TheStreet.com's MIDDAY UPDATE
December 7, 1999
Market Data as of 12/7/99, 1:19 PM ET:
o Dow Jones Industrial Average: 11,128.52 down 96.49, -0.86%
o Nasdaq Composite Index: 3,543.77 down 2.24, -0.06%
o S&P 500: 1,413.43 down 9.91, -0.70%
o TSC Internet: 1,038.62 down 6.02, -0.58%
o Russell 2000: 463.77 down 1.98, -0.43%
o 30-Year Treasury: 98 28/32 up 14/32, yield 6.203%
In Today's Bulletin:
o Midday Musings: Nasdaq Hangs Tough as Market's Rocket Ride Pauses
o Herb on TheStreet: Will MedImmune's Financial Performance Ever Justify Its Stock Price?
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Midday Musings: Nasdaq Hangs Tough as Market's Rocket Ride Pauses
12/7/99 1:09 PM ET
A truly exceptional market like this one rarely surprises. Astonishing advances become the norm, while pullbacks are always "to be expected," enablers of the next move higher. Wall Street was getting a taste of the latter at midday, but that's not stopping observers from marveling at the big tech machine.
At midday, the major benchmarks were mixed to lower. The
Dow Jones Industrial Average
was down 85 to 11,140 and the
was off 9 to 1415, while the
Nasdaq Composite Index
was up a point and a half to just under 3548.
Net stocks and small-caps were in the red. The
was down 2 to 464, while
TheStreet.com Internet Sector
was 4 lower to 1041.
"Based on all the normal measures -- and even the extreme measures -- of valuation and momentum and all these things, it's just off the charts in every way," said Robert Dickey, managing director of technical analysis at
Dain Rauscher Wessels
in Minneapolis. "So we should be looking for a return to average soon."
The traditional contrarian measures have been foretelling a pullback for some time now. One place technicians often look for signs of market tops is the options market. In particular, the
Chicago Board Options Exchange Market Volatility Index
effectively tracks the level of fear in the market. In general, throughout 1999, the closer the VIX has gotten to 20, the better a selling point it's proven. But except for a brief stretch two weeks ago, the VIX has been tucked smugly in the low 20s since early November.
Today's selling was making investors a bit more nervous, with the VIX lately sitting at up 0.97 to 22.03. But that's still far from fearful, and it would be very shortsighted to mistake today's action for a "return to average." The losses on Wall Street toward midday are hardly denting the huge gains the market's seen recently, especially in the technology sector. Before today, the Nasdaq had gained 29.8% since mid-October. And the broader S&P 500 had risen 14.1%, and the Dow 12%
"Measures are averages of extremes," Dickey said. "Right now, we're at the extreme of extremes, and it's just bigger than what we've all seen in the past. I remember smaller, isolated incidents in the past, but not as broad as this. It's narrowly based, but narrowly based in a lot of stocks."
Dickey's talking about tech, of course: "If you look at something that doesn't have any tech in it, it stinks. The utilities, transports and many, many other groups and sectors just aren't participating. It's tech alone."
Today, tech was taking a bit of a breather, especially chip stocks. The
Philadelphia Stock Exchange Semiconductor Index
was down 2.7%, while the
Morgan Stanley High-Tech 35
had fallen a more modest 0.3%. But that contraction wasn't too much rotation into nontech sectors.
earnings warning yesterday is making the
banking sector an unpopular place to be long, with the
Philadelphia Stock Exchange/KBW Bank Index
off 1.5% in an extension of its pullback from its mid-November highs.
Transports were looking better, especially the airlines. The
American Stock Exchange Airline Index
was up 1.8%, while the
Dow Jones Transportation Average
was 0.2% higher. But drug stocks were continuing their recent downtrend, with the
American Stock Exchange Pharmaceutical Index
"Tech is the one area where the fundamentals seem intact," said Peter Boockvar, equity strategist at
. "So it continues to be the place to hide." And even with the mixed performance in the broader tech sector today, investors were piling into stocks like
. Yahoo! will be joining the S&P 500 after today's close. Cisco was lately up 2.9%, while Yahoo! had picked up a further 6.9% to crack 300 for the first time.
Ultimately, in heady times like these, retail investors might do better to just mind their own business. Timing market tops is a delicate and difficult task. "You get a watched-clock syndrome," Dickey said. "And it doesn't matter anyway, because people don't buy 'the market.' The whole point is that people should be careful, and notice if their individual stocks start to turn. And individually, they're all over the place. That's what you've got to focus on."
