midday10-25-99

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TheStreet.com's MIDDAY UPDATE

October 25, 1999

http://www.thestreet.com

Market Data as of 10/25/99, 1:09 PM ET:

o Dow Jones Industrial Average: 10,332.52 down 137.73, -1.32%

o Nasdaq Composite Index: 2,796.55 down 19.97, -0.71%

o S&P 500: 1,288.54 down 13.11, -1.01%

o TSC Internet: 718.59 up 2.48, 0.35%

o Russell 2000: 415.59 down 3.10, -0.74%

o 30-Year Treasury: 96 13/32 down 19/32, yield 6.391%

In Today's Bulletin:

o Midday Musings: Debate on What's Next Rages as Blue-Chips Sell Off Hard
o Herb on TheStreet: The Capers Continue at Compaq

TheStreet.com Community

TheStreet.com's message boards have personality! Check out these great conversations fueled by TSC's thought-provoking commentary. And make sure to visit the Community section every day for the latest discussions and information on upcoming chats and appearances.

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Herb on TheStreet:

http://www.thestreet.com/bbs/Forum1/HTML/000048.html

Today's Market Update

http://www.thestreet.com/bbs/Forum6/HTML/000007.html

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Midday Musings: Debate on What's Next Rages as Blue-Chips Sell Off Hard

By

Justin Lahart

Senior Writer

10/25/99 1:10 PM ET

There are two ways to characterize what's going on with the stock market today, and whichever one is right makes all the difference in the world.

One way is to say that today's pullback is nothing more than a momentary pullback in a market that's finally found it's feet. The

S&P 500

tacked on 4.3% last week in a rally that, for once, wasn't based on just a narrow group well-loved, big-cap stocks advancing. So what if the market takes a little pause? The trend is up.

The market: Join the discussion on

TSC

Message Boards.

The other way of looking at what's going on is to say that last week was a fake-out, an oversold bounce higher in a downward-moving market. Until stocks see some textbook capitulative selling, this thing hasn't plumbed the bottom yet.

Among market watchers, who have already seen stocks rally and fail three times since hitting their highs in late July, the latter interpretation of the market seemed the more popular today.

"Basically, I'd say there's no change in my view that this is a bear market rally that we've been seeing," grumbled Tim Hayes, senior equity strategist at

Ned Davis Research

in Nokomis, Fla. "I think the market will come back to the realization that nothing has really changed for the better. The internals of the market have not improved in terms of breadth and volume."

Moreover, Hayes feels that when shares hit their latest lows a little more than a week ago, "we had not got the deeply oversold levels you need for a bottom that's going to last."

Hayes, who spends a lot of time tracking sentiment measures, does note that some of them are getting pretty low -- the ones put out by

Market Vane

are scraping along at levels not seen since the 1980s. But sentiment gauges that measure more of a long-term outlook than Market Vane's (which tracks sentiment through the stock futures market) are still pretty high. "The shorter-term you get, the more pessimism you see -- which sort of goes along with the idea of a bear-market rally," said Hayes.

Others may not be as down on the market as Hayes, who reckons the market won't come back until it cuts 23% to 25% off its highs, but there's still a sense that stocks will continue to struggle for a while.

"The rate increases that you've seen in the bond market are having a corrosive effect on the stock market," said Jim Benning, stock trader at

BT Brokerage

. "I don't think it's going to hurt the stock market too badly, but it doesn't help."

The bond market was hurting awfully badly, with the benchmark 30-year Treasury down 20/32 to 96 13/32. Its yield swelled to 6.40%, the highest since Oct. 22, 1997. (For more on the fixed-income market, see today's early

Bond Focus.)

For Benning, the key will be Nov. 16

Federal Open Market Committee

meeting. He's hopeful that whichever way the Fed goes -- tighten or stand pat -- there will be clear sense that the Fed will be out of picture once it's done.

But for that to happen, points out Steve Goldman, market strategist at

Weeden

in Greenwich, Conn., it will be important things start cooling down. "We need a vision or a clear-cut sign that the economy is slowing down," he said. "There's still no evidence of that. Subsequently, stocks are going to have a difficult time."

The

Dow Jones Industrial Average

was lately off 132, or 1.3%, to 10,338. The

S&P 500

was down 13, or 1%, to 1289.

Things were a little bit better in tech-land. The

Nasdaq Composite

was off 19, or 0.7%, to 2797. And

TheStreet.com Internet Sector

index was actually registering gains. The DOT was lately up 2 to 718.

