midday11-09-99

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TheStreet.com's MIDDAY UPDATE

November 9, 1999

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Market Data as of 11/9/99, 1:06 PM ET:

o Dow Jones Industrial Average: 10,632.61 down 86.24, -0.80%

o Nasdaq Composite Index: 3,119.31 down 24.66, -0.78%

o S&P 500: 1,366.46 down 10.55, -0.77%

o TSC Internet: 834.97 down 5.93, -0.71%

o Russell 2000: 444.97 down 0.10, -0.02%

o 30-Year Treasury: 100 22/32 down 7/32, yield 6.072%

In Today's Bulletin:

o Midday Musings: Stocks Decline at Long Last, but No One's Too Worried
o Herb on TheStreet: Maybe Investors Ought to Shift Their Focus From Tyco to Newell

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Midday Musings: Stocks Decline at Long Last, but No One's Too Worried

By

Thomas Lepri

Staff Reporter

11/9/99 1:15 PM ET

Sure, they had to consolidate eventually. But those who have been making that call every morning for the last six mornings would be batting a miserable .141, way below the Mendoza line. And that won't keep you in the league for long.

Stocks' early strength turned faster than a cat on carpet, and all the major benchmarks were underwater at midsession.

The

Dow Jones Industrial Average

was down 99, or 0.9%, to 10,619, while the

S&P 500

was sinking 12, or 0.9%, to 1365. Weighed down by its largest stocks, particularly

Microsoft

(MSFT) - Get Report

, the recently record-setting

Nasdaq Composite Index

was 26 lower to 3118.

Net shares were also under pressure.

TheStreet.com Internet Sector

index was down 8 to 833.

Amazon.com

(AMZN) - Get Report

was off about 6.6% despite making a "significant announcement" to launch four new shopping sites. That's not too bad, considering that the company's preparatory press release "signified" a 20.1% rise in the stock yesterday.

The small-cap Russell 2000 was also resting from its recent runup. Having gained about 8.8% since Oct. 18, the Russell was lately down a fraction to 445.

"The market's just taking a breather," said Pete Boockvar, equity strategist at

Miller Tabak

. "The Nasdaq's been up seven days in a row. It shouldn't surprise anybody that we're down. Even if we're down tomorrow, it shouldn't surprise anybody."

"It's the normal profit-taking that you would expect," concurred Tony Dwyer, chief market strategist at

Kirlin Holdings

. "I'd use it as a buying opportunity."

Quite normal, even if you're not focusing on the very narrow measure of technology strength. The 1370-1380 level have been extremely tough resistance areas for the S&P 500 this year, with approaches in April, May and August all followed by heavy consolidation.

Today's downturn was also prefigured by the relatively high level of complacency in the market as measured by the

Chicago Board Options Exchange Market Volatility Index

. Every sharp selloff this year has been accompanied by a VIX approaching 20. The VIX was at sitting smugly at 21.34 when the market opened this morning, down from yesterday's close of 21.52. It was lately at 22.59.

Timing downturns is tougher to do than rationalizing them in retrospect, though. Looking forward, market observers were generally seeing more good things for the market. For one thing, according to both Dwyer and Sam Ginzburg, managing director of equity trading at

Gruntal

, much of the cash that portfolio managers raised this summer has yet to hit the market, despite the fine run that tech stocks have had lately. "Two weeks isn't enough time for that money to get involved," Dwyer said. "You still have investors looking to put money to work."

There's also the matter of the bond market. "With interest rates going back to 6%," Boockvar said, "certainly the environment has gotten more friendly for stocks."

The bonds were lately shedding some strength ahead of the results of today's $15 billion five-note auction, which the

Treasury Department

will announce at 1:30 p.m. The 30-year Treasury was lately off 11/32 to 100 20/32, putting its yield at 6.08%. (For more on the fixed-income market, see today's early

Bond Focus.)

Tomorrow, the

Producer Price Index

will give the market it's latest read on inflation. That number, along with Friday's retail sales report and third-quarter productivity figures, may help clarify a still-divided debate over whether the

Fed

will raise interest rates on Nov. 16.

Ginzburg has got a hunch. "Just from a gut feel, I'd say that they probably raise and go neutral, and then we have a melt-up. I'm looking to make a play long into the number. I'll take a shot at that."

In addition to financial stocks, Ginzburg said he's looking at "retailers, drugs, the drug retailers -- the usual sectors."

Finding strong sectors wasn't as easy today as it has been recently. Oil and oil service stocks were extending yesterday's rally, the

American Stock Exchange Oil & Gas Index

up 1.4% and the

Philadelphia Stock Exchange Oil Service Index

up 4%.