The bond market was moving higher after a
coupon pass and a benign speech by Fed boss
. The 30-year Treasury was up 12/32 to 98 27/32, putting the yield at 6.21%. (For more on the fixed-income market, see today's early
Breadth was solidly negative on strong volume.
New York Stock Exchange:
1,003 advancers, 1,936 decliners, 570 million shares. 72 new 52-week highs, 240 new lows.
Nasdaq Stock Market:
1,682 advancers, 2,193 decliners, 893 million shares. 207 new highs, 92 new lows.
Tuesday's Midday Watchlist
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
Mergers, acquisitions and joint ventures
lost 12 to 59 1/2 and
inched up 11/16 to 84 9/16 after the companies said they will dissolve their European fuel and lubricants joint venture and divide up the assets in line with their equity stakes. Mobil had to sell its 30% interest in the fuel business as a condition of European regulatory approval of its merger with Exxon. BP Amoco will pay about $1.5 billion for Mobil's stake, which includes its pipeline at London's
raised Exxon Mobil to its recommended list from market outperformer. For more on BP Amoco's
buy, check out a separate story from the
said it granted regulatory approval to the full buyout of Dutch company
. Shares of lost 1 1/16 to 57 1/8.
rose 1 1/16 to 5 5/8 after saying it has retained
Credit Suisse First Boston
to explore alternatives for its Engineered Products business, including a possible sale.
slipped 3/16 to 38 5/8 and
rose 5/16 to 45 13/16 after the companies said they formed a $1 billion partnership in which News Corp. will take a 10.8% stake in the online health network to move into the health programming arena. The financial terms include $700 million in branding services provided by News Corp. over 10 years and a $100 million purchase of Healtheon/WebMD stock at $50 a share. The alliance also includes a $100 million cash investment by News Corp. in an international joint venture and a $62.5 million five-year licensing agreement for syndication of WebMD daily broadcast content.
Banc of America Securities
upped its rating on Healtheon to buy from market performer. For more on News Corp.'s
new friend, check out a separate story from the
rose 3 9/16, or 11.1%, to 35 5/8 after it said its
unit will merge with a unit of
. Shares of UICI slipped 15/16 to 23 11/16. Provident said each company's shareholders will own 50% of the new Healthaxis.com, which will receive a $57 million equity investment.
Tricon Global Restaurants
climbed 1/16 to 40 1/8 after saying it will combine its Canadian restaurant operations with
, with the combined group operating most
outlets in Canada for a total of about 639 stores.
lost 1/16 to 52 15/16 after it said it has chosen
to supply its infrastructure for its next-generation network technology in Britain, the Netherlands and Greece. Ericsson fell 1 5/8 to 57 5/8 despite the news. The General Packet Radio Service technology will let mobile customers access services such as train timetables, directions and online shopping.
Separately, U.S. regulators approved the planned combination of the U.S. wireless operations of
and Vodafone, as long as the companies eliminate some overlapping properties, Bell Atlantic said. Shares of Bell Atlantic gained 5/16 to 64 11/16.
Earnings/revenue reports and previews
rose 5/16 to 43 7/16 after it reported second-quarter earnings of 65 cents a share, a penny better than the 17-analyst estimate and up from 60 cents a year ago. Heinz said it was comfortable with third-quarter estimates of 62 cents and fourth-quarter estimates of 63 cents. The current 15-analyst estimate calls for 63 cents a share in each of those quarters. Heinz also said it was on track to deliver a year-end target of 6% to 7% earnings-per-share growth.
said it cleared plans by Heinz's European unit to buy U.K.-based
frozen and chilled foods unit. The cost of the purchase, made in October, was $317 million. For more on
Heinz, check out a separate story from the
fell 7/8 to 17 1/16 after it reported second-quarter earnings of 40 cents a share, missing the nine-analyst estimate of 49 cents and the year-ago 44 cents a share. The company said the latest second-quarter decline in earnings was due to business disruptions from Hurricane Floyd, ongoing operational start-up problems in the northeast bakery consolidation project and higher selling and delivery costs.
Offerings and stock actions
popped 5 5/8, or 7.4%, to 81 5/8 after it said it will split its shares 2-for-1.
Goldman Sachs started
as a market outperformer. Shares of BroadVision were slipping 4 to 101 1/2.