The small-cap

Russell 2000

was down 3 to 416.

Market Internals

Breadth was negative on moderate volume.

New York Stock Exchange:

1,002 advancers, 1,877 decliners, 440 million shares. 31 new 52-week highs, 186 new lows.

Nasdaq Stock Market:

1,554 advancers, 2,176 decliners, 514 million shares. 67 new highs, 105 new lows.

Monday'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

Asarco

(AR) - Get Report

added 1/16 to 29 5/8 after saying it forged a $1.18 billion pact with

Grupo Mexico

, axing its planned $1.17 billion merger with

Phelps Dodge

(PD) - Get Report

lately up 1/2 to 58 9/16. The transaction also calls for Grupo Mexico to assume $1 billion of Asarco's debt. Asarco's decision to unite with Grupo Mexico followed Phelps refusal to up its cash and stock bid, which valued the company at $29.34 a share based on Friday's closing prices. Before inking the agreement, Asarco handed over a $30 million breakup fee to Phelps Dodge.

An investment group, including

Berkshire Hathaway

(BRK.A) - Get Report

, is buying

MidAmerican Energy Holdings

(MEC) - Get Report

for $35.05 a share in cash, a hefty premium over MidAmerican's closing price of 27 1/4 Friday. Shares of MidAmerican jumped 6 3/16, or 22.7%, to 33 7/16.

Columbia Energy Group

(CG) - Get Report

rose 2 1/8 to 64 1/8 after it said no to

NiSource's

(NI) - Get Report

sweetened $6.1 billion takeover bid. Columbia said the NiSource offer was financially inadequate. Columbia said its board authorized management to look into strategic alternatives, including a merger. Shares of NiSource inched up 7/16 to 20 3/8.

Deutsche Bank

said it would buy

Chase Manhattan's

(CMB)

Dutch auction business, which arranges competitive bids on securities. Deutsche said the transaction will be made through its

Bankers Trust

subsidiary and will expand its Dutch auction business by more than 150 clients. Shares of Chase fell 2 11/16 to 77 15/16.

Excite@Home

(ATHM) - Get Report

added 1 1/8 to 40 1/8 after saying it's buying

Bluemountain.com

for about $780 million in cash and stock.

GreenPoint Financial

(GPT)

slipped 13/16 to 25 15/16 after it said its manufactured housing unit signed two separate service agreements totaling $900 million, as well as a backup servicing agreement. GreenPoint Credit signed a deal with a unit of

Bank of America

(BAC) - Get Report

, which fell 1 3/16 to 57 9/16, and made a servicing agreement with

Deutsche Financial

, a unit of Deutsche Bank. The backup service deal is with

Dynex Capital

(DX) - Get Report

.

Stamps.com

(STMP) - Get Report

added 9/16 to 38 9/16 after it said it plans to buy

iShip.com

, which provides Web-based shipping services for about $300 million in stock. Stamps.com plans to issue 8 million shares of common stock for all shares, options and warrants of privately held iShip.

Earnings/revenue reports and previews

Arrow Electronics

(ARW) - Get Report

climbed 1, or 5.3%, to 19 3/4 after it reported third-quarter earnings of 38 cents a share, beating the six-analyst estimate of 36 cents and up from a year-ago 37 cents a share.

Atlantic Richfield

(ARC) - Get Report

fell 2 to 92 despite posting third-quarter operating net of $1.55 a share, well above the 17-analyst estimate of $1.23 a share and the year-ago 22 cents a share.

AT&T

(T) - Get Report

, a Dow Jones Industrial Average component, rose 1 1/4 to 44 5/16 after it posted third-quarter operating earnings of 54 cents a share, a penny ahead of the 22-analyst estimate, but down from the year-ago 68 cents.

Chevron

(CHV)

fell 2 to 91 3/4 after reporting third-quarter earnings of $1.07 a share, well above the 21-analyst estimate of $1.01 a share and up from a year-ago 59 cents a share.

CIT Group

(CIT) - Get Report

climbed 5/16 to 18 9/16 after it reported third-quarter earnings of 60 cents a share, a penny shy of the eight-analyst estimate but up from a year-ago 53 cents a share.

Columbia/HCA Healthcare

(COL)

edged up 1/16 to 21 13/16 after it reported third-quarter earnings from continuing operations of 27 cents a share, 2 cents ahead of the 21-analyst estimate and up from the year-ago 20 cents.

