TheStreet.com's MIDDAY UPDATE
December 14, 1999
Market Data as of 12/14/99, 1:10 PM ET:
o Dow Jones Industrial Average: 11,181.89 down 10.70, -0.10%
o Nasdaq Composite Index: 3,611.14 down 47.03, -1.29%
o S&P 500: 1,409.66 down 5.56, -0.39%
o TSC Internet: 1,121.84 down 32.17, -2.79%
o Russell 2000: 465.52 down 4.86, -1.03%
o 30-Year Treasury: 97 19/32 down 1 11/32, yield 6.300%
In Today's Bulletin:
o Midday Musings: Bonds' Battering Weighing Down Equities' Juggernaut
o Herb on TheStreet: Trying to Justify Qualcomm at These Levels
TheStreet.com's message boards have personality! Check out these great conversations fueled by TSC's thought-provoking commentary. And make sure to visit the Community section every day for the latest discussions and information on upcoming chats and appearances.
Herb Greenberg: The Return of the MonEmailbag
James Cramer: The Market According to Cramer
Adam Lashinsky: SiliconStreet.com
And make sure to join longtime tech watcher Jim Seymour on Wednesday, Dec.15, for a Q&A about the future of Microsoft, B2B and other tech-related queries. Post your questions now. Seymour will be jumping on the board Wednesday afternoon to answer your queries.
Also on TheStreet.com:
Wrong! Dispatches from the Front: The Latest Temptation of Cramer
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Internet: Online Shopping -- Unwrapped: Better Be Good: Rating Popular Sites
This year's