft said. "Anyone that is short gold is in trouble." He was referring to today's
Wall Street Journal
Heard on the Street article that cited
Republic New York
Credit Suisse First Boston
as some of the dealer's with large exposure to the bankrupt
By midsession, the
Dow Jones Industrial Average
was off 29 to 10,559, with
weighing it down.
After falling short of record closing stats
yesterday, the tech-heavy
Nasdaq Composite Index
was surging 24, or 0.8%, to 2881. Yahoo! was doing its part to fuel the index, after its solid earnings report had the stock had the stock pumping up 8.1%.
New York Stock Exchange
Barnes & Noble
was sliding 10.4% after
sliced its rating on its shares to market perform from long-term buy, while
American Home Products
was gaining weight, up 3 1/8, or 6.9%, to 48 1/4, after announcing a proposed settlement in the lawsuit over the fen-phen diet cocktail. AHP also announced restructuring plans for its
sank 8 1/8, or 11.5%, to 61 7/8 after the company said second-quarter profits would miss consensus estimates, while
, jumping 6 1/8, or 18.8%, to 38 11/16, and
, mounting 6 5/16, or 7.7%, to 88 11/16, were following Yahoo!'s lead.
Other stock proxies were mixed with the broad
down slightly, 1 to 1324, while the small-cap
was sliding 1 to 429.
TheStreet.com Internet Sector
index was also getting a boost from Yahoo!'s flight, and coupled with gains from
, the index was leaping 23, or 3.1%, to 731.
In other Big Board news, decliners were leveling advancers, 1,643 to 1,154 on 489 million shares, while on the
Nasdaq Stock Market
, laggards were edging out leaders 1,843 to 1,753 on 766 million shares. The new 52-week lows were pummeling new highs on the NYSE, 74 to 36, while on the Nasdaq new highs were beating out lows 103 to 65.
On the bond front, the benchmark 30-year Treasury was down 1/32 to 99 8/32, its yield at 6.18%. (For more on the fixed-income market, see today's early
Thursday's Midday Watchlist
Shares of IPO
rocketed 15 9/16, or 97.3% to 31 3/4 after being priced top-range at $16. The company is an online destination for prescription drugs, herbs and other medical supplies.
wrote about PlanetRx.com in a story
Webvan: Join the discussion on
In response to
Securities and Exchange Commission
said it is postponing its initial public offering, originally slated for this week. According to a report in Thursday's editions of
The Wall Street Journal
, the SEC is worried about Webvan's possible failure to observe quiet-period restrictions in giving pre-IPO interviews to
as well as its dissemination during road-show presentations of information not included in its prospectus. Details of the road show were brought to light by
column yesterday, which earned mention in today's
Two more major online brokerages --
-- said they'd be joining the after-hours trading party in the not-too-distant future.
Both Fidelity, the brokerage unit of the mutual fund giant, and DLJdirect, a unit of investment bank
Donaldson Lufkin & Jenrette
, plan to trade Nasdaq and some listed stocks through the
electronic communication network, in which they and
each hold 25% stakes.
Spear Leeds & Kellogg
owns the remaining 25%.
Fidelity's hours for retail trading will now include a 4:30 p.m. through 8 p.m. EDT session. DLJdirect is planning trading for both the morning from 8 a.m. to 9:15 a.m. and the evening from 4:15 p.m. to 7 p.m. Schwab
earlier this week said it would trade from 4:30 p.m. to 7 p.m. on the REDIbook network.
DLJdirect was up 3/4 to 16 11/16.
Mergers, acquisitions and joint ventures
lost 5/8 to 66 1/16 after saying it is acquiring $550 million of
Metromedia Fiber Network's
optic infrastructure. Metromedia moved up 1 7/8, or 6%, to 33 3/16. Bell Atlantic will invest about $700 million to purchase about 9.9% of the equity of MFN via the purchase of newly issued shares at $28 a share. Also, Bell Atlantic will buy about $975 million in debt securities convertible into common stock at a conversion price of $34 per share, boosting Bell Atlantic's potential equity investment in MFN to about 19% of the company.
dropped 3 3/16, or 5.8%, to 51 3/4 after agreeing to acquire privately held
, a supplier of Internet marketing software, in a stock deal worth about $275 million. Macromedia also unveiled alliances with
lately down 3/8 to 30 7/8, and
which rose 2 5/8 to 164. Macromedia said it plans to issue about 5 million shares of stock in the connection with the acquisition and take one-time charges of up to $5 million in its current quarter.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
Advanced Micro Devices
slipped 1/4 to 19 3/16 after last night reporting a third-quarter loss of 72 cents a share, narrower than the 18-analyst estimate of a loss of 97 cents but worse than the year-ago earnings of 1 cent.
inched up 11/16 to 79 7/16 after posting fourth-quarter earnings of 79 cents a share, beating the 22-analyst estimate of 76 cents and the year-ago 65 cents.
slipped 13/16 to 122 7/8 despite posting third-quarter earnings of 80 cents a share, a penny ahead of the 13-analyst estimate and up from the year-ago 69 cents. Revenue jumped to a record $27.2 billion, a 13% increase over the year-ago period.
Goody's Family Clothing
climbed 1, or 12%, to 9 5/16 after it said September same-store sales rose 4.8%.
In Focus Systems
added 3 1/2, or 19.1%, to 21 7/8 after posting third-quarter earnings of 31 cents a share, beating the seven-analyst estimate of 23 cents and the year-ago 8 cents.
slipped 15/16 to 32 7/8 despite posting a 4.1% increase in September same-store sales.
Yahoo! flew 14 1/4, or 8.1%, to 190 after last night reporting third-quarter earnings of 14 cents a share before charges, ahead of the 26-analyst estimate of 9 cents a share, and up from the year-ago 2 cents before items.
