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midday11-01-99's MIDDAY UPDATE

November 1, 1999

Market Data as of 11/1/99, 1:26 PM ET:

o Dow Jones Industrial Average: 10,708.15 down 21.71, -0.20%

o Nasdaq Composite Index: 2,984.52 up 18.09, 0.61%

o S&P 500: 1,361.54 down 1.39, -0.10%

o TSC Internet: 759.49 up 8.70, 1.16%

o Russell 2000: 431.51 up 2.87, 0.67%

o 30-Year Treasury: 99 07/32 down 8/32, yield 6.175%

In Today's Bulletin:

o Midday Musings: Market Watching Another Magic Number With Nasdaq 3000 in Reach
o Herb on TheStreet: The IDT Plot Thickens as It Delays Filing Its 10-K Annual Report Community

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Midday Musings: Market Watching Another Magic Number With Nasdaq 3000 in Reach


Thomas Lepri

Staff Reporter

11/1/99 1:13 PM ET

Nasdaq 3000. You don't have to be much of a prosodist to know that phrase doesn't roll off the tongue as trippingly as Dow 10K. But it's a nice, round milestone all the same, and unbeknownst to the market's trading range, it's almost within reach.

The market's major benchmarks were mixed around midday. The

Dow Jones Industrial Average

was down 21 to 10,709, while the S&P 500 was off 1 to 1362. Small-caps and Net stocks were faring better, with the

Russell 2000

up 3 to 432 and Internet Sector

index up 8, or 1.1%, to 759.

The market: Join the discussion on


Message Boards.

Meanwhile, the

Nasdaq Composite Index

was still floating around in record territory, though it had backed off from its earlier highs. The Comp was up 19, or 0.6%, to 2986, having traded as high as 2997.90. "Considering the rally we had last week, not to be down today is a pretty good sign," said Peter Boockvar, equity strategist at

Miller Tabak


Stocks' ability to dig in at these levels has much to do with the bond market, which is easing back only slightly after putting together three pretty impressive rallies itself last week. Earlier, the 30-year Treasury had fallen around a half-point after the

National Association of Purchasing Management's

released its

Purchasing Managers' Index

. The headline PMI slipped to 56.6 in October from 57.8 in September, slightly higher than the 56.4 forecast by economists in the


poll, but the prices paid index rose to 69.4 from 67.6.

The bonds shrugged that off easily enough. The long bond was lately down 5/32 to 99 9/32, putting its yield at 6.18%. (For more on the fixed-income market, see today's early

Bond Focus.)

"Today the bonds are acting great," said Boockvar. "The prices-paid component is being ignored, with people thinking it may have topped out. Now the glass is half full."

Boockvar was referring to the bond market's shift in sentiment following

last Thursday's

Employment Cost Index

, which came in slightly softer than expected and sparked the first of two huge rallies in both stocks and bonds. "This NAPM is not a good number for bonds. But now any news is good news, whereas before, any news was bad news."

And that's been good for stocks as well. "Overall, things have definitely improved as of late last week," said Bob Dickey, managing director of technical analysis at

Dain Rauscher Wessels

in Minneapolis. "We had three really good days with the kind of technical underpinnings we haven't seen in two months: decent advance/declines, improvement in the new highs/new lows ratio, better participation by big-cap tech stocks."

Still, many market participants are remaining cautious toward the market, which never approached the level of capitulation that conventional wisdom said it needed to form a bottom to the fall correction. "We never really reached an extreme reading as far as sentiment to the downside is concerned," Dickey said. "Now we're seeing a shift to the bullish side, but the spots on the market are changing. We're in for more of a rotational and churning sort of market than a trending market -- not necessarily down, but mixed. I don't think the market is going to bail us out any more."

On a technical basis, Dickey said he sees money moving into big-cap technology and drug stocks: "It's longer-term momentum for techs, while the drugs are more of a turnaround play. Financials have had their run and are likely going to be struggling now."

That's not exactly what Byron Wien has in mind.

Morgan Stanley Dean Witter's

equity strategist said today that he was raising the equities position of his portfolio to 85% from 80%, with all of that new exposure in financial stocks. (The remaining 15% of Wien's portfolio is in cash.)