Meanwhile, the

S&P Chemical Index

was up 2.4% after

Credit Suisse First Boston

analyst James Hickman reiterated his overweight recommendation on the sector, citing quickening demand from global industry.

DuPont

(DD) - Get Report

, which Hickman upgraded, was one of the Dow's few areas of strength, lately up about 3.4%.

Tech was deep in the market's rear-guard, the

Morgan Stanley High-Tech 35

down 0.4%. Personal computer stocks were taking it especially hard, with the

Philadelphia Stock Exchange Computer Box Maker Index

off about 1.1%.

Brokers and banks continued to consolidate after their recent astonishing run higher. the

Philadelphia Stock Exchange/KBW Bank Index

was down 2.2%. Brokers were having a worse time of it, the

American Stock Exchange Broker/Dealer Index

off 1.4%.

Market Internals

Breadth was negative on good volume.

New York Stock Exchange:

1,198 advancers, 1,698 decliners, 512 million shares. 58 new 52-week highs, 70 new lows.

Nasdaq Stock Market:

1,730 advancers, 2,006 decliners, 903 million shares. 175 new highs, 57 new lows.

Tuesday's Midday Watchlist

By Tara Murphy
Staff Reporter

Mergers, acquisitions and joint ventures

AT&T

(T) - Get Report

fell 1 1/4 to 46 3/8 despite announcing it won a $125 million contract from

CVS

(CVS) - Get Report

for voice and data services. CVS rose 1/8 to 37 3/8.

Cisco

(CSCO) - Get Report

slipped 7/16 to 74 7/8 after it saying it will buy

Aironet Wireless Communications

(AIRO)

in a deal valued at about $799 million. Cisco says it expects a charge of between 3 cents and 8 cents a share from the merger. Shares of Aironet gained 2 15/16, or 6.8%, to 46 3/16.

EDS

(EDS)

inched up 15/16 to 63 1/16 and

Healtheon

(HLTH)

dropped 4 3/8, or 10%, to 39 5/8 after the companies said they will offer a Net-based service for health-care payers.

First Consulting Group

(FCGI)

rose 1 1/2, or 15%, to 11 1/2 after it signed a seven-year deal worth about $228 million to provide information technology and telecommunications services to

New York-Presbyterian Hospital

. Under the terms of the deal, FCG Management, a newly formed entity, will hire 432 employees of the hospital's current IT staff.

Monsanto

(MTC) - Get Report

rose 1 3/4 to 45 1/2 after

The Wall Street Journal

reported it has held talks with Swiss drugmaker

Novartis

about a possible sale of all or part of Monsanto.

Nortel Networks

(NT)

fell 1 3/16 to 68 5/16 after saying it will slash router prices and make Internet networking technology work with all types of systems. Nortel said it was allying with

Intel

(INTC) - Get Report

to add elements of the new open Internet platform to Intel's Internet products.

United Airlines

, a unit of

UAL

(UAL) - Get Report

said it will launch a travel portal with

Delta Air Lines

(DAL) - Get Report

and

Continental

(CAL) - Get Report

. UAL lost 1 1/2 to 66 5/16, Delta slipped 7/8 to 51 1/8 and Continental fell 1/2 to 40 7/8.

Earnings/revenue reports and previews

Ackerly Group

(AK)

was unchanged at 17 1/8 after it posted a third-quarter loss of 11 cents a share, narrower than the single-analyst estimate of a 15-cent loss but down from the year-ago 1-cent profit.

Allied Waste

(AW)

was falling 7/16 to 9 13/16 after it reported third-quarter earnings of 38 cents a share, excluding charges. The seven-analyst estimate called for earnings of 28 cents a share. Year-ago results were not available as the company said the figures aren't comparable because of an acquisition.

Goldman Sachs

cut its rating on Allied Waste to market performer from the recommended list.

Capital Re

(KRE) - Get Report

slipped 1/16 to 15 after it posted third-quarter operating earnings of 51 cents a share, in line with the single-analyst estimate, and up from a year-ago 40 cents a share.

Dollar General

(DG) - Get Report

climbed 1/16 to 25 5/16 after it reported third-quarter earnings of 19 cents a share, in line with the 14-analyst estimate and up from a year-ago 15 cents a share.

Donna Karan

(DK) - Get Report

inched up 5/8, or 7.7%, to 8 3/4 after it posted third-quarter earnings of 46 cents a share, a penny better than the three-analyst estimate and up from a year-ago 35 cents a share.

Equity Residential Properties

(EQR) - Get Report

gained 7/16 to 42 1/16 after it reported third-quarter funds from operations of $1.13 a share, a penny better than the 18-analyst estimate and up from a year-ago $1.02 a share.

