midday10-08-99

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TheStreet.com's MIDDAY UPDATE

October 8, 1999

http://www.thestreet.com

Market Data as of 10/8/99, 1:26 PM ET:

o Dow Jones Industrial Average: 10,633.30 up 96.25, 0.91%

o Nasdaq Composite Index: 2,868.04 up 7.34, 0.26%

o S&P 500: 1,332.21 up 14.57, 1.11%

o TSC Internet: 722.69 down 0.53, -0.07%

o Russell 2000: 426.50 down 1.61, -0.38%

o 30-Year Treasury: 99 00/32 down 7/32, yield 6.189%

In Today's Bulletin:

o Midday Musings: Market Finds No Certainty Despite Long-Awaited Jobs Release
o Herb on TheStreet: How C3 -- Oops, Charles & Colvard -- Once Again Buried the 'News' in a Press Release

TheStreet.com Community

You know TheStreet.com's the place for great market commentary, but did you know it's also the place for intelligent investing discussion? Whether it's Cramer's commentary or breaking news, we bring the conversation straight to you. Check out all the great talk going on today in the Community section:

Webvan Stakes Its Claim in Net Groceries Business

http://www.thestreet.com/bbs/Forum1/HTML/000031.html

Measuring the Rally's Quality

http://www.thestreet.com/bbs/Forum1/HTML/000032.html

Wake-Up Call: September Employment Report

http://www.thestreet.com/bbs/Forum6/HTML/000002.html

The Market According to Cramer

http://www.thestreet.com/bbs/Forum4/HTML/000014.html

Y2K: The Real Deal

http://www.thestreet.com/bbs/Forum2/HTML/000016.html

TheStreet.com on the Fox News Channel

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Also on TheStreet.com:

Wrong! Dispatches from the Front: A Rally Based on Nothing

That's a hard type of rally to play, Cramer says. But this morning, the collective hedge fund world had to act.

http://www.thestreet.com/comment/wrong/792614.html

Consumer Products: Recent Selloffs Leave Some Consumer-Products Stocks Looking Cheap

Few analysts are recommending that you load up on Revlon. But others in the industry are valued attractively, some say.

http://www.thestreet.com/stocks/consumer/792270.html

Hardware & PCs: ACNielsen Survey Shows Repeat Buyers Account for Bulk of PC Sales

Most of those buyers were adding a second computer to the home, not replacing an outdated one.

http://www.thestreet.com/tech/hardware/792290.html

Fixed-Income Forum: Do Bond Mutual Fund Managers Ever Sell?

Only rarely do bond mutual fund managers hold securities until they mature. That's not portfolio management, one says.

http://www.thestreet.com/funds/bondforum/791977.html

Midday Musings: Market Finds No Certainty Despite Long-Awaited Jobs Release

By

Brian Louis

Staff Reporter

10/8/99 1:36 PM ET

Can't wait for that employment report. Gonna help give an idea which way the

Fed

might go in November. Or so the hope of countless traders went ahead of this morning's release of the September

employment report

.

Yeah, right.

Traders of both the bond and stock variety -- seeking clarity from this morning's jobs data -- were left scratching their heads about which way the

Federal Open Market Committee

will head in November, after the release of the Floyd-corrupted (that's the Hurricane, not the barber) September jobs report.

"The number was a little bit confusing this morning," said Scott Curtis, senior equity trader at

Brown Brothers Harriman

, of the employment report. The confusion stemmed from a drop in nonfarm payrolls -- which was good for a market fearful of rate hikes -- giving hope to the economy cooling. However, wage gains troubled more than a few people.

The effect on the 30-year Treasury bond early this afternoon was negligible. As for stocks, major market averages, after a brief sell off, stormed back into positive territory, led by the

Dow Jones Industrial Average

and the

S&P 500

. Meanwhile, certain sectors were turning in performances ranging from "ugly" to "handsome."

