TheStreet.com's MIDDAY UPDATE
October 26, 1999
Market Data as of 10/26/99, 1:19 PM ET:
o Dow Jones Industrial Average: 10,384.76 up 34.83, 0.34%
o Nasdaq Composite Index: 2,851.92 up 35.97, 1.28%
o S&P 500: 1,296.82 up 3.19, 0.25%
o TSC Internet: 731.36 down 0.58, -0.08%
o Russell 2000: 418.43 up 0.67, 0.16%
o 30-Year Treasury: 96 23/32 down 9/32, yield 6.366%
In Today's Bulletin:
o Midday Musings: Distractions Abound as Nasdaq Leaps, Dow Shuffles
o Wrong! Dispatches from the Front: Cramer Knew He Had a Good One With Lucent
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Technical Analysis: From Patterns to Predictions
Today's Market Update
Cramer vs. Padinha: Getting up on the Wrong! Side of the Bed
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Midday Musings: Distractions Abound as Nasdaq Leaps, Dow Shuffles
10/26/99 1:13 PM ET
Out with the old-timers, in with the whippersnappers.
shook things up a bit this morning when it announced it was ousting some no-longer-trusty industrials form its benchmark index and replacing them with retail and technology titans. Stocks moved mostly higher on the news, which provided some temporary distraction from earnings reports and rate concerns.
Proud index parent Dow Jones will pull
from the index Monday. The stocks were mostly sulking about the news, with Goodyear down the most at 6.7% -- not surprising when you consider that all of the departing stocks have called the Dow home since at least the early 1930s, and some for longer than that.
Proving it's hip to that Internet thing, Dow will add
, marking the first time that
Nasdaq Stock Market
stocks have ever become members of the index.
will also join the Dow crowd. The industrial average was displaying modest gains, lately up 26 to 10,379.
Nasdaq Composite Index
sailed up 34, or 1.2%, to 2850, on the news, some traders said the reaction was somewhat muted to news deemed long overdue. "Obviously the stocks are reacting well, but a lot of people felt that this should have been done a while ago," said Mark Donahoe, managing director at
U.S. Bancorp Piper Jaffray
. This is a better representative on a basis of what the 30 most widely held stocks are, said Donahoe.
Others said stocks like Microsoft and Intel could play havoc with the index, volatility-wise. "You could certainly make the argument that they are more representative of the economy," said Howard Simons, a professor of finance at the
Illinois Institute of Technology
. But when one of them has a "bad hair day," said Simons it will not be unusual to see 200- to 300-point drops in the Dow.
Elsewhere, other major indexes were leaning towards the upside, with the
up 3 to 1296, and the
inching up a point to 419.
TheStreet.com Internet Sector
index was down a point to 731, however.
As earnings news continues to dominate and people remain fixed on the direction of interest rates. Simons optimistically said he thinks selling pressure has subsided a bit, with stocks tending to bounce off intraday lows. "Equities are doing reasonably well and I'm starting to see that sellers are not lining up" the way they had been, he said. Still, Simons thinks trading will stay range-bound until bond yields start to come down a bit. The 30-year Treasury was lately down 9/32 to 96 22/32, its yield at 6.37%. (For more on the fixed-income market, see today's early
"There are a lot of variables that could sway the market right now," said Donahoe. "People are in watch mode," he said, noting that a handful of
presidents are speaking today. Fed head
will deliver a speech Thursday night.
And speaking of banks,
said it named ex-
chairman of its board's executive committee. Rubin will have no direct line-of-report responsibilities but will help to run Citigroup along with co-Chairmen Sandy Weill and John Reed. Citigroup was up 1 1/4 to 49 1/16 on the news.
delved into the announcement in a
New York Stock Exchange
, decliners were edging out advancers 1,551 to 1,324 on 507 million shares, while on the Nasdaq Stock Market, leaders were beating laggards 1,906 to 1,718 on 606 million shares. New 52-week lows were topping new highs 194 to 32 on the Big Board, and on the Nasdaq, new lows were beating new highs 102 to 82.
For more discussion of the new Dow, don't miss our
TV show this weekend on
Fox News Channel
. This week's guest is Charles Carlson, manager of the
Dow 30 Value fund. The show airs Saturdays at 10 a.m. and 6 p.m. ET, and Sundays at 10 a.m. ET.
