TheStreet.com's MIDDAY UPDATE
November 3, 1999
Market Data as of 11/3/99, 1:20 PM ET:
o Dow Jones Industrial Average: 10,600.19 up 18.35, 0.17%
o Nasdaq Composite Index: 3,029.32 up 47.69, 1.60%
o S&P 500: 1,354.41 up 6.67, 0.49%
o TSC Internet: 767.26 up 14.49, 1.92%
o Russell 2000: 435.98 up 3.59, 0.83%
o 30-Year Treasury: 100 02/32 up 11/32, yield 6.113%
In Today's Bulletin:
o Midday Musings: Nasdaq Keeps Steaming Toward Close Above 3000
o Herb on TheStreet: Why P.T. Barnum Would Love CellNet Investors
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Midday Musings: Nasdaq Keeps Steaming Toward Close Above 3000
11/3/99 1:27 PM ET
Technology stocks fueled the market's upside this morning, making the
Nasdaq Composite Index
look like the big index that could. The tech-infused average broke through the key 3000 level for the second consecutive day, and by midday was still floating happily above it, up 47, or 1.6%, to 3029.
TheStreet.com Internet Sector
index was jumping as well, up 13, or 1.8%, to 766.
A number of positive earnings announcements and joint ventures were powering the move higher. Leading the pack on the Nasdaq market was
, sprinting 19.1%, after last night announcing an e-commerce venture with
showed some muscle, lately up 9% after
last night reporting better than expected earnings.
Meanwhile, in another room, pharmaceutical stocks were popping on news of a $65 billion
American Home Products
American Stock Exchange Pharmaceutical Index
was rising 3%.
Broader indices, though also heading higher, were not smiling quite as much. The
Dow Jones Industrial Average
was up just 18 to 10,600, retreating from its intraday high of 10,649.74 behind declines in
. The broader
was up 7 to 1354. The small-cap
was up 4 to 436.
Though happy about the general tone of the market today, some traders and strategists tempered their enthusiasm with caution about the weeks ahead, noting upcoming economic reports and the next
meeting on Nov. 16.
"The Nasdaq is of course setting new highs, but it's not going to go a heck a lot of higher," said Jim Volk, co-director of institutional trading at
in Portland, Ore. If inflation signals and interest rates don't cooperate, "you could get some dislocation in this market," warned Volk, who sees the Dow and S&P as being locked in a trading range right now.
Volk called this morning's activity a "technical reaction to the fact that the bond market did not act poorly," after a Treasury announcement detailing next week's issue of new 5- and 10-year notes. Indeed, the bond market actually took the news quite well, with the benchmark 30-year Treasury lately up 10/32 to 100 2/32, its yield easing to 6.12%.
"The market has pretty well discounted the 25-basis-point rate hike" at the upcoming Fed meeting, said Volk. Stocks got their act together after what he characterized as a "kind of sloppy market" yesterday, referring to the Nasdaq's flip-flop around 3000.
Michael Clark, managing director and head of equity trading at
Credit Suisse First Boston
, echoed the feeling. "A decent bounce is warranted. We came out of October OK and the tax-selling season is over," he said. "The broad market was badly beaten up and breadth is much better now." Still, he said he doesn't expect the market to go running off into the next performance stage, at least until the new year rolls around.
"We've got a heavy calendar to eat through in November, it's going to be stagnant until early December," Clark said. Though he said he is not really worried about Y2K, he feels there will be a lot more leadership and ideas in terms of stock picking as 1999 winds down.
Breadth was moderately positive this afternoon, with
New York Stock Exchange
advancers edging out decliners 1,464 to 1,416 on 557 million shares. Leaders were beating laggards 2,124 to 1,564 on 823 million shares on the
Nasdaq Stock Market
. New lows were topping new highs 65 to 49 on the Big Board, while new highs were leading new lows 183 to 62 on the Nasdaq.
Wednesday's Midday Watchlist
American Home Products and Warner-Lambert are negotiating a $65 billion merger that would join two of the world's largest pharmaceutical companies, the companies confirmed. AHP Chairman John Stanford would likely be tapped as chairman of the merged company, while Warner-Lambert Chairman Lodewijk J.R. de Vink would probably become CEO, the newspaper said. Shares of AHP were jumping 4 1/4, or 8.4%, to 54 5/8, while Warner-Lambert was leaping 3 13/16 to 82.
joint newsroom reported on the merger in a
story this morning.