On the homely side were semiconductor and computer makers, while retail, drug and airline stocks looked lovely.

News on the earnings front was also moving select stocks, among the notables

Xerox

(XRX) - Get Report

, which was getting hammered after issuing a profit warning before the open, sending its stock down 23.9%. And then there was the

Hi/fn

(HIFN)

debacle. Hi/fn was off a whopping 43.2%.

The Dow was up 94, or 0.9%, to 10,631, shaking off some earlier weakness.

Johnson & Johnson

(JNJ) - Get Report

provided the biggest boost to the blue-chip gauge, accounting for 19.63 points of the Dow's gain. Conversely, reflecting today's weakness in techs,

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

were both suffering noticeably among Dow components.

The S&P 500 was up 14, or 1.1%, to 1332. The

Nasdaq Composite Index

was up 6, or 0.2%, to 2867.

The

Philadelphia Stock Exchange Semiconductor Index

was off 3.1%, while the

Philadelphia Stock Exchange Computer Box Maker Index

was down 2.9%.

The small-cap

Russell 2000

was off 2, or 0.4%, to 426.

TheStreet.com Internet Sector

index was down half a point to 723, taking a break from its recent breathtaking rise. Going into today, from its recent low set in early August, the DOT has soared roughly 50%.

In the Treasury market, the 30-year bond was lately down 7/32 to 99, yielding 6.19%. (For more on the fixed-income market, see today's early

Bond Focus.) The bond market is closing at 2 p.m. EDT today and will be closed Monday in observance of Columbus Day.

Stinks to be a bond trader, huh?

As for the aforementioned employment report, the

Labor Department

reported

nonfarm payrolls fell 8,000 in September, a mile away from the growth of 218,000 new jobs predicted by economists in a

Reuters

poll. The jobless rate remained at 4.2% in September.

However, hourly wages in the month gained 0.5%, two-tenths of a point higher than expected. Average hourly earnings rose 7 cents to $13.37. The wage gains troubled both the bond and stock market which is already highly fearful of inflation and afraid of more Fed interest rate hikes.

Mario DeRose, fixed-income strategist at

Edward Jones

, said the bond market was scratching its head over the jobs report and "not sure what to make of it."

Labor said nonfarm payrolls would have risen 50,000

sans

Hurricane Floyd.

"We're lucky we have another employment report" before the next Fed meeting, DeRose said.

The data wasn't a "clean enough number to go out and start buying," DeRose said of bond investors' attitudes to the report. The strategist said the employment number was supposed to set the tone for the month, "and it's not going to do it." DeRose said it's going to be difficult for the bond market to sustain a rally.

Speaking of inflation, the rise in oil prices this year has also fanned some analysts' fears of inflationary pressure. But while oil prices have really gushed this year, today it's taking a rude plunge. Crude oil futures were swooning and that drag was helping tackle oil service and oil stocks. The

Philadelphia Stock Exchange Oil Service Index

was down 3.4%, while the

Chicago Board Options Exchange Oil Index

was off 2.3%.

Conversely, the tumble in oil was aiding airline stocks along with an upgrade of a couple of airlines by

Donaldson Lufkin & Jenrette

. Airline issues were bumping up the

Dow Jones Transportation Average

, which was up 1.2%. DLJ upgraded

AMR

(AMR)

and

Northwest Airlines

(NWAC)

. The

American Stock Exchange Airline Index

was up 2.1%.

Drug and retail stocks were posting large gains. The

American Stock Exchange Pharmaceutical Index

was up 3.7%, while the

S&P Retail Index

was up 3.1%.

Today is also the one-year anniversary of last year's market's bottom. (As a quick aside, remember that episode of

The Flintstones

when they sang

Happy Anniversary

over and over? It's a classic.)

While major market gauges have snapped back, breadth was negative. On the

New York Stock Exchange

, decliners were beating advancers 1,447 to 1,305 on 571 million shares. On the

Nasdaq Stock Market

, losers were leading winners 1,835 to 1,703 on 637 million shares.