Time will tell. The

Philadelphia Stock Exchange/KBW Bank Index

, which had gained about 25% between Oct. 15 and last Friday, was letting off some steam today, lately down about 0.7%. You can chalk a lot of that downside up to

American Express

(AXP) - Get American Express Company Report

, down 3.1%, and

Chase Manhattan


, off 2.6% after saying that a rogue trader's book-cooking would be rectified to the tune of $60 million in pretax fourth-quarter profits.

In other sector news, the

Morgan Stanley High-Tech 35

was about 1.1% higher, while paper stocks were also extending Friday's strength, with the

Philadelphia Stock Exchange Forest & Paper Products

Index up a further 0.7%.


Dow Jones Transportation Average

was down about 2%.

Market Internals

Breadth was narrowly positive.

New York Stock Exchange:

1,436 advancers, 1,400 decliners, 484 million shares. 62 new 52-week highs, 54 new lows.

Nasdaq Stock Market:

1,844 advancers, 1,882 decliners, 639 million shares. 158 new highs, 70 new lows.

Monday's Midday Watchlist

By Eileen Kinsella
Staff Reporter

The technology sector was pulling away from the rest of the pack and heading higher at midday, helped along by a number of joint venture and financing agreements.

said it will receive $22 million in third-round financing from


(EBAY) - Get eBay Inc. Report


Benchmark Capital


Morgan Stanley Dean Witter


. The deal calls for eBay CEO Meg Whitman and Benchmark venture capitalists Bill Gurley and David Beirne to sit on's board. Shares of eBay gained 3 1/16 to 138 1/8 while Morgan Stanley fell 3/16 to 110.

America Online


bounced up 3 5/8 to 132 7/8 after it announced a two-year online marketing pact with

Toys R Us


lately up1, or 7%, to 15 1/8.



wasn't exactly smiling about the news, and was lately off in the corner, sulking 2 7/16 to 57 1/2.

Lastly, America Online and eBay announced four new co-branded sites on several AOL sites. For more on the Internet sector, see the latest

Nothing but Net.

Mergers, acquisitions and joint ventures


(ADPT) - Get Adaptive Biotechnologies Corp. Report

inched up 9/16 to 45 5/8 after saying it plans to acquire privately-held

Distributed Processing Technology

for $235 million in a deal that will strengthen Adaptec's efforts to provide backup hardware and software for computer storage systems. The purchase price includes the cost of assuming Distributed Processing's stock option plan.



said it would assume a goodwill charge of $2.4 billion to $2.5 billion for the $3.3 billion majority interest it has taken in

Pimco Advisors


. Shares of Pimco popped up 2 3/8, or 6.9%, to 37 1/16. Allianz board member Helmut Perlet said at a news conference that the charge in 2000 would total roughly $120 million to $220 million in the following year,


reported. Allianz said earlier that it plans to have the goodwill completely written off over a 15-year period.

Separately, Allianz said it could boost its 70% interest in Pimco Advisors, while

Pacific Life Insurance

, in which Pimco shareholders have a 30% stake, would possibly lower its interest in the interim. Allianz also said that after closing the transaction, Pimco would be delisted.


(T) - Get AT&T Inc. Report

rose 7/16 to 47 3/16 and


lost 1 to 59 /8 after the companies announced plans for a broad marketing agreement.

Separately, AT&T announced plans to form a new public company,

AT&T Latin America

, that will merge the operations of


, the local exchange company AT&T is buying in Brazil, and


, a publicly traded company with telecommunications operations in Chile, Colombia and Peru.

examined the deal in a

story today.


(C) - Get Citigroup Inc. Report

fell 1 1/16 to 53 1/4 after it announced plans to take a minority interest in Japan-based online broker

Nikko Beans

. Citigroup said the 19% interest enables both parties to sell to other's customers in Japan.


General Electric PLC

announced that its

Marconi Communications

division would acquire


(NOK) - Get Nokia Oyj Report

SDH/DWDM transport equipment unit. Shares of Nokia fell 3 1/16 to 112 1/2.


(TGP) - Get Teekay LNG Partners L.P. Report

rose 1/16 to 23 15/16 after it announced plans to sell its California timberlands to

Hawthorne Timber LLC

, in a deal for roughly $397 million.



fell 9/16 to 39 1/8 after it said the

Justice Department

asked it for additional information on the proposed acquisition of Visio by


(MSFT) - Get Microsoft Corporation Report

. Shares of Microsoft were up 1/8 to 92 3/4.