Danka Business Systems

(DANKY)

inched up 15/16 , or 10.5%, to 9 7/8 after it said it sees second-quarter net income in a range of 13 cents to 15 cents, excluding items. The current four-analyst estimate calls for earnings of 15 cents.

EG&G

(EGG)

climbed 1 7/8 to 40 1/4 after it reported third-quarter earnings of 35 cents a share, missing the four-analyst estimate of 38 cents but up from the year-ago 14 cents a share.

Exxon

(XON) - Get Report

, a Dow component, fell 1 3/16 to 75 11/16 after reporting third-quarter earnings of 61 cents a share, ahead of the 21-analyst estimate of 59 cents and up from the year-ago 58 cents.

LSI Industries

(LYTS) - Get Report

lost 1 1/8 to 46 13/16 after it posted first-quarter earnings of 52 cents a share, beating the two-analyst estimate of 46 cents and the year-ago 40 cents a share.

MDU Resources

(MDU) - Get Report

lost 7/16 to 23 3/16 after it posted third-quarter earnings of 52 cents a share, be3ating both the 12-analyst estimate of 50 cents and the year-ago 42 cents.

3M

(MMM) - Get Report

, a Dow component, rose 1/16 to 92 5/8 after posting third-quarter operating earnings of $1.14 a share, ahead of the nine-analyst estimate of $1.06 and up from the year-ago operating earnings of 97 cents.

Union Carbide

(UK)

, also a Dow component, slipped 3/8 to 59 1/2 after it posted third-quarter operating earnings of 36 cents a share, a penny shy of the 10-analyst estimate.

Zenith National Insurance

(ZNT)

fell 1/8 to 22 1/2 after it cautioned investors that it expects a third-quarter loss in the 20-cents-a-share range, citing slowness in its workers compensation insurance and property reinsurance markets. The company's loss would be in line with the consensus estimate of a 20-cent loss.

Offerings and stock actions

Catalina Marketing

(POS)

was hopping 7/16 to 84 1/16 after it said that its board approved an additional $50 million to the company's buyback plan, bringing the program total to $59 million.

Colonial Properties

(CLP)

was climbing 1/4 to 25 5/8 after it said its board authorized the buyback of up to $50 million of its outstanding common shares.

Packaging Corp. of America

(PKG) - Get Report

said it is postponing its IPO. The sixth-largest producer of containerboard in the U.S. was scheduled to begin trading tomorrow, with 42.8 million shares priced at $16 to $19 each through

Goldman Sachs

.

Radio One

(ROIA)

was slipping 7/8 to 45 1/8 after it said it has set a 5 million-share Class A stock offering. According to its

Securities and Exchange Commission

filing, Radio One will offer 4 million shares, while stockholders offer the remaining 1 million.

The vice chairman of

UPS

(UPS) - Get Report

said the shipping giant's shares could begin trading Nov. 10.

Morgan Stanley Dean Witter

is offering 109.4 million shares in a range of $36 to $42 each.

UST

(UST) - Get Report

was advancing 3/16 to 28 13/16 after it said that its board approved the repurchase of up to 20 million common shares.

Analyst actions

PaineWebber

raised its 1999 earnings estimates for

Amerada Hess

(AHC) - Get Report

to $2.55 from $2.45. Shares of Amerada Hess were falling 1 7/16 to 57 5/16.

PaineWebber raised its rating on

Aon

(AOC)

to buy from neutral and lifted its price target to 45 from 32. Shares of Aon were gaining 1 3/8 to 33 1/8.

Salomon Smith Barney

cut its rating on shares of

American General

(AGC) - Get Report

to neutral from outperform. American General shares were losing 3 1/4 to 71 1/2.

A number of research firms made positive moves on

Ericsson

(ERICY)

.

Donaldson Lufkin & Jenrette

raised its rating to buy from market perform, while

Lehman Brothers

raised its rating to outperform from neutral.

Deutsche Banc Alex. Brown

and

Credit Suisse First Boston

raised their price targets on the stock. Shares of Ericsson were declining 13/16 to 38 3/16.

Deutsche Banc Alex. Brown and

J.P. Morgan

initiated coverage of

Foundry Networks

(FDRY)

with buy ratings. Foundry shares were soaring 5 1/8 to 167 1/4.