On the NYSE, 92 issues had set new 52-week lows while 39 had touched new highs. On the Nasdaq, 78 issues had set new 52-week lows while new highs totaled 65.

Meanwhile, among other indices, the

Dow Jones Utility Average

was up 0.8% and the

American Stock Exchange Composite Index

was down 0.5%.

On the Big Board, Xerox was most active with 34.8 million shares changing hands.

On the Nasdaq,

Global Crossing

(GBLX)

was most active with 25.8 million shares changing hands. It was up 8.5%.

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.

)

Mergers, acquisitions and joint ventures

DuPont's

(DD) - Get Report

DuPont Pharmaceuticals

division said it bought the global marketing rights and patent for a chemical compound called

Definity

through its purchase of

ImaRx Pharmaceuticals'

outstanding shares. DuPont plans to sell Definity as the first ultrasound contrast agent for heart, liver and kidney imaging in the United States. Shares of DuPont were up 1 13/16 to 67 3/16.

Warburg initiated coverage of

DuPont

(DD) - Get Report

with a hold rating.

EMC

(EMC)

said its merger with

Data General

(DGN)

should close shortly since it received regulatory and shareholder approval. EMC was slipping 1 3/4 to 71 7/8, while Data General was unchanged at 22 3/8.

KPN Telecom

announced its plans to team up with

Oracle

(ORCL) - Get Report

to sell business software packages on the Internet to small or mid-sized businesses in the Benelux. Oracle shares were off 1/16 to 44 5/8.

Volvo

(VOLVY)

is buying a 5% stake in

Mitsubishi Motors

of Japan and forming a strategic truck and bus alliance. Volvo was stumbling 1/4 to 28 1/16.

Earnings/revenue reports and previews

Analogic

(ALOG)

was falling 1 to 30 after it posted fourth-quarter EPS of 30 cents, greatly missing the single-analyst estimate of 45 cents and the year-ago 56 cents.

Consolidated Papers

(CDP)

was climbing 2 1/16, or 7.3%, to 30 posted third-quarter earnings of 21 cents a share, well ahead of the 10-analyst estimate of 15 cents and above the year-ago 19 cents.

Ericsson's

(ERICY)

new handset models would lead to stronger fourth-quarter results compared with those in the second quarter and boost earnings in 2000, according to a

Reuters

report. Ericsson shares were declining 1 1/2 to 33 5/8.

HA-LO Industries

(HMK)

was tumbling 11/16, or 11.5%, to 5 1/4 after it said that it expects to post a third-quarter loss between 3 to 5 cents, greatly below the nine-analyst estimate of a 9-cent profit, and the year-ago 17-cent gain.

Hi/fn, whose stock got crushed yesterday, said it expects to report fourth-quarter earnings above the five-analyst estimate of 37 cents. Hi/fn said, after its shares were halted on the

Nasdaq Stock Market

, that after a 30% price decline, two major customers had sliced their specialty semiconductor orders for the fourth quarter.

SG Cowen

and

BancBoston Robertson Stephens

cut their ratings on the shares to neutral from buy and long-term attractive from buy, respectively. Shares of Hi/fn were plummeting 32 1/4, or 43.5%, to 41 13/16.

Landmark Systems

(LDMK)

was slumping 2 1/4, or 25.3%, to 6 3/4 after it said it expects to post third-quarter earnings between 1 and 2 cents per share, greatly below the two-analyst estimate of 16 cents a share.

SLI

(SLI)

was off 9/16 to 10 7/8 after it warned it expects third-quarter earnings to come in between 20 cents to 25 cents a share, below the seven-analyst estimate of 35 cents. For the full year, before restructuring and other charges, the company expects to post earnings of between $1.36 and $1.46 a share, below the seven-analyst estimate of $1.72.