Deutsche Banc Alex. Brown
started coverage of
as a strong buy. Deutsche resumed coverage of
as a strong buy, and
as a market performer. Shares of Casella Waste were adding 5/16 to 19, while Republic Services was losing to 12 7/16. Waster Management shares were sliding 3/16 to 15 1/4.
Donaldson Lufkin & Jenrette
to a market perform from a buy. Shares of Coca-Cola were sinking 5, or 8.6%, to 59.
started shares of
with an intermediate-term accumulate, long-term buy rating. Merrill said it sees shares of Corning doubling within the next three years. Corning shares were hopping 2 15/16 to 107 15/16.
Goldman Sachs upped its rating on
to a market outperformer from market performer. CNF Transportation was climbing 11/16 to 30 15/16.
raised its price target on
to 20 from 10 and upped its rating to buy from a neutral. Shares of Cygnus were bouncing 6, or 73%, to 15 7/8.
CIBC World Markets
analyst Jim Berlino upgraded
to buy from hold and set a price target of 55. Shares of Dell were edging up 1/8 to 45.
started coverage with buy ratings on
Shares of Exodus were jumping 7 5/16, or 5.6%, to 131 5/16 and Akamai was leaping 8 3/8 to 224. Covad shares were advancing 2 15/16, or 5.4%, to 56 15/16.
rolled out coverage of
with a buy rating. J.P. Morgan also stamped the stock as a buy. Shares of Finistar were plunging 8 3/16, or 7.5%, to 100 1/2.
Deutsche Banc Alex. Brown started coverage of
with a buy rating and set a price target of 45. Shares of Flextronics were losing 3/4 to 88 7/8.
cut its rating on
to neutral from outperform. Shares of Guidant were skidding 3/4 to 47.
SoundView Technology raised its price target on
to 140 from 110 and maintained its buy rating. IBM shares were slipping 1/16 to 116.
initiated coverage of
with a buy rating. Shares of Lucent were up .92% to 80 15/16.
Robertson Stephens initiated coverage of
with a buy rating. Shares of Net2Phone was climbing 1 3/16 to 54 1/16.
initiated coverage of
with a buy rating. Shares of Starwood Financial were gaining 1/16 to 17 3/4.
Banc of America Securities
raised its rating on
to strong buy from buy rating and upped its price target to 72 from 60. Shares of Symantec were bouncing 3 3/8, or 6.45, to 55 3/8.
to market performer from market outperformer. Shares of Texaco were skidding 1 to 57 15/16.
Lehman started coverage on
as a buy and set a 12-month price target of 140. Shares of Veritas Software were sinking 2 1/16 to 102 1/16.
said its boosted its price target on
to 350 from 225. Yahoo! was soaring 19 1/4, or 6.9%, to 300.
El Al Airlines
signed a $400 million deal with
for three 777 planes. Shares of Boeing were sliding 5/16 to 38 5/16.
was climbing 1 5/16, or 7.6%, to 18 9/16 after it said it agreed to pay $2.83 billion to settle a shareholder class action lawsuit over accounting irregularities. Cendant said the settlement would result in a noncash, after-tax charge of $1.8 billion in the fourth quarter and would reduce 2000 earnings-per-share by 12 cents to 16 cents.
took an in-depth look back at the Cendant debacle in an
was declining 1 5/16, or 6.1%, to 20 1/16 after it said it would cut 2,200 jobs, or 19% of its workforce, and consolidate manufacturing, product lines and sourcing activities in a sweeping restructuring. Hasbro said it will close manufacturing plants in Tijuana, Mexico, and Ashford, England. The company said it expects to post a fourth-quarter charge of $141 million from the consolidation, and also set a new $500 million share-buyback plan. See additional reporting from
joint newsroom for more on the
tinkering at Hasbro.
was edging up 5/16 to 16 1/4 after it said it would record special charges of $825 million in the fourth quarter as part of a restructuring that will include cutting 850 jobs. The program will provide estimated annual pretax savings of about $70 million affecting 2000, according to the company.
were plummeting 38, or 43.3%, to 49 7/8 after the
International Trade Commission
made an initial finding in favor of a rival in a patent infringement case. For more on VISX
vexation, check out a separate story from the
A front-page story in
The Wall Street Journal
examines an unusual breed of day traders, who continuously trade a single stock, irrespective of the company's revenue, profits, news developments or strategies. For instance, the story cites one trader, who, in a single day, traded more than 130,000 shares of
. The trader accounted, by himself, for nearly 2% of the company's total daily volume. The aim for such traders is to determine when big, institutional players are buying or selling stock in volume, and jump in ahead of them. Shares of CMGI were adding 7 to 174.
