TheStreet.com's MIDDAY UPDATE
October 19, 1999
Market Data as of 10/19/99, 1:16 PM ET:
o Dow Jones Industrial Average: 10,283.13 up 166.85, 1.65%
o Nasdaq Composite Index: 2,722.15 up 33.00, 1.23%
o S&P 500: 1,273.80 up 19.67, 1.57%
o TSC Internet: 684.63 up 14.77, 2.20%
o Russell 2000: 413.65 up 4.75, 1.16%
o 30-Year Treasury: 97 14/32 up 3/32, yield 6.304%
In Today's Bulletin:
o Midday Musings: Friendly Data Embolden Spirits; Dow Rallying at Midday
o Herb on TheStreet: Good Omen for Apple? And Bad Omen for Sabratek, Family Golf and Pillowtex?
From accounting to Xerox, we've got the markets covered in today's community section. Cramer takes a closer look at copiers, Seymour says there must be a way to value the Web, our staff continues cracking the books and Erin Arvedlund and author Lewis Borsellino talk options.
James Cramer: A Closer Look at This Troubled Printer/Copier Group
Jim Seymour: There's Gotta Be a Way to Value the Web
Cracking the Books, Part II
Then, chat with Erin Arvedlund and author Lewis Borsellino for the latestin options trading on Yahoo! at 5 p.m. EDT. Register for Yahoo! Chat at: chat.yahoo.com. It's free!
Also on TheStreet.com:
Wrong! Rear Echelon Revelations: Turning Down the Heat on the Dot-Com Economy
The Fed's tightening is now beginning to impact the 'real' economy. Cramer thinks the Fed should look to raising margin rates instead to get the job done. What do you think? Post it on our message boards.
SiliconStreet.com: Parsing the Logic Behind Intel's Purchase of DSP Communications
The U.S. chipmaker is paying big bucks for a tiny player -- and for DSPC's phalanx of high-tech engineers.
Cracking the Books: Cracking the Books II: Gillette's Cash Management Sets Some Observers on Edge
Inventory and receivables data suggest the razor-blade giant could be using its cash far more efficiently. Talk about it on our message board.
Cracking the Books: Cracking the Books II: At Cerner, an Eye-Catching Development on the Balance Sheet
Critics believe that the software concern's capitalization of software-development costs could obscure cash-flow weakness.
Midday Musings: Friendly Data Embolden Spirits; Dow Rallying at Midday
10/19/99 1:19 PM ET
Fear? Capitulation? Thanks to a benign
Consumer Producer Index
, you won't be finding much of that in the stock market today.
released figures showing the headline CPI gaining 0.4% overall in September, equaling the consensus estimate in the
poll and up from the 0.3% clip in August. The core rate, which excludes food and soaring energy prices, increased 0.3%, also in line with expectations and higher than the month-ago 0.1% gain.
The market was ready for a much higher number, given the 1.1% jump in Friday's
Producer Price Index
, much of which was due to a large increase in tobacco prices. Excluding tobacco, the CPI would have risen 0.3%, the Labor Department said.
"Even though it's not assuredly a good number, people are happy relative to Friday's sticker-shock PPI," said Peter Boockvar, equity strategist at
. "And that's moving people who were on the sidelines to come in and buy stocks."
To wit, all the major proxies were solidly higher at midsession. The
Dow Jones Industrial Average
was up 142 to 10,258, while the
was running up 16.9 to 1271. The
Nasdaq Composite Index
was 26 higher to 2715, despite spotty performance among its largest stocks.
Net shares were looking solid.
TheStreet.com Internet Sector Index
was climbing 5, or 3%, to 175 7/16, led by strong upside moves by
With breadth looking up on both major exchanges, the small-cap
was up 5 to 414.
Has everyone forgotten all the talk about the market's increasingly tenuous support levels and the need for capitulation? Apparently so. The market's fear gauge, the
Chicago Board Options Exchange's Volatility Index
, or VIX, was lately down 2.64, or 9.0%, to 26.80.
Beyond the very short term, the complacency suggested by the VIX could prove painful for investors, Boockvar thinks. "I think investors have to be careful not to get fooled by these kinds of rallies," he said. "We've seen over the last month that these rallies will get sold."
Case in point: Sam Ginzburg, managing director of equity trading at
, basking in the warm, green glow of the BKX on his trading screen toward midday.