Retailers' September same-store sales were up, with discount chains in the lead, according to

The Wall Street Journal

. The newspaper reported that some analysts plan to up their earnings estimates for

Wal-Mart

(WMT) - Get Report

,

Dayton Hudson

(DH)

and

Costco

(COST) - Get Report

as a result of the strong sales. Shares of Dayton Hudson were hopping 2 5/8 to 67 5/8 and Wal-Mart was advancing 1/16 to 15 15/16.

Xerox

(XRX) - Get Report

was sinking 10 7/8, or 25.4%, to 31 13/16 after it warned that it expects to post essentially flat revenue for the third quarter and to see about a 10% to 12% slump in earnings compared with the year-ago 53 cents a share. The 13-analyst consensus estimate called for the company to earn 58 cents a share in the quarter. Xerox blamed weaker revenue in combination with an unfavorable product mix and heightened competitive pressures.

Prudential Securities

lowered its rating on Xerox to accumulate from buy, while cutting its fiscal 1999 and 2000 earnings estimates to $2.42 from $2.57 a share and to $2.70 from $2.85 per share, respectively.

PaineWebber

also cut its rating on Xerox to neutral from buy, while

Goldman Sachs

removed the stock from its recommended list and rated it a market perform.

York Research

(YORK)

was off 1/8 to 4 after it reported second-quarter earnings of 3 cents a share, beating the single-analyst estimate of 1 cent, but down from the year-ago 14 cents.

Offerings and stock actions

J.P. Morgan

, Goldman Sachs and

Salomon Smith Barney

priced a 14 million-share offering for

AES

(AES) - Get Report

at $57.1875 a share. Shares of AES were tumbling 11/16 to 56 1/2.

Aetna

(AET)

was slipping 7/16 to 52 1/4 after it announced it plans to set a $1 billion share-repurchasing plan. Separately, another lawsuit against Aetna was filed yesterday in Mississippi federal court, claiming that the HMO denied participants care.

Genentech

(DNA)

said

Roche Holdings

plans to sell 20 million shares of Genentech stock in an underwritten public offering, which will represent 15.6% of the outstanding common stock of Genentech. The company also said its board approved a 2-for-1 stock split. In the wake of the planned offering, Roche's economic and voting ownership of Genentech will be trimmed to about 65%. In conjunction with the offering, Roche also plans to issue U.S. dollar-denominated bonds exchangeable with Roche for up to about 5.5 million shares of Genentech stock owned by Roche. Shares of Genetech were plummeting 19 13/16, or 11.4%, to 153.

Credit Suisse First Boston

priced

Interwoven's

(IWOV)

3.2-million-share IPO above-range at $17 a share. Shares of Interwoven were soaring 24, or 141%, to 41 1/4.

Donaldson Lufkin & Jenrette priced

Jupiter Communications'

(JPTR)

3.1 million-share IPO above-range at $21. Jupiter Communications' shares were leaping 20 1/16, or 95%, to 41 1/16.

K-Swiss

(KSWS)

set a $25 million share-repurchasing plan. K-Swiss was up 1/4 to 17 5/16

Bear Stearns

priced

TriZetto Group's

(TZIX)

4.2-million-share IPO at $9, the low end of the estimated $9 to $10 range. TriZetto shares had not begun traded by midday.

Analyst actions

PaineWebber initiated coverage of

Automatic Data Processing

(AUD)

and

Tanning Technology

(TANN)

with buy ratings. Automatic Data Processing shares were up 3/4 to 44 15/16, while Tanning shares were adding 1 3/4, or 6.4%, to 29 1/4.

Donaldson Lufkin & Jenrette raised its ratings on

AMR

(AMR)

and

Northwest

(NWAC)

to outperform from marketperform. AMR shares were gaining 2 1/2 to 63 7/8, while Northwest was up 3/4 to 29 1/8.

Merrill Lynch initiated coverage of

Applied Micro Circuits

(AMCC)

with near-term accumulate, long-term buy ratings. Shares of Applied Micro were down 10 7/8, or 14.4%, to 64 3/4.