Tuesday's Midday Watchlist
The stocks heading into the Dow Jones Industrial Average were heading skyward to various degrees, with Microsoft up 1 3/4 to 94 3/16, Intel up 2 9/16 to 73 13/16, Home Depot up 1 1/4 to 73 3/16 and SBC up 1 9/16 to 45 13/16.
Different story on the other side. Goodyear was stumbling 3 1/16, or 6.7%, to 42 1/8 after it said it is disappointed to be cut from the Dow but said the deletion will not have a fundamental impact on its business. Elsewhere among the deleted stocks, Sears was off 1 13/16, or 6.3%, to 27 1/16; Chevron was down 1 9/16 to 88 7/16; and Union Carbide, getting no help from an
upgrade to buy from hold, was off 1/4 to 59 3/16.
Mergers, acquisitions and joint ventures
was slipping 5/16 to 17 3/16 after it said it has upped its bid for
to $14 a share, in attempt to compete with XL Capital's cash offer. According to Capital Re, Ace's rival bid came after a Delaware court rejected an injunction to prevent talks between Capital Re and XL Capital. The court's decision allows Capital Re to take XL Capital's all-cash offer if Ace did not launch a bid "at least as favorable." Both bids see Capital Re worth $511 million, reflecting on its 36.5 million outstanding share. Shares of Capital Re were bouncing 7/16 to 14, while XL Capital was climbing 11/16 to 47 3/16.
agreed to merge, creating a company with a market capitalization of $850 million. IPIX shareholders will get 1.369 shares of Bamboo.com for each IPIX share, with IPIX and Bamboo shareholders each owning about 50% of the combined company. Shares of Bamboo were advancing 1 3/8, or 8.4%, to 17 5/8, while Interactive Pictures was mounting 1 1/2, or 75, to 22 7/8.
Separately, each of the companies reported narrower-than-expected third-quarter losses. Bamboo.com reported a third-quarter loss of 63 cents a share, smaller than the two-analyst expectation of a 65-cent loss, but wider than a year-ago loss of 1 cent a share. Interactive Pictures reported a loss of 44 cents a share, narrower than the four-analyst estimated loss of 45 cents a share, and a year ago loss of 78 cents a share.
agreed to buy
for $41.125 a share in cash, or about $280 million. Watkins makes wireless communications equipment. Shares of Watkins-Johnson were popping 6 5/16, or 19.9%, to 37 7/8.
Microsoft may invest billions over four years to develop and promote a home-game console, code-named X-Box, in an effort to compete with
forthcoming Playstation 2,
The Wall Street Journal
said. Microsoft was adding 2 1/8 to 94 9/16, while Sony was gaining 1 7/16 to 150 5/16.
said Intel will offer its Linux program. Shares of Red Hat were soaring 10 1/2, or 13.6%, to 87 9/16.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
Burlington Northern Santa Fe
was climbing 3/8 to 29 3/8 after it reported third-quarter earnings of 70 cents a share excluding items, beating the 11-analyst estimate of 67 cents and the year-ago 66 cents.
slipped 5 1/4, or 11.5%, to 39 1/4 after it reported first-quarter earnings of 53 cents a share excluding items, in line with the 14-analyst estimate and up from the year-ago 43 cents including items.
hopped 1 1/16 to 76 5/16 after it said third-quarter earnings beat expectations, rising 14%, and helped by strong sales of its Chrysler and Mercedes cars. The company earned $1.6 billion, or $1.65 a share, after adjustments for onetime charges and profits, compared with $1.41 billion, or $1.45 a share, in the same period a year ago.
was down 5 3/8, or 16.5%, to 27 9/16 after warning that its 2000 earnings will fall short of expectations. The Ireland-based company blamed a delay in the launch of a migraine drug. The negative news overshadowed strong third-quarter results, also released today.
was falling 1/2 to 9 5/16 after warning late Monday it expected a net loss of about 36 cents in the third quarter, due to charges related to a contract dispute.
The Jackson, Miss.-based company
warned in late September that its contract dispute with Norwegian firm
would lead to a charge. At that time, the extent of the charge was not known. Analysts polled by First Call/Thomson Financial expected Friede to earn 19 cents in the quarter.
was bouncing 4 1/16, or 6.8%, to 63 15/16 after it reported fourth-quarter earnings of 31 cents a share, beating the 29-analyst estimate of 29 cents and the year-ago 7 cents. The company said that excluding acquisition-related charges, profits rose to $972 million from $647 million a year earlier helped by strong growth in sales of wireless, data and optical networking equipment.