Online investment bank

Wit Capital


rose 4 1/16, or 23.5%, to 21 11/16 is buying

SoundView Technology

, a private investment banking concern based in Connecticut, for about $320 million in stock.

took a look at the deal in a

story today.

Earnings/revenue reports and previews


Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.


Air Express International


jumped 3 1/2, or 13.2%, to 30 1/8 after it posted third-quarter earnings of 38 cents a share, missing the 12-analyst estimate of 40 cents and in line with year-ago 38 cents.

Avado Brands


lost 1/8 to 5 3/8 after it reported third-quarter earnings of 10 cents a share, shy of the six-analyst estimate of 18 cents and down from the year-ago 58 cents.

Mercury General

(MCY) - Get Mercury General Corporation Report

slipped 3/16 to 28 after it posted third-quarter earnings of 59 cents a share, missing the six-analyst estimate of 69 cents and down from the year-ago 73 cents.


(ORBK) - Get Orbotech Ltd. Report

climbed 2 15/16 to 80 3/4 after it posted third-quarter earnings of 97 cents a share, beating the five-analyst estimate of 88 cents and up from the year-ago 75 cents

Offerings and stock actions



rose 5/16 to 36 5/16 after it set a 10 million-share buyback.

Neuberger Berman's

(NEU) - Get NewMarket Corporation Report

fell 1/2 to 28 1/2 after its board approved a $50 million stock buyback plan. Neuberger Berman went public last month.

Track Data


gained 2 3/8, or 25.2%, to 11 7/8 after it set a 2-for-1 stock split.


(UAL) - Get United Airlines Holdings, Inc. Report

, parent of

United Airlines

, lost 1 9/16 to 66 1/2 after its board authorized a $300 million-share buyback plan.



added 7/8 to 22 1/4 after it said it was canceling its secondary offering. WorldGate plans to withdraw its registration statement, saying that it doesn't believe that an offering at this time is in the best interest of shareholders.

Analyst actions

Morgan Stanley sliced its rating on

Allmerica Financial

(AFC) - Get Ares Capital Corporation 6.875 % Notes 2007-15.4.47 Global Report

to neutral from outperform. Shares of Allmerica were falling 1 7/8 to 55 5/16.

Merrill Lynch

initiated coverage of

Calico Commerce


with an intermediate-term accumulate rating and a price target of 72. Calico Commerce was plunging 6 3/16, or 9.9%, to 56 7/8.

Donaldson Lufkin & Jenrette

upped its rating on

Cardinal Health

(CAH) - Get Cardinal Health, Inc. Report

to top pick from buy. Cardinal Health was up 1/8 to 43 5/8.

Merrill sliced its intermediate and long-term ratings on

Frontier Insurance Group

(FTR) - Get Frontier Communications Corp. Report

to neutral from accumulate. Frontier Insurance was sinking 2 1/2, or 28%, to 6 3/8.

DLJ slashed its rating on

Hartford Life

(HLI) - Get Houlihan Lokey, Inc. Class A Report

to market perform from buy. Hartford Life shares were skidding 2 5/8 to 50.

Merrill reinstated coverage of

LSI Logic

(LSI) - Get Life Storage, Inc. Report

with an intermediate-term accumulate rating and a long-term buy rating. LSI Logic was adding 15/16 to 54 1/8.

Merrill named

News Corp.

(NWS) - Get News Corporation Class B Report

a Focus One selection and upped its 12-month price objective to 45 from 40. Shares of News Corp were gaining 3/4 to 30 3/8.

Goldman Sachs

initiated coverage of



as a market outperformer. Goldman was lead underwriter of the company's Oct. 7 IPO. Shares of were sliding 2 7/8, or 12.2%, to 20 5/8.

Credit Suisse First Boston

initiated coverage on

PRI Automation


with a buy rating and a price target of 45. PRI Automation was climbing 1 3/8 to 41 1/2.

Morgan Stanley initiated coverage of

Province Healthcare





with outperform ratings. Shares of Province Healthcare was mounting 1/16 to 16 1/4.

Morgan Stanley U.S. equity strategist Byron Wien said he boosted the stocks position in his U.S. equities portfolio by 5 points to 85%, while slicing the cash portion by 5 points to 15%. Wien noted that his portfolio additions came from financials, which include

Bank of New York

(BK) - Get Bank of New York Mellon Corporation Report


American International Group

(AIG) - Get American International Group, Inc. Report


Mellon Financial



Fannie Mae




(CB) - Get Chubb Limited Report


Banc of America Securities

sliced its rating on

Wells Fargo

(WFC) - Get Wells Fargo & Company Report

to market perform from buy. Wells Fargo was slipping 1 3/8 to 46 1/2.