Credit Suisse First Boston initiated coverage of

CD Radio

(CDRD)

as a buy. Shares of CD Radio were bouncing 1 1/16 to 26 5/8.

Warburg Dillon Read

rolled out coverage of

Cytec Industries

(CYT)

with a buy rating. Cytec was skidding 2 3/4, or 9.8%, to 25 1/4.

Warburg Dillon Read raised its rating on

Dow Chemical

(DOW) - Get Report

to buy from a hold and set a price target of 130. Dow was popping 2 to 116 13/16.

Warburg initiated coverage of

Engelhard

(EC) - Get Report

with a strong buy rating. Engelhard was up 1/16 to 18 5/8.

PaineWebber upped its rating on

Ferrellgas

(FGP) - Get Report

to a buy from attractive. Ferrellgas was off 1/16 to 16 3/8.

Merrill Lynch added

Infinity Broadcasting

(INF) - Get Report

to its

Focus One

list. Infinity was advancing 1 1/16 to 32 3/16.

PaineWebber started

Keane

(KEA)

and

Perot Systems

(PER) - Get Report

with neutral ratings. Keane was sliding 9/16 to 21 11/16, while Perot shares were unchanged at 18 3/8.

Morgan Stanley

raised its rating on

Kennametal

(KMT) - Get Report

to outperform from neutral. Shares of Kennametal were climbing 1 13/16, or 6.9%, to 27 7/8.

Deutsche Banc Alex. Brown

lowered its rating on

Marten Transport

(MRTN) - Get Report

to neutral from buy. Marten Transport was unchanged at 11.

Morgan Stanley Dean Witter sliced its rating on

Merrill Lynch

(MER)

and

TD Waterhouse

(TWE)

to neutral from outperform. Morgan Stanley also downgraded

Charles Schwab

(SCH)

to neutral from outperform. Shares of Merrill Lynch were sliding 1 1/16 to 68 15/16, while TD Waterhouse was also falling 9/16 to 12 15/16.

ING Barings

rolled out coverage of

priceline.com

(PCLN)

with a strong buy rating. Shares of priceline were bouncing 3 3/16 to 75 11/16.

Goldman Sachs upgraded shares of

Southern Peru Copper

(PCU)

to market outperformer from market performer. Southern Peru was hopping 1 1/8, or 6.6%, to 18.

Merrill Lynch started coverage of

TranSwitch

(TXCC)

with a near-term and long-term accumulate. TranSwitch shares were declining 5 1/2, or 9.4%, to 52 1/2.

Goldman Sachs upped its rating of

Tredegar

(TG) - Get Report

to market outperformer from market performer. Shares of Tredegar were up 1/2 to 22 3/4.

Goldman Sachs raised its rating on

Plains All American

(PAA) - Get Report

to its recommended list. Shares of Plains were unchanged at 18 1/2.

Lehman Brothers

began coverage of

PMC-Sierra

(PMCS)

with a buy rating. PMC-Sierra was down 7 13/16, or 7.8%, to 92 1/8.

DLJ began coverage of

Starwood

(HOT)

with a market perform rating and sliced its rating on

Marriott

(MAR) - Get Report

to market perform. Shares of Starwood were up 1 to 21 1/16, while Marriott was sinking 1 1/14 to 30 11/16.

Salomon Smith Barney

sliced its rating on

Vitesse Semiconductor

(VTSS)

to outperform from buy, in the wake of Hi/fn's announcement of fiscal 2000 first-quarter earnings woes. Hi/fn supplies components to Lucent, which gives Vitesse 20% of its business. Vitesse was sliding 6 15/16, or 85, to 79 1/4.

Miscellany

Ford

(F) - Get Report

and the

UAW

are still in talks to reach an accord before tonight's 11:59 p.m. strike deadline, the

Journal

reported. According to the newspaper, negotiations have been hindered by Ford's desire to spin off its

Visteon

parts division. Ford shares were up 9/16 to 51 15/16.