Deutsche Banc Alex. Brown
U.S. Bancorp Piper Jaffray
all raised ratings and/or earnings expectations on Yahoo!.
Offerings and stock actions
slipped 7/16 to 31 9/16 in its trading debut after being priced at $32 a share by Goldman.
added 1/2 to 21 1/4 after it announced plans for a 2.5 million-share secondary offering.
slipped 3/8 to 13 1/8 after
Morgan Stanley Dean Witter
priced 11.9 million ADRs at $13.50 each, the bottom of the estimated range. One ADR is equal to five ordinary shares.
climbed 1 5/16 to 62 7/8 after Deutsche Banc raised its rating to strong buy from market perform.
Barnes & Noble fell 2 3/4, or 10.4%, to 23 3/4 after
lowered its rating to market perform from long-term buy.
added 11/16 to 17 15/16 after
initiated coverage with a neutral rating.
climbed 1 7/8, or 7.6%, to 26 1/2 after PaineWebber initiated coverage with a buy rating.
climbed 4 5/8 to 156 1/4 after Deutsche Banc raised its price target to 175 a share.
First Health Group
climbed 1/8 to 22 1/4 after
raised its rating to accumulate from intermediate-term neutral.
fell 3 1/8, or 6.5%, to 45 5/16 after PaineWebber initiated coverage with a neutral rating.
Health Management Associates
fell 1/8 to 7 5/8 after Merrill upped its intermediate-term opinion to accumulate from neutral.
rose 5/8 to 56 11/16 after Merrill raised its rating to intermediate-term buy from accumulate.
slipped 11/16 to 7 15/16 after J.P. Morgan cut its rating to market perform from buy.
climbed 2 5/8, or 8.2%, to 34 3/4 after PaineWebber initiated coverage with an attractive rating.
slipped 7/16 to 24 3/16 after saying it would take an after-tax charge of $31 million, or 33 cents a share. The company settled three lawsuits relating to the sale of its boat engines.
lost 1/16 to 5 5/16 after Chairman and CEO Bill Schmidt resigned after less than six months in the post. Schmidt also quit as a board member and will be replaced by Jim Jannard, who founded the company in 1975.
said it will further delay the filing of its second-quarter earnings report and may be delisted if Nasdaq does not grant it an extension.
Herb on TheStreet: The Real Wall Street Story Behind the Maker of
10/7/99 6:30 AM ET
Picking on Pixar:
From the day it went public in late 1995,
has been a "story" stock. Sure, there's
and its upcoming sequel,
Toy Story 2
, but the real story is how Wall Street pitches Pixar not as an investment, but as a cyclical trade. Don't forget, this was a company whose IPO was timed to coincide with the release of the original "Toy Story," a strategy that caused its stock to soar as the stock was sold to gullible individuals hoping to cash in on the story of
and the gang, only to watch the stock sink after the movie -- the very successful movie -- made its debut.
Such has been the story of Pixar ever since. Go back and look at a chart
last fall's rollout of
A Bug's Life
Alex Berenson's take at the time). And look what's happening now in front of
Toy Story 2
. Last month
analyst Katherine Styponias, for example, upgraded Pixar to a "strong buy" from "hold" in part because the marketing behind the new movie "should act as a very potent catalyst in propelling the shares closer to our price target." And
Jeffrey Logsdon, upgrading from a "neutral" to "strong buy," wrote that the stock's summertime swoon "provides a nice trading opportunity for nimble, aggressive investors."
And therein lies the trouble: When the call goes out to sell, everybody won't be able to get out at the same time because, as one veteran short-seller says, "Everybody has the same strategy." What's more, after
Toy Story 2
, the next Pixar movie won't be out for at least two years. That translates into a lack of earnings predictability. (Not good for a stock that trades at around 58 times this year's expected earnings.) "It's a fool's game," the short-seller says, "with hedge funds selling to retail."
Unfortunately for investors, Pixar's stock has never been as good as its movies. For its part, Pixar says that, over the long term, it believes its library of films will make this a story with a happy ending. (Fine, but how many chapters are in the book?!)
My, my -- seen Midway?:
here last January questioned the sanity of
CEO Neil Nicastro for selling stock in
(a related company that makes slot machines) and buying shares in Midway, which makes video games -- two companies whose fortunes seemed flip-flopped. "Ask me this question a year from now," he said, "and then ask me if this seems like a strange situation."
It's not quite a year, and quite frankly I had forgotten about Midway until one money manager quoted here at the time singing the praises of Midway -- Chris Warning of
in Naperville, Ill. -- checked in the other day with an update. "When we talked about Midway the stock was at 8," he says. "Today it trades at 17 1/4. For what it's worth, I still like it here: It trades at 14 times fiscal-year 2000 (June) earnings estimates and they've got some great product coming down the pipe.
"The key for them is to avoid being so 'hit-driven' and get some greenfield products (such as sports --
franchise) to smooth out the earnings growth.
"In my judgment they're making the right moves to get there. If they achieve just a minor success to that effect the stock's got a lot of room to go
EA trades at 35-times FY 2000 March earnings estimates. Moreover, for the moment anyway,
is doing better than expected. Midway has three strong games on that platform. All are selling well while EA has none. Nicastro also brought back to the company the international rights to their games. This could add meaningfully to earnings in the next couple years; most companies in the biz do about one-third of sales internationally."
"Eventually," he guesses, "Nicastro sells this company."
Nicastro couldn't be reached, but one thing's for sure:
, no investment dummy and a large Midway investor with a 25.3% stake, has been adding to his position.
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
email@example.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
Copyright 1999, TheStreet.com