TheStreet.com's MIDDAY UPDATE
October 21, 1999
Market Data as of 10/21/99, 1:34 PM ET:
o Dow Jones Industrial Average: 10,248.62 down 143.74, -1.38%
o Nasdaq Composite Index: 2,768.11 down 20.02, -0.72%
o S&P 500: 1,274.96 down 14.47, -1.12%
o TSC Internet: 715.36 up 5.84, 0.82%
o Russell 2000: 412.67 down 1.27, -0.31%
o 30-Year Treasury: 97 00/32 down 6/32, yield 6.345%
In Today's Bulletin:
o Midday Musings: DOT Moves Into Positive Territory as IBM Keeps Weighing on Dow
o Wrong! Rear Echelon Revelations: Hardware's Big Blindside
With the Dow taking a bow, make sure to check out TheStreet.com's message boards for insightful discussion.
James Padinha: Getting Up on the Wrong! Side of the Bed
Jim Seymour: Microsoft Is Up, Dell Is Down and IBM Pulls Its Aptivas
Cracking the Books, Part II
Then chat with Tom Lepri on AOL's MarketTalk at 2:30 p.m. EDT. MarketTalk is hosted by Sage Online. (Keyword: PF Live)
TheStreet.com on Fox News Channel
Steve Sanders, president of MDL Capital Management, is this week's guest on "Stock Drill." See what Herb Greenberg and Dan Colarusso have to say about this money manager's picks.
"Chartman" Gary B. Smith takes on a new rival in funds columnist Dagen McDowell and tries his hand at charting mutual funds. And on "Word on TheStreet," our panel will be taking a look at IBM and Y2K, and Cramer offers some thoughts on making the most of earnings news and takingadvantage of negativity.
"TheStreet.com" on 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:
IPOs: Getting Unlocked Could Clock Some Net Stocks
The next few months will see a deluge of supply as Net companies that went public last spring reach the end of their lockup periods.
Online Brokers: Morgan Stanley's Tow-Truck Days Are Over
The brokerage giant renames its online presence after itself, ending the run of Discover Brokerage.
Europe: As Rival Mannesmann Bids for Orange, Deutsche Telekom Can't Shake the Blues
For Deutsche Telekom, Mannesmann's invasion of the British Isles isn't its only pressing concern.
Under the Hood: It May Be Better Late Than Never When Buying Microsoft Stock
Most fund managers agree: You probably can't go wrong with Mister Softee.
Midday Musings: DOT Moves Into Positive Territory as IBM Keeps Weighing on Dow
10/21/99 1:28 PM ET
After a brief visit to the year-end rally thought to lie in its future, Wall Street has leapt back into its downbeat, hard-selling past.
Just when it started looking like the worries were overblown,
earnings report brought Y2K woes back to the fore again, just a day after upbeat
sent market movers on a full-out buying spree.
The market: Join the discussion on
"The story is IBM," said Ronny Kraft, CEO of
Gotham Capital Management
, referring to IBM's plunge after warning investors that Y2K concerns could slow sales for its fourth-quarter and first-quarter fiscal 2000. "People are starting to wake up to the fact that there is going to be a slowdown in tech revenues as a result of Y2K. I think the fourth-quarter is going to be extremely challenging for all
tech companies. If you think this quarter is problematic, wait till you see the fourth quarter."
Kraft said earnings problems like IBM's aren't foreign to Wall Street, but this latest blow is one of the harshest. "There are so many companies that are blowing up:
and now IBM," said Kraft. "This is a continuous problem. The multiples that exist on these stocks are absurd in the context of continuous evidence of a slowdown for Y2K, not to mention the yield of the long bond is 6.3%."
Yesterday's booming market conditions made for some buy-happy investors, convinced that Microsoft's heyday might last for more than one session. But the market's return to negative territory has left yesterday's bullish buyers running for cover. "We're right back at where we were before yesterday," said Todd Clark, head of listed trading for
Volpe Brown Whelan
in San Francisco. "We're seeing a lot of short-covering after yesterday's big run-up in the over-the-counter market."
Dow Jones Industrial Average
was plummeting 133, or 1.3%, to 10,259, with IBM sinking 15 7/8, or 14.8%, to 91 1/16. IBM was hacking nearly 110 points out of the Dow, though, because it was down 21 11/16 from its New York close, on which the Dow is based. IBM lost some ground in late composite trading yesterday.