The Heard on the Street column in the
takes a look at a spat between
parent IOS Brands and
, a unit of
. In a suit which will be heard in New York federal court, FTD has accused Bankers Trust of improperly forcing its way into FTD's newly public Internet subsidiary, FTD.com, by demanding and receiving, warrants in the parent during negotiations over a previous FTD financing. Shares of FTD.com were slipping 1/4 to 6.
Herb on TheStreet: Will MedImmune's Financial Performance
Justify Its Stock Price?
12/7/99 6:30 AM ET
With a market cap of $8.4 billion, or 30 times sales,
is riding a wave of investor enthusiasm over last year's rollout of Synagis, a treatment for a serious respiratory disease in infants. Some analysts have called the drug one of the most successful launches ever in the biotech industry.
While there can be little dispute about the success of Synagis, there's plenty of dispute between the shorts and longs about how fast its sales will grow. (What else is new?) Analysts are expecting the drug, which accounts for most of MedImmune's revenue, to chug along at a growth rate of 40% this year and 30% next. MedImmune itself has done little to put the kibosh on such bullish forecasts. As recently as a week ago, at an investment conference, CFO David Mott reportedly said he was comfortable with analyst projections of $1.80 to $1.90 per share for next year (up from $1.05 for 1999). According to
, during a breakout session, Mott even upped sales estimates for Synagis.
Herb's Latest: Join the discussion on
However, according to one of this column's most dogged short-selling sources -- who claims to have called 50 high-volume neonatal centers throughout the country -- those forecasts for Synagis, as is often the case of hot new drugs, may be overly ambitious. And those calls to neonatal centers can't be overlooked because that's where Synagis is believed to be dispensed the most. The short-seller's survey shows that the most rapid penetration by Synagis occurred last winter, during the drug's first season on the market. And at a cost of $5,000 per treatment, the short-seller adds, hospitals have to be careful about how much they use.
What's more, he points to a September article in the medical journal
, which says that based on the drug's current price, the use of Synagis should be restricted to the earliest premature infants, especially those born before 32 weeks.
As a result, the short-seller believes that growth of Synagis use could, at best, be flat next year -- and certainly nowhere near the 40% predicted by Wall Street.
analyst William Tanner, a MedImmune bull, cautioned in a recent report that only 10% of the patients treated in one season are treated the next season. "Thus, unless there is an increase in the number of child births in any given clinic over the previous year, growth in Synagis sales will have to come from physicians prescribing the drug more widely, or from physicians who haven't prescribed the drug previously adopting it as a therapeutic option," he wrote.
For the drug to really take off, even the short-seller concedes, it would have to gain wide acceptance by doctors for use in babies born between 32 and 35 weeks. However, a survey of 11,000 docs by Tanner -- with only 487 responding -- shows that only 16% would increase their use in the 32-to-35-week age group; another 9% would decrease their use -- of what supposedly is a hot new drug.
Tanner, by the way, points out that his survey wasn't quantitative, and he stresses that his report was not meant to be interpreted as a bearish call on the company. He also told me the company, which supposedly knows what it is talking about, has been telling analysts that it's signing up new docs to use the drug at a robust clip.
They had better be right: MedImmune's stock trades at 66 times next year's expected earnings. That's 66 times for a company that, beyond Synagis, has what is generally regarded as a very early stage R&D pipeline.
MedImmune's spokespeople didn't return my two calls.
Action Performance: The Plot Thickens
here last week noted how
had abruptly cancelled an appearance at an investment conference. (Not usually a good sign.) Well, now we know why. Yesterday, Action issued a press release announcing a few management changes. Nothing too startling till you get down to the end of the press release and you see that Chris Besing and Lonnie Boutte "are leaving the company" as chief executive and president, respectively, of Action's
unit. Until five months ago, Besing also was Action's chief financial officer.
Action makes die-cast
collectibles, and goracing.com was supposed to be Action's entry into the online world. It filed five months ago to go public, but so far at least, no deal.
Reached at home by my colleague,
, Besing said he is no longer with the company, and that the departure was "by mutual agreement." When Martinez asked him whether he was fired, he responded, "No." He declined further comment; Action declined comment beyond the press release.
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
email@example.com. Greenberg also writes a monthly column for Fortune.
Mark Martinez assisted with the reporting of this column.
Copyright 1999, TheStreet.com