"We took a shot and were long into the number because we liked the way the banks looked toward the end of the day
yesterday," Ginzburg said. "We booked a profit in them. In this market, if you have some money you need to keep it."
Good for him. The long-suffering
Philadelphia Stock Exchange/KBW Bank Index
was one of the market's strongest segments, up about 4.3%.
"It's not telling me to dip my toe back into the water and get long," Ginzburg said of today's action. "It's more of a maintenance time. I'm just kind of settling into the midday reprieve."
There's no telling how long "maintenance time" will last. For one thing,
, whose comments have roiled a market or two in the past, is currently speaking at an Atlanta Fed conference on financial risk. But more importantly, the market's ambivalence toward this quarter's blowout earnings suggests that stocks' ability to rebuild after their recent declines hinges mainly on the direction of inflation and interest rates. The
Federal Open Market Committee
meets next on November 16, and there's still a lot of data between now and then.
Boockvar remains cautious: "I still think we're in a downward trend. Even though the CPI was in line, it's not a particularly good number -- 0.4% in the headline is still above trend. We're not out of the woods yet. Inflation seems to be ticking higher, and that's not going to be good for Bonds and, thus, for stocks."
Nonetheless, the brokers were lately running up along with the banks, the
American Stock Exchange Broker/Dealer Index
up about 3%. Elsewhere, the
American Stock Exchange Pharmaceutical
Index was up about 4.3%, and the
Dow Jones Transportation Average
was up 1.6%.
Most notable on the downside were the boxmakers, which were getting crushed in the fallout from
wrote about the industry implications of Dell's chip-pricing problems in
a story last night, and first predicted in an
Oct. 6 story that a Taiwan supply crunch might hurt Dell's results.
After initially reacting cautiously to the CPI, the 30-year Treasury was lately up 12/32 to 97 23/32, putting the yield at 6.28%. The December bond futures were up 11 to 111 27/32. "If
the futures can get over 112," said Ginzburg, "that would be very good for the market, very good."
(For more on the fixed-income market, see today's early
Breadth was decidedly positive.
New York Stock Exchange:
1,795 advancers, 1,038 decliners, 506 million shares. 13 new 52-week highs, 161 new lows.
Nasdaq Stock Market:
2,192 advancers, 1,359 decliners, 601 million shares. 40 new highs, 72 new lows.
Tuesday's Midday Watchlist
was soaring 20 5/8, or 47.6%, to 64 after last night's announcement by
that it plans to buy the e-business software maker in a stock transaction valued at $2.1 billion. Shares of Nortel were falling 1 to 51 3/8.
Mergers, acquisitions and joint ventures
rose 1 1/2 to 33 13/16 after saying it closed a deal with
lately up 5/16 to 16 7/8, for Latin American satellite access.
Republic New York
lost 1/2 to 61 7/16 after it said its shareholder vote on its $10.3 billion proposed merger with Britain-based
has been postponed for the third time due to an ongoing investigation of Republic's futures brokerage division. Republic said it would push the meeting back to Nov. 30 from Oct. 29, in order to complete a probe into the bank's relations with a New Jersey money manager Martin Armstrong, who is accused of securities fraud.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
Dell dropped 3 1/8, or 7.6%, to 38 3/16 after cautioning last night that a 25% increase in computer memory-chip component prices used in its PCs would probably dent its third-quarter profit margins. CFO Thomas Meredith said that although he sees the price hike as a short-term problem, the company's third-quarter operating margins would be affected. Dell refused to say if stress on profit margins would trigger lower
earnings per share.
gained 4 1/8, or 5.8%, to 75 5/8 after reporting third-quarter earnings of 54 cents a share, in line with the 24-analyst estimate and up from the year-ago 47 cents.
added 3/16 to 5 11/16 after posting a third-quarter loss of 53 cents a share, narrower than the two-analyst estimate of 55 cents but wider than a year-ago loss of 23 cents.
added 3/8 to 23 1/16 after it posted third-quarter earnings of 24 cents a share, beating the 17-analyst estimate of 21 cents but down from the year-ago 28 cents.
rose 1/16 to 24 3/8 after it posted third-quarter earnings of 24 cents a share, better than the 12-analyst estimate of 21 cents and up from a year-ago 2 cents a share.
posted third-quarter funds from operations of 35 cents a share, a penny better than the 14-analyst estimate, and up from a year-ago 32 cents.
lifted 1 1/8 to 33 11/16 after posting third-quarter earnings of 60 cents a share, beating the eight-analyst estimate of 58 cents and the year-ago 23 cents.
