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midday12-07-99'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? Community

You know's the place for great market commentary, but did you know it's also the place for intelligent investing discussion? From Cramer on the market to Dagen McDowell on mutual funds, we bring the conversation straight to you. Check out today's boards at:

Can't get enough great TSC conversation? Then chat with James J. Cramer on AOL at 5 p.m. EST. (Keyword: LIVE)

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Midday Musings: Nasdaq Hangs Tough as Market's Rocket Ride Pauses


Thomas Lepri

Staff Reporter

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

S&P 500

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

Russell 2000

was down 2 to 464, while 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.

U.S. Bancorp's


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

1.9% lower.

"Tech is the one area where the fundamentals seem intact," said Peter Boockvar, equity strategist at

Miller Tabak

. "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

Alan Greenspan

. 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

Bond Focus.)

Market Internals

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

By Tara Murphy
Staff Reporter


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


Mergers, acquisitions and joint ventures

BP Amoco


lost 12 to 59 1/2 and

Exxon Mobil


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

Gatwick Airport


Goldman Sachs

raised Exxon Mobil to its recommended list from market outperformer. For more on BP Amoco's

buy, check out a separate story from the

joint newsroom.


European Commission

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.

News Corp.


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

joint newsroom.

Provident American


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, 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

Scott's Restaurants

, with the combined group operating most

Pizza Hut




Taco Bell

outlets in Canada for a total of about 639 stores.

Vodafone AirTouch


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

Bell Atlantic


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

H.J. Heinz


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.


European Commission

said it cleared plans by Heinz's European unit to buy U.K.-based

United Biscuits'

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

joint newsroom.

Interstate Bakeries


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.

Analyst actions

Goldman Sachs started



as a market outperformer. Shares of BroadVision were slipping 4 to 101 1/2.

Deutsche Banc Alex. Brown

started coverage of

Casella Waste


as a strong buy. Deutsche resumed coverage of

Republic Services


as a strong buy, and

Waste Management


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.

Merrill Lynch

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

CNF Transportation


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.

J.P. Morgan

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.

SoundView Technology

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.

Lehman Brothers

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.

Robertson Stephens

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.

Bear Stearns

initiated coverage of

Starwood Financial


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.

Goldman cut



to market performer from market outperformer. Shares of Texaco were skidding 1 to 57 15/16.

Lehman started coverage on

Veritas Software


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

April series.



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.

IMC Global


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.

Shares of



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

joint newsroom.

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

Bankers Trust

, a unit of

Deutsche Bank

. 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,, by demanding and receiving, warrants in the parent during negotiations over a previous FTD financing. Shares of were slipping 1/4 to 6.

Herb on TheStreet: Will MedImmune's Financial Performance


Justify Its Stock Price?


Herb Greenberg

Senior Columnist

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

Dow Jones

, during a breakout session, Mott even upped sales estimates for Synagis.

Herb's Latest: Join the discussion on


message boards.

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.


SG Cowen

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

An item

here last week noted how

Action Performance


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 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,

Mark Martinez

, 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 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,