CSFB added

Glaxo Wellcome

(GLX)

to its European focus list. Glaxo Wellcome shares were stumbling 1/8 to 59 7/16.

Merrill Lynch started coverage of

Interactive Intelligence

(ININ)

with an intermediate-term accumulate rating and a long-term buy rating. Merrill set a 12-month price target of 33. Interactive Intelligence shares were skidding 1 7/8, or 6.7%, to 25 3/4.

Merrill Lynch

cut its rating on

Lehman Brothers

(LEH)

to near-term accumulate from buy. Shares of Lehman Brothers were declining 2 3/8 to 65 9/16.

Merrill also lowered its rating on

Morgan Stanley Dean Witter

(MWD)

to near-term neutral from near-term accumulate. Shares of Morgan Stanley were tumbling 2 13/16 to 100 1/16.

SG Cowen

raised its rating on

Protein Design Labs

(PDLI) - Get Report

to strong buy from buy. Protein Design Labs was bouncing 3 1/4, or 8.3%, to 42 1/4.

Miscellany

CMGI's

(CMGI)

AltaVista

division unveiled a huge revamp, converting itself into an Internet portal site to better compete with portal leader

Yahoo!

(YHOO)

. CMGI was advancing 3 15/16 to 107.

According to two market research firms,

Dell

(DELL) - Get Report

hopped to No. 1 among PC sellers in the third quarter, rising above

Compaq

(CPQ)

. Dell shares were sliding 5/16 to 39 1/2.

E-Stamp

(ESTM)

was climbing 1 1/4, or 6.1%, to 21 1/2 after it said it is launching a $126 million brand marketing campaign.

Herb on TheStreet: The Capers Continue at Compaq

By

Herb Greenberg

Senior Columnist

10/25/99 6:30 AM ET

Short Positions

Quite the prediction

: In his latest report to clients on

Compaq

(CPQ)

last night,

Piper Jaffray's

Ashok Kumar noted that year to date Compaq's stock is down 56% vs. a 6% advance for the

S&P 500

. Then he wrote: "The stock's attempted bottoming process has failed. Having had a near-death experience, we are doubtful if Compaq will ever return to its glory days. Ironically in spite of all the acquisitions, there is a real threat of Compaq falling back to being a commodity player again."

Compaq officials were not available last night.

No fun and games:

So,

Mattel

(MAT) - Get Report

says it did an audit of

The Learning Company

and found no irregularities. Can't help but wonder how it could do a thorough audit in just two weeks. The company, however, says that's just what it did with the help of a special team from the law firm of

Wachtell, Rosen, Lipton & Katz

and a special unit of

PricewaterhouseCoopers

. Yet the company never said just why The Learning Company -- which Mattel bought last year -- missed its numbers. Any bets that this fairy tale doesn't have a happy ending?

Join the discussion on

TSC

Message Boards.

Diamond in the rough:

Charles & Colvard

(CTHR) - Get Report

-- formerly known as

C3

and the maker of a fake diamond called moissanite -- reported a third-quarter loss of 21 cents a share the other day. But the most interesting figure was in the balance sheet.

Before I give you that number, however, remember my interview with C&C CEO Jeff Hunter a couple of weeks or so ago? In that interview,

I asked about the deal C&C has with

Cree Research

(CREE) - Get Report

, which makes the silicon carbide crystals. The deal calls for C&C to buy all of the crystals Cree makes through June 2000. Considering that C&C's shipments are below expectations, I had asked, Does that mean C&C's inventory would be up? He said yes, but added, "This isn't like lettuce, something you have to use. We're thinking for the long term."

The

very

long term, apparently. As of the third quarter, C&C's inventory was valued at $10.3 million, or around 1,000 days -- nearly three years.

CHS calamity

: Can't wait to see what news

CHS

(HS)

has today. The company's stock was halted shortly before the market closed on Friday. No further information was available.

TSC's new design

: Bravo to the design team. As someone who frequently works from home, I can now honestly say that there's no reason

TheStreet.com

can't be my primary source for biz news and analytical tools. If you haven't done it already, check out the button on the upper right hand side of the front page for ready access to news and press releases on

all

companies. (

TheStreet

was the only mainstream site I could find that carried the

Reuters

news of CHS' halt.) And I can't say enough about

TheStreet's

real-time quotes. Very easy to sign up for and use. Not clunky. As with the whole new design: great execution.

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