Mergers, acquisitions and joint ventures
was slipping 7/16 to 60 1/8 after it announced its plans to buy
Aluminum of Korea
set a multiyear pact whereby Blockbuster will become the premier home video provider on AOL's Entertainment Channel, while AOL will be heavily promoted through Blockbuster. As part of the pact, AOL will make a $30 million equity investment in
. Shares of Blockbuster were hopping 1 5/16, or 10.5%, to 13 13/16, while America Online was bouncing 4 5/8 to 137 3/4.
for $10.25 a share in cash, or $162.3 million. American Greetings said the takeover is expected to be additive to earnings in the upcoming fiscal year. American Greetings was climbing 3/4 to 25 13/16, while Gibson Greetings was popping 3, or 66%, to 9.
has offered about $700 million for
television station, the
reported, citing people familiar with the bid. General Electric shares were jumping 2 9/16 to 131 9/16.
was mounting 3 5/8, or 6.5%, to 58 7/8 after it said it is not in negotiations to be bought by
. Shares of Microsoft were climbing 7/16 to 92.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
was unchanged at 33 15/16 after it posted third-quarter earnings of 54 cents a share, a penny ahead of the 12-analyst estimate and up from the year-ago 31 cents.
was bouncing 2 5/8, or 6.5%, to 43 after it posted third-quarter earnings of 57 cents a share, beating the seven-analyst estimate of 53 cents and up from the year-ago 42 cents.
was sliding 1/8 to 19 7/16 after reported a third-quarter loss of 17 cents a share, wider than the six-analyst estimate of a 16-cent loss but narrower than the year-ago 38-cent loss.
was stumbling 3/16 to 6 after it posted third-quarter earnings of 16 cents a share, in line with the nine-analyst estimate but down from the year-ago 28 cents.
was climbing 13/16 to 24 5/16 after it posted third-quarter earnings of 57 cents a share, missing the 11-analyst estimate by a penny and down from the year-ago 74 cents.
fell 1 5/16 to 37 13/16 after it said October same-store sales rose 10%.
Qualcomm was soaring 20 7/16, or 9%, to 245 5/16 after it posted fourth-quarter operating earnings of 91 cents a share, beating the 16-analyst estimate of 88 cents and the year-ago 27 cents. Qualcomm also said its board approved a 4-for-1 common stock split and would hold a special meeting in December to vote on the split. For more details on Qualcomm's quarter, take a gander at the
story reported by
was hopping 5/16 to 10 5/8 after it posted third-quarter earnings of 18 cents a share, missing the two-analyst estimate by a penny but up from the year-ago 3 cents a share.
was mounting 1 13/16, or 6.6%, to 28 15/16 after it posted fiscal second-quarter earnings of 79 cents a share, ahead of the 15-analyst estimate of 73 cents and above the year-ago 60 cents.
was declining 1 9/16 to 53 3/4 after it posted third-quarter earnings of 81 cents a share, beating the 22-analyst estimate of 78 cents and ahead of the year-ago 66 cents.
Offerings and stock actions
was advancing 1 11/16, or 7.4%, to 24 1/2 after it said it set a $40 million addition to its existing stock buyback.
was soaring 20 3/16, or 168.2%, to 32 1/4 in its trading debut.
Donaldson Lufkin & Jenrette
priced the 5.6 million-share IPO top-range at $12.
was jumping 2 1/4, or 5.7%, to 41 11/16 after it said it set a 20 million-share repurchasing program.
was unchanged at 35 1/4 in its trading debut. Goldman Sachs priced the 21.1 million-share IPO at $22.588 a share.
upped its expected price range for
25 million-share IPO to $13 to $15 from $11 to $13. The offering is set to price on Thursday. For more on Webvan, check out
was popping 1 to 25 3/4 after it said it plans to add $30 million to $50 million to its current $150 million share repurchasing program.
upped its price target on
to 90 to 95 from 75 to 80. Apple was rising 1 13/16 to 82.
Morgan Stanley Dean Witter
sliced its rating on
to neutral from outperform. Beckson was inching up 1/4 to 49 1/2.
upgraded shares of
to accumulate from neutral. Deere jumped 2, or 6.3%, to 39.
cut its rating on
to neutral from attractive, citing price. Goldman slipped 9/16 to 69 3/16.
Hambrecht & Quist
sliced its rating on
to market perform from buy. Hutchinson fell 3 5/16, or 14.4%, to 19 13/16.
sliced its rating on
to market perform from buy. Navistar dropped 5, or 12%, to 36 5/8.
Credit Suisse First Boston
to strong buy from buy. Nortel rose 1 13/16 to 62 13/16.
Merrill Lynch reinstated coverage of the following oil stocks with buy ratings:
, which jumped 1 1/2 to 64 1/4;
, which inched up 1/16 to 59 9/16;
, which slipped 7/16 to 26 11/16;
, which fell 15/16 to 73 3/16; and
, which moved up 1/2 to 55 3/4.
Merrill also started coverage of
and BP Amoco with accumulate ratings. Royal Dutch gained 5/8 to 60 1/8, Shell Transport rose 3/16 to 45 15/16, Chevron added 1/16 to 88 13/16 and BP Amoco fell 1 1/8 to 54 1/8.
Merrill Lynch upped its rating on
Oxford Health Plans
to near-term accumulate from neutral . Oxford rose 1 15/16 to 17 3/8.