Modis Professional Services

(MPS)

shed 2 7/16, or 18.1%, to 11 1/8 after it reported third-quarter earnings of 30 cents a share, missing the 12-analyst estimate of 32 cents, but up from a year-ago 19 cents. Modis said it sees disappointing fourth-quarter earnings of between 15 cents and 18 cents a share, citing a slowdown of information technology projects ahead of the millennium. The 10-analyst estimate currently calls for earnings of 33 cents a share. Modis also said it was exploring strategic alternatives, including a spinoff or IPO of its information technology unit. Modis also said its board approved the repurchase of up to $65 million of common stock.

OfficeMax

(OMX)

slipped 1/16 to 6 5/16 after it reported third-quarter earnings of 14 cents a share, in line with the 14-analyst estimate, but down from 27 cents a year ago.

Olsten

(OLS)

lost 1/16 to 10 1/4 after it reported third-quarter earnings of 17 cents a share, a penny shy of the three-analyst estimate. Year-ago restated earnings were 14 cents a share.

Overseas Shipping Group

(OSG) - Get Report

fell 1/8 to 13 5/8 after it posted third-quarter earnings of 9 cents a share, beating the single-analyst estimate of 7 cents but down from the year-ago 14 cents.

Polo Ralph Lauren

(RL) - Get Report

fell 5/8 to 16 5/8 after it posted second-quarter earnings of 56 cents a share, in line with the 13-analyst estimate and up from a year-ago 48 cents a share.

Sunbeam

(SOC)

gained 1, or 22.2%, to 5 1/2, after it posted a third-quarter loss of 47 cents a share, wider than the two-analyst estimate of a loss of 30 cents a share but down from the year-ago loss of $1.88 a share. Sunbeam said it would sell backpack division

Eastpak

and other nonessential assets, and expects to receive about $200 million in net proceeds, which will be used primarily to pay down debt.

Wal-Mart

(WMT) - Get Report

fell 1 9/16 to 56 15/16 despite reporting third-quarter earnings of 29 cents a share, a penny better than the 17-analyst estimate and up from a year-ago 23 cents. The company said same-store sales for the period rose 7%, representing a 7.4% comparable increase at Wal-Mart stores and a 5.8% comparable increase at Sam's Club stores.

Merrill Lynch

added Wal-Mart to its Focus One list.

Offerings and stock actions

Alpharma

(ALO) - Get Report

was falling 1 15/16, or 5.8%, to 31 3/16 after it said it entered into an agreement with

Bear Stearns

to sell 2 million shares of its Class-A common stock.

Celestica

(CLS) - Get Report

said it priced its public offering of 7 million subordinate voting shares at $60.625 per share for a total of $424.4 million. Lead managers are

Morgan Stanley Dean Witter

and

RBC Dominion Securities

. Shares of Celestica were climbing 1 11/16 to 62 5/16.

Analyst actions

Banc of America Securities

started coverage of

Alberto-Culver

(ACV) - Get Report

with a market performer rating. Alberto Culver was slipping 3/16 to 23 3/8.

Salomon Smith Barney sliced its rating on

AmerUs Life Holdings

(AMH) - Get Report

to neutral from outperform. AmerUs Life Holdings was falling 5/16 to 24.

Salomon Smith Barney

cut its rating on

Apple

(AAPL) - Get Report

to outperform from buy based on valuation. Apple shares were sinking 6 1/4, or 6.4%, to 90 1/16.

Morgan Stanley Dean Witter

raised its rating on

Clorox

(CLX) - Get Report

to a strong buy from outperform. Clorox was bouncing 2 11/16, or 6.65, to 43.

Credit Suisse First Boston

raised its ratings on DuPont and

PPG Industries

(PPG) - Get Report

to buy from hold. Shares of DuPont were climbing 1 13/16 to 62 3/8, while PPG Industries hopped 5/8 to 59 5/16.

Lehman Brothers

started coverage of

Franklin Resources

(BEN) - Get Report

at outperform and set a price target of 39. Franklin Resources was gaining 1/4 to 31 7/8.

Bear Stearns initiated coverage of

Network Solutions

(NSOL)

with a buy rating and set a price target of 182. Network Solutions was stumbling 2 9/16 to 146 1/2.

Lehman Brothers upped its price target for

Razorfish

(RAZF)

to 85 from 75. Razorfish was tumbling 3/8 to 71 3/8.

Goldman Sachs raised its price target on

Sandisk

(SNDK)

to 80 from 60. Sandisk was adding 4 5/8, or 6.7%, to 73 5/8.

Salomon Smith Barney started coverage of

Women.com Networks

(WOMN) - Get Report

with a buy rating and a price target of 35. Women.com shares were sliding 1 1/16, or 5.2%, to 19 5/16.