(For a look at mutual funds with the most exposure to IBM stock, click
The tech giant was helping to push the
Morgan Stanley High-Tech 35
down as well, 1.5%.
In other tech news, the
Nasdaq Composite Index
was losing 16, or 0.6%, to 2772, with
, down 6 13/16, or 11.3%, to 53 5/16, contributing to its negative stance.
TheStreet.com Internet Sector
index was actually in positive territory, up 5, or 0.7%, to 715 behind gains in
. The DOT's turn reflects a general improvement in the major indices despite their overall negative cast, with all measures of their worst levels of the session.
Nasdaq Stock Market
, shares of
were skidding 9, or 13.7%, to 56 5/8 on disappointing third-quarter results.
On the upside,
was climbing 6 11/16, or 12.9%, to 58 11/16 with upgrades from
Warburg Dillon Read
New York Stock Exchange
was stumbling 7 1/2, or 11.1%, to 60 1/16 after receiving a negative opinion from the
on an antidiabetes drug, while
was bouncing 6 15/16, or 7.3%, to 102 11/16 after its positive third-quarter earnings report.
Other major indices were dripping in red, with the broad
off 12, or 1%, to 1277, while the small-cap Russell 2000 was down 2, or 0.5%, to 412.
On the Big Board, decliners were leveling advancers 1,918 to 937 on 586 million shares, while on the Nasdaq, laggards were also edging out leaders 2,140 to 1,474 on 653 million shares. The new 52-week lows were pummeling the new highs on the NYSE, 243 to 16, while on the Nasdaq, lows were beating out the highs 126 to 74.
On the bond front, the benchmark 30-year Treasury was down 2/32 to 97 4/32, with its yield at 6.34%. (For more on the fixed-income market, see today's early
Thursday's Midday Watchlist
IBM sank 15 7/8, or 14.8%, to 91 1/16 after it posted third-quarter earnings yesterday of 90 cents a share, in line with analysts' estimates and up from the year-ago 78 cents.
Worrisome to the market today, though, were the company's warnings about the end of this year and next year. IBM cautioned that soft spending by big clients before Y2K could dent profits for the fourth quarter of this year and the first quarter of fiscal 2000. IBM said its fourth-quarter earnings could dip 15 cents to 20 cents below the year-ago $1.24, leaving profits below the $1.33 consensus estimate. The company sees first-quarter 2000 earnings matching or slightly missing the year-ago 78-cent profit, also well short of analysts' consensus estimate of 90 cents a share.
analyst Steve Milunovich downgraded the shares to an intermediate neutral, long-term buy from intermediate buy, long-term buy.
cut the stock to outperform from buy and slashed its price target to 105 from 155.
cut its 1999 and 2000 earnings estimates on Big Blue.
Mergers, acquisitions and joint ventures
Bank of New York
fell 1/4 to 36 13/16 after it said it would buy the issuer, agency and depository services business of
in an effort to boost its global trust services and securities processing.
slipped 1 to 36 5/16 after it announced its plans to acquire
in a stock transaction. Shares of Ascent jumped 2 11/16, or 21.3%, to 15 3/8 . Liberty said that Ascent shareholders would receive $513.6 million in Liberty shares, with Ascent valued at $17.26 a share.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
America Online jumped 2 to 120 1/16 after late yesterday reporting first-quarter earnings of 15 cents a share on a fully taxed basis, beating the 32-analyst estimate of 13 cents and the year-ago 4 cents. Lehman Brothers raised its 2000 earnings estimates on the stock to 66 cents from 64 cents.
climbed 2 11/16 to 56 11/16 after it reported third-quarter earnings of 38 cents a share, a penny better than the 12-analyst estimate and up from the year-ago 33 cents.
inched up 7/8 to 53 5/8 after reporting third-quarter earnings of 32 cents a share, in line with the 16-analyst estimate, but down from the year-ago 36 cents a share.