(DIS) - Get Walt Disney Company Report

and the government of Hong Kong have reached a deal to construct a Disney theme park in Hong Kong, according to published reports.

DuPont Photomasks


said David Gino has resigned as executive vice president-finance and CFO.

Nearly two years after

Merrill Lynch's


acquisition of

Mercury Asset Management

of Britain, the get-together isn't working out as gracefully as expected, the Heard on the Street column in

The Wall Street Journal

says today. Merrill was up 11/16 to 79 3/16.



was hopping 2 5/8 to 99 15/16 after it unveiled its DSP56690 baseband processor, which can handle all major existing wireless standards as well as satellite-based products.

Nextera Enterprises


was skidding 1/8 to 5 after it named board member Stephen Fink as CEO. The company also said it expected third-quarter revenues and earnings to be within the range of expectations. The current four-analyst estimate calls for earnings of 6 cents a share.


(RNWK) - Get RealNetworks, Inc. Report

RealJukebox software secretly monitors the listening habits and other activities of people who use it,

The New York Times

reported, citing a security expert. RealNetworks contends the practice does not violate consumer privacy because the info isn't stored by RealNetworks or distributed to other companies, the newspaper reported. Shares of RealNetworks were slipping 1 13/16 to 108.

Herb on TheStreet: The IDT Plot Thickens as It Delays Filing Its 10-K Annual Report


Herb Greenberg

Senior Columnist

11/1/99 6:30 AM ET

Monday's Short but Unsweet Start to the Week

IDT insanity:

The story just keeps getting wilder. Late Friday (and I do mean late -- 5:40 p.m. ET)



filed with the


that it'll be late in submitting its


annual report. Remember, this is the report with


numbers -- the report on which the auditors must sign off. (IDT's fiscal year ended July 31, which meant it had until the end of October to file the 10-K.) As I've mentioned repeatedly, it's generally


a good sign when companies delay their regular SEC filings, especially the filing that includes the audited fourth quarter -- a fourth quarter, which as reported

here, was convoluted, at best.

IDT's explanation (you'll love this!): "The Registrant has devoted all of its attention and energy to the further development of its business and accordingly is unable to file its Form 10-K for the year ended July 31, 1999 within the prescribed time period without unreasonable effort and expense."

Herb's Latest: Join the discussion on


Message Boards.

So, they're just too busy to comply with the SEC right now, and they'll get back to the agency when they aren't too busy?

Can't wait to see the next twist in this plot.

Hostile React-O-Meter:

It's continuing to spin outta control over this column's kudos to Jeff Matthews for his prescient

(AMZN) - Get, Inc. Report


here last August. Most readers think he was wrong because the stock is higher now than it was back then -- even with Amazon's most recent performance. "

Fund manager David Alger thinks Amazon will have $750 million in sales this Christmas and will simply run others out of business," writes

Georgi Orlov

of Seattle. "I'll take him over your 'shorty' any time. Care to know why? Because he has made people and himself a lot of money and your no-name 'short' simply does not stack up." (Never mind that this column's motto is that it


you money.)

And famed

Motley Fool


Dale Wettlaufer

, who has left the Fool to join former Fool Randy Befumo working with famed fund manager Bill Miller at

Legg Mason Fund Advisers

, writes that Matthews is off on his concern over declining gross margins "because he's not looking at the components" of cost of goods sold this quarter. (Maybe so, maybe not; time will tell.)

What I will tell Dale and everybody else (though I


like to hear from Dale because his arguments are well thought out) is to do me and all of our readers a favor: Instead of emailing me about


subject, take a trip over to our boards and post your comments on the

Herb on TheStreet

board. That way we won't keep our conversations private.

I get way too much email to respond to each one, and many are so good they shouldn't be wasted on one pair of eyes. (I know,


burns the midnight oil responding to his avalanche, which is what the Internet is all about. But, hey, I've only got so much time and unlike some people I know, I'm trying to have a life!) Besides, I'd rather post my responses, when I have them, for all to see.

Herb Greenberg writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at Greenberg also writes a monthly column for Fortune.

Mark Martinez assisted with the reporting of this column.

Copyright 1999,