slipped 3/16 to 22 1/2 after it posted third-quarter earnings of 46 cents a share, in line with the five-analyst estimate and up from the year-ago 43 cents.
fell 3/16 to 11 3/4 after it reported third-quarter earnings of 49 cents a share, missing the three-analyst estimate of 50 cents but up from the year-ago 31 cents a share.
rose 5/8 to 26 3/8 after posting third-quarter earnings of $1.96 a share, missing the 12-analyst estimate of $1.98 but up from the year-ago loss of $2.91.
was climbing 3/16 to 15 3/8 after it reported pro forma fourth-quarter earnings of 18 cents a share, beating the 11-analyst estimate of 16 cents and the year-ago 17 cents.
Was sinking 1/4 to 30 1/4 after it reported third-quarter underlying earnings of 87 cents a share, in line with the 12-analyst estimate and up from underlying earnings of 84 cents a year ago. The company said underlying results exclude several pretax charges. Including the charges, the company earned 84 cents a share, compared with a year-ago 81 cents.
Was popping 1 7/16 to 31 7/16 after it posted third-quarter earnings of 53 cents a share, falling below the 18-analyst estimate of 70 cents and the year-ago 67 cents.
was falling 2 3/16 to 82 1/4 after it posted third-quarter earnings of 51 cents a share, handily beating the 25-analyst estimate of 43 cents and the year-ago 19 cents, which included a pretax charge of $14 million for depression of fixed assets.
was climbing 1 3/4 to 41 1/4 posted third-quarter earnings of 57 cents a share, in line with the 27-analyst estimate and up from the year-ago 45 cents.
Offerings and stock actions
was bouncing 1 to 29 9/16 after it said it set a stock buyback for up to 4 million common shares.
upgraded shares of
to intermediate-term buy from accumulate, while
Credit Suisse First Boston
upped its rating to buy from hold. Lexmark was jumping 6 1/2, or 10%, to 71 9/16.
upped its rating on
to buy from market performer. PaineWebber upped the stock's fiscal 2000 EPS to $1.27 from $1.10. Lattice shares were hopping 2 3/16, or 7.8%, to 31.
Warburg Dillon Read
upped its rating of
to strong buy from buy. Lucent shares were advancing 1 3/4 to 59 1/16.
Warburg Dillon Read rolled out coverage of
with a strong buy rating and a price target of 55. Shares of Rayonier were adding 1/4 to 37 7/16.
Banc of America Securities
upped its rating on
to buy from market performer. Suiza Foods was gaining 1 to 36 7/16.
was hopping 2 1/8 to 119 3/4 despite its appliances' division announcment that it was recalling roughly 3.1 million
brand dishwashers that could be possible fire hazards. GE, along with the
U.S. Consumer Product Safety Commission
, said that models made between April 1983 and January 1989 contain a slide switch that can melt and ignite over time.
was leaping 1, or 8.5%, to 13 after it said it plans to hike Web-based advertising and email marketing rates.
Herb on TheStreet: Good Omen for Apple? And Bad Omen for Sabratek, Family Golf and Pillowtex?
10/19/99 6:30 AM ET
here two months ago mentioned that businesses were starting to reconsider buying
The info was based on data from Mike Kelly of
, an Emeryville, Calif., company that tracks PC buying patterns. The latest data, Kelly says, show businesses are continuing to evaluate Apple but have been holding off purchases. But if additional positive press on Apple's new products allays those fears, he says, new biz purchases should start showing up in a quarter or two.
And regarding Dell: He says
biz continues to accelerate "by every measure we have," except in low-end servers, where his data show it being beaten by
, a relatively insignificant part of Dell's biz.
This company just goes from bad to worse. Two weeks ago it was
spilling the beans on internal accounting issues. The latest: Late Friday, after everybody on Wall Street had gone home, the hobbled maker of medical infusion pumps said it would not make its $2.4 million semi-annual interest payment due on its convertible notes. It added: "If the interest payment is not made within a 30-day cure period, then an Event of Default will take place under the Indenture." In which case, the company could be headed for the Big B.
Family Golf Centers
, which yesterday said it had received its second extension in two weeks from lenders. But it, too, warns this last-ditch effort may not be successful.
lately? A week ago its lenders amended the loan covenants to allow Pillowtex more flexibility. Still, the important stats: $1.1 bil in debt, and a market value of $77 mil.
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