Lucent also announced it would restructure into four core businesses in order to focus on the fastest-growing equipment markets, such as data and optical networking, wireless and semiconductors. The four business units, which will operate under one brand and be supported by Bell Labs technology are: Service Provider Networks, Enterprise Networks, NetCare Professional Services and Microelectronics and Communications Technologies.
was gaining 1 1/16, or 6.2%, to 18 1/16 after it posted third-quarter earnings of $1.08 a share, beating the nine-analyst estimate of 97 cents and the year-ago 64 cents.
was unchanged at 20 1/2 after it reported third-quarter earnings of 66 cents a share, beating the 10-analyst estimate of 64 cents, and the year-ago 58 cents.
Thomas & Betts
slid 9/16 to 45 15/16 after it reported third-quarter earnings of 82 cents a share, in line with the five-analyst estimate and up from a year-ago loss of 66 cents.
was sinking 1 1/16 to 34 7/16 after it reported third-quarter operating net of 18 cents a share, in line with the 21-analyst estimate and up from a year-ago 2 cents.
Offerings and stock actions
was climbing 1 9/16 to 95 3/8 after it said it added $3.5 billion worth of stock to its existing repurchasing program. The addition comes after a recent decline in stock price. The company also said it set its regular quarterly dividend of 12 cents a share, or an annual 48 cents. Last week, IBM cautioned that its fourth quarter and its first quarter of fiscal 2000 profits could be dented by slow sales due to Y2K fears.
upped its price target on
to 160 from 150. Shares of American Express were advancing 1 1/2 to 144 7/8.
Salomon Smith Barney raised its rating on
to a buy from a neutral. ATMI was climbing 2 5/8, or 11.7%, to 25 1/8.
Morgan Stanley Dean Witter
upped its 1999 earnings estimate on
to $2.18 a share from $2.13. AT&T was sliding 3/16 to 44 1/2.
sliced its price target for
to 75 from 80. Computer Sciences soaring 4 1/16, or 6.7%, to 64 1/4.
Morgan Stanley Dean Witter started
with an outperform rating. Digital Insight was falling 2 5/16, or 7%, to 30 5/8.
Donaldson Lufkin & Jenrette
sliced its rating on
to market perform from buy. Hearst-Arygle was retreating 1 1/16 to 21 15/16.
Morgan Stanley started
with an outperform rating and set a price target of 105. Shares of Internap were climbing 2 7/8 to 83 1/4.
Credit Suisse First Boston
cut its rating on
Park Place Entertainment
to buy from strong buy. Shares of Park Place Entertainment were slipping 1/4 to 13 1/2.
Salomon Smith Barney
initiated coverage of
with a buy/speculative rating and set a price target of 60. Radware was bouncing 1/16 to 41 1/4.
lowered its intermediate-term rating on
to neutral from accumulate. Semco Energy was tumbling 1/16 to 14 3/4.
PaineWebber raised its price target on
to 120 from 80. VoiceStream was plummeting 5 1/2, or 6%, to 85 3/8.
Wrong! Dispatches from the Front: Cramer Knew He Had a Good One With Lucent
James J. Cramer
10/26/99 1:06 PM ET
Short and cover. Short and cover.
reports a good number, not a blow-out number, not a super-de-duper number, but not a disgrace. And it goes up. It goes up because the hedge fund community was short it, in part because of all sorts of Y2K issues that still weren't addressed.
Cramer's Latest: Join the discussion on
To which I say "So what?" What matters is beating the psychology of the market.
Last week, I
said that Lucent was so over-shorted, so leaned against, that I didn't even care what it reported, I knew I had a good one going. (Shared it with the site, for the record.)
Lucent comes under two separate trading tenets I believe in: When too many people are short a good company, and Lucent is a good company, you can make money by taking the other side of the trade, and when a good company drops big ahead of the quarter, the risk is taken out of it. (I touched on the latter on our
TV show as a way to make money.)
These methods, as
, our editor-in-chief, points out, won't work for just any old company. A poor company that goes down ahead of a quarter doesn't mean much to me.
But for a company like Lucent, the risk reward at 56 was simply too great not to play.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Lucent. 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
Copyright 1999, TheStreet.com