Miscellany

Amazon.com was retreating 5 3/16, or 6.6%, to 72 13/16 after it said it would launch four new stores on Nov. 10, including home improvement, software, video games and gift ideas. The company also said it acquired

Tool Crib of the North

, a tools and equipment catalog company.

Microsoft

(MSFT) - Get Report

, whose stock is proving to be quite

resilient amid a less-than-favorable legal

opinion, said it is set to begin offering office software over the Internet. Shares of Microsoft were losing 2 15/16 to 87 15/16.

Saks

(SKS)

was slipping 13/16 to 16 5/16 after it named Christina Johnson president and CEO of

Saks Fifth Avenue

.

Standard & Poor's

said

Teradyne

(TER) - Get Report

will replace

Case

(CSE)

in the

S&P 500

index after the close of trading Nov. 12. Case is being acquired by

New Holland

(NH) - Get Report

for about $4.6 billion.

CheckFree Holdings

(CKFR)

will replace Teradyne in the

S&P MidCap 400

index.

Waste Management

(WMI)

is expected to name A. Maurice Myers as its new CEO, the

Journal

reported. Myers, currently CEO of

Yellow

(YELL)

, would be the sixth man to serve as CEO at Waste Management since May 1996, according to the

Journal

. Shares of Waste Management was falling 1/2 to 28 1/4.

The Heard on the Street column in the

Journal

said the

Securities and Exchange Commission

is examining why

Chase Manhattan

(CMB)

accumulated a discrepancy, which started at $40 billion, in an internal tracking system. However, the irregularity is not expected to affect Chase's reported financial results and no restatement of earnings is foreseen, the story said. Shares of Chase were sliding 1 5/8 to 82 3/4.

Herb on TheStreet: Maybe Investors Ought to Shift Their Focus From Tyco to Newell

By

Herb Greenberg

Senior Columnist

11/9/99 6:30 AM ET

On one hand,

Tyco

(TYC)

and

Newell Rubbermaid

(NWL) - Get Report

couldn't be more different.

Tyco is high-tech electronics; Newell is low-tech housewares. Tyco is based in beautiful Bermuda; Newell is based in sleepy Freeport, Ill. Tyco is in the accounting spotlight; Newell is in the shadows.

On the other hand, well, let's just say Tyco may be getting all the attention, but Newell deserves just as much scrutiny.

Herb's Latest: Join the discussion on

TSC

Message Boards.

Going into this year, Newell bragged that it had made 20 major acquisitions in 10 years, which added $3 billion to revenue and generated compound annual earnings growth of 16%. Some of those deals were done for cash; others (like most of Tyco's) were done for stock. Unlike Tyco, however, Newell's deals included little in the way of the kind of big-bath takeover charges that have become the target of investor revolt.

That is, until last March, when Newell paid $5.8 billion to acquire Rubbermaid, which itself had taken a series of back-to-back quarterly charges last year related to a restructuring of its own. Rubbermaid's largest charge of the year, in fact, occurred in the fourth quarter of 1998,

after

the company -- with $2.6 billion in annual sales -- had agreed to be acquired by Newell. A way to gussy itself up to help the merged company look better after getting hitched? Hard to say, because ever since the acquisition Newell keeps increasing the amount of Rubbermaid-related charges it plans to take this year.

Now there's nothing wrong with takeover charges. It's just when they become excessive and frequent that investors should start to worry. The bigger they are and the more they are, the more you can't help but wonder whether they include costs that really should have been a hit against expenses. (You know how GAAP accounting goes: Some of that falls into a gray area that can go either way.)

In the case of Rubbermaid (get out your calculators), Newell took an immediate $178 million pretax restructuring charge related to the acquisition. The company then told Wall Street to expect Rubbermaid-related charges in the range of $100 million to $150 million during the rest of the year.

A few months later, however, when second-quarter earnings were released, Newell took an additional $136 million charge and told investors not to be surprised if $50 million to $60 million more in charges were taken.

But, come October, with third-quarter earnings, Newell took yet another charge for $84.9 million and told analysts to expect an additional $50 million to $60 million in charges, for a total of $450 million to $460 million for the year -- or about $100 million over original estimates.

The problem is that $460 million in charges would be 97% of Newell's 1998 pre-Rubbermaid operating earnings, minus nonoperating expenses. (On an apples-to-apples comparison, that would be even higher than Tyco's charges as a percentage of operating earnings!) Put another way, Newell has charged off almost all of what it earned last year to acquire a company that, at best, has helped produce little more than flat operating income through the first nine months of this year. Imagine what shape it would be in if it couldn't take all those charges. And given Newell's poor record at forecasting charges, it's not clear yet whether the company's current guidance will be adequate.

Makes you wonder whether Rubbermaid, a controversial deal from the start, will ever make any sense.

A Newell spokesperson didn't return my call.

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