Mattel

(MAT) - Get Report

CEO Jill Barad told the company's board that she did not fully understand what was wrong at the company's

Learning Co.

division, but assured the board that she would produce a full accounting in the near future, the

Journal

reported. Mattel was off 5/16 to 12.

Wendy's

(WEN) - Get Report

said it plans to shut down 7 restaurants in the U.K. as a result of high real estate and operating costs. The company said the closures would not have a negative impact on forth-quarter earnings. Shares of Wendy's were up 1/2 to 26 7/16.

Herb on TheStreet: How C3 -- Oops, Charles & Colvard -- Once Again Buried the 'News' in a Press Release

By

Herb Greenberg

Senior Columnist

10/8/99 6:30 AM ET

Maybe the best way to do research on

Charles & Colvard

(CTHR) - Get Report

, formerly called

C3

, would be to hire a gravedigger. That way it would be easier to find all of the news that it buries in its press releases.

No stranger to this column, this is the company that makes imitation diamonds called moissanite, which are honed from silicon carbide crystals that it buys from

Cree Research

(CREE) - Get Report

. Cree is run by the brother of C3's CEO, Jeff Hunter. Cree has a guarantee that requires C3 to buy all of Cree's silicon carbide crystal production through next June.

It was just a month ago that C3 was chided

here for burying the news that third-quarter shipments of moissanite, its main product, were below expectations. While they were weak, however, the company assured investors that "based upon feedback from domestic retailers and international distributors, the company is confident it will meet its sales goals for the second half of 1999."

Which brings us to Wednesday and a late-in-the-day press release headlined, "C3 Inc. Launches Strategic Global Marketing Program; Company Hires New Talent to Advance Strategy." If you didn't know any better, you'd think it's just another boring press release about some marketing program. And that's just what it is -- until deep in the press release, in a sentence that starts with the word "however" and ends with the words, "given the current forecast the company does not expect to meet previously announced estimates for the second half of the year." The release also said the company had shipped about 10,000 carats of moissanite in the third quarter.

Huh? What happened to the July forecast that the old C3 would meet its sales goals of at least 60,000 carats for the second half of the year? Or last month's assertion that it would still meet second-half sales goals

despite

the third-quarter slowdown? The company had blamed third-quarter problems on a summer jewelry slump that it hadn't expected because it's new to the jewelry biz. Never mind that the old C3 has been selling these gems for 16 months, and never mind that Hunter told me a month ago that a new national advertising campaign -- just in time for Christmas -- should spark year-end demand.

What changed? According to Hunter, a recent trip to countries outside the U.S., which account for between two-thirds and one-half of all of its sales, convinced the company that international retailers didn't have the marketing material and appropriate branding to sell the required volume to meet projections. (Excuses, excuses!)

The result: A new branding program and a new name, Charles & Colvard -- a name that "reflects the heritage of the company."

Heritage? What heritage? This company is only 4 years old. Who is Charles, and who is Colvard? Family names, Hunter says. They're two of the three Cs in C3 -- the third is Cree.

Speaking of Cree, what about C&C's "deal" with Cree to buy everything Cree makes through June? If C&C's shipments are down, but it has to continue taking product from Cree, won't C&C's inventory be up? Yep, says Hunter. "But this isn't like lettuce, something you have to use. We're thinking for the long term."

Great, but if the company takes

too

long to get its act together, it risks running out of excuses.

Pixar Revisited

An item yesterday

mentioned how

Pixar

(PIXR)

has become a story stock that rises and falls before and after the release of each of its movies. Watch for the company, miffed at the stock's image, soon to announce a strategy to counter the company's cyclicality. Also watch for it to get aggressive with the way it communicates with Wall Street; an investors' day is planned for analysts by year-end at the company's California headquarters.

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.

Copyright 1999, TheStreet.com