El Paso Energy
edged up 1/16 to 41 1/8 after it posted third-quarter earnings of 50 cents a share, beating both the 13-analyst estimate of 48 cents and the year-ago 43 cents.
fell 1 11/16 to 43 1/8 after it reported third-quarter earnings of 61 cents a share including items. The six-analyst estimate called for earnings of 49 cents a share, while the year-ago figure was $1.17 a share, including a 20 cent gain.
was unchanged at 74 11/16 after it posted third-quarter earnings of 39 cents a share, a penny better than the nine-analyst estimate and up from the year-ago 32 cents.
climbed 3/4 to 39 after it posted third-quarter earnings of 9 cents a share, a penny below the 16-analyst estimate but up from the year-ago loss of 18 cents.
edged up 13/16 to 42 5/16 after posting a first-quarter loss of 22 cents a share, narrower than the 10-analyst estimate of a 32-cent loss but down from the year-ago 27-cent profit.
fell 11/6 to 28 7/16 after it posted third-quarter operating net of 69 cents a share, beating the 16-analyst estimate but falling below the year-ago 76 cents. The company's third-quarter retail revenue fell 4.1%, to $6.8 billion from $7.09 billion a year ago, but it said it was encouraged by retail sales and gross margin improvements in September. Sears also said it would focus on cutting costs and investing in e-commerce.
lost 2 3/8 to 86 after it reported fourth-quarter earnings of 92 cents a share, beating both the 15-analyst estimate of 89 cents and the year-ago 25 cents a share.
was soaring 33, or 27.7%, to 152 after reporting a third-quarter loss of 19 cents a share, 2 cents narrower than the 10-analyst expectation and narrower than the year-ago loss of 35 cents.
Banc of America Securities
upgraded it to strong buy from buy.
Offerings and stock actions
was surging 29 1/8, or 182%, to 45 1/8 in its trading debut.
priced the 6 million-share IPO at $16 a share, above the $13-to-$15 range.
inched up 5/16 to 108 1/4 after it set a 2-for-1 stock split, effective Dec. 9 for stockholders of record Nov. 18.
fell 3 1/4 to 81 9/16 after saying it plans to offer 20 million Class-A common shares in the U.S. and Canada, leaving the remaining 5 million up for grabs in other countries.
Morgan Stanley Dean Witter
will serve as the deal's underwriters.
jumped 4 15/16, or 5.2%, to 100 11/16 after it announced it would recommend canceling 64.28 million of its own shares and attempt to set a new stock buyback.
Morgan Stanley Dean Witter cut its 1999 earnings estimates on
to $1.92 a share from $1.97. Amgen dropped 6 1/16 , or 7%, to 80.
rose 5/8 to 31 1/8 despite Morgan Stanley's cutting its 1999 earnings estimates to $3.06 a share from $3.13.
Bear Stearns raised its 1999 estimates on Gateway to $1.43 from $1.40 and fiscal 2000 estimates to $1.82. Gateway jumped 5 7/8, or 11.3%, to 57 7/8.
was down 5/16 to 60 11/16 even though
Donaldson Lufkin & Jenrette
upgraded it to buy from market perform and
Deutsche Banc Alex. Brown
reiterated a strong buy rating.
was up 1 1/8 to 28 5/16 after Merrill Lynch upped it to near-term accumulate from neutral, while trimming earnings estimates, and
Salomon Smith Barney
raised it to buy from outperform.
Pratt & Whitney
, a unit of
said it received an engine contract from
America West Holdings'
America West Airlines
, worth about $500 million. Shares of UTX slipped 5/16 to 55 11/16.
Wrong! Rear Echelon Revelations: Hardware's Big Blindside
James J. Cramer
Microsoft, Dell, IBM:
Join the discussion on
Message Boards. Remember the way in which corporate America shares information. For two months of the quarter, companies are pretty free with guidance. With one month left, they shut up. They can't reveal anything that would give a clue to anybody. They are quiet.
It looks like in the month of September, the salespeople got Y2K'd. It stunted sales badly. And the worries weren't communicated. The analysts didn't get it.
Hence the big blindside for so many of these older hardware companies. They were reassuring us not to worry even as their own people were beginning to freak out. The quiet period betrayed a frightening reality that we are now learning about.
My conclusion: I am sticking with what is in my medicine chest and my fridge until this period runs its course. (Small tech, telco-tech and the Net should be fine on weakness today.)
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Most portfolio trackers suck. We are a paid site. Ours has to be the best. So it is. While you are waiting for the action today, switch to it. You will be blown away.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long IBM. 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
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