J.P. Morgan downgraded shares of
to market perform from buy. Paccar fell 2 11/16, or 5.7%, to 44 9/16.
First Boston upgraded
to strong buy from buy. The stock dropped 2 1/8 to 75 5/8.
PaineWebber raised its price target on
to 155 from 120. Sapient rose 3/8 to 130 13/16.
rolled out coverage of
with a buy rating and a price target of 36. Shares rose 1 to 27 7/8.
Herb on TheStreet: Why P.T. Barnum Would Love CellNet Investors
11/3/99 6:30 AM ET
Are investors being fooled again? That's what one smart investor who specializes in the bonds of troubled companies was whispering to me yesterday about
CellNet Data Systems
, whose stock rose 19% after the company's subsidiary,
, announced that it will make a dividend payment on its preferred securities. This same source was among those whose wisdom I tapped for info on the likes of
Just for Feet
after they had hit the skids.
CellNet Data, a provider of telemetry services, recently warned that it's having trouble raising much-needed cash and if it continues to have trouble, existing shareholders could find their investment diluted.
Herb's Latest: Send your thoughts and questions to
But now, with this payment, some investors must be thinking the company is healthier than it's letting on. Unfortunately, according to a company spokesman, this was a regularly scheduled payment on the preferred out of an escrow account. "And people misunderstood it as a sign of health," our source says.
The real sign of health, or lack thereof, can be seen in CellNet Data's bonds, which are trading at 6 cents on the dollar, and the subsidiary's preferred stock, which has a face value of $25 per share, but is trading at 5 3/16. Yet CellNet Data still has a market value of $99.7 million. "That's laughable," he says. "I call this the smart money vs. the foolish money. They just don't understand. But when you've gone through a couple of these, it's always the same."
Yep, investors thinking they've found a bargain. For more info on what could happen, check out yesterday's
extra on Just for Feet.
And this column's Bomb of the Year award goes to:
here in June started, "For those of you wondering if I have it in my heart to ever write anything remotely positive..." I went on to report how one of my sources, Ken Londoner of
Red Coat Capital
U.S. Franchise Systems
, a hotel franchising company. Londoner is a longtime tracker of the lodging industry, and he rarely goes on the record. So, here he was, willing to go on the record, and he had several compelling reasons he thought the company was attractive: a strong balance sheet, good management and lots of smart investors who already owned the stock.
But the column also questioned whether the USFS story was too good to be true and raised a few red flags of its own. And when I asked CFO Neal Aronson about risk, he responded, "Our risk is timing."
How prescient. Turns out the hotel industry has gone into a deep slump, and earlier this week, USFS warned that its biz may not be as bright as earlier expected. The news caused USFS' stock to lose 60% of its value; it closed yesterday at 5 1/8. (It was 18 1/4 when first mentioned here.)
Londoner, meanwhile, continues to be impressed by USFS' business model, which throws off large amounts of cash flow. But now he says, "Perhaps it would be more intelligent for them to be operating in the confines of a larger organization."
Hostile React-O-Meter working overtime on
, which has added almost $500 million in market value since its fundamentals were first questioned
here. Ditto for
Diamond Technology Partners
, which has grown by 200%. Emailers wanna know why I don't just write that my sources were wrong.
Because I try not to confuse the momentum of a stock with the fundamentals of a company. (Doesn't the momentum in some of these stocks, and the lack of worry about fundamentals, remind you of this time last year? So many of last year's autumn stars were among this year's biggest has-beens.)
Pinnacle of its success:
here yesterday mentioned a number of "unadulterated disasters" that were good calls by short-seller Marc Cohodes of
. As some of you pointed out, some of those companies finally got their act together and soared, among them,
. All three got pummeled because of botched biz plans (go back and look at the charts and earnings), and all have subsequently done much better.
Does that mean the shorts were wrong? Hardly. The operative phrase in the column was "at one time or another." Those companies
fall on hard times -- and they recovered. Some companies (even tech companies) are like cats: They eventually land on their feet, though most don't have nine lives.
More Gap gossip:
here yesterday mentioned how my wife couldn't find turtlenecks, a staple winter item, at
from Westport, Conn., a former buyer at
Saks Fifth Avenue
, tells a similar story:
I have been shocked every time recently that I've gone into my Gap store in my town for my kids. I went in a few days before Columbus Day weekend looking for sweat pants, and there were NONE! They said they had been promised sweats for a long time and didn't get them. The store was EMPTY! So, of course, we had to go elsewhere. I said to my husband that I was glad we didn't own any Gap, because they truly had problems. (The old Peter Lynch method of picking stocks.)
Yep, gotta hand it to PL. Sometimes his strategy of buying, selling or staying away from what you know really
Question or comment on something you've read here?
Instead of shooting me an email (which all too frequently I can't answer), post it on
Herb on TheStreet
board so our discussion can be public.
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
firstname.lastname@example.org. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
Copyright 1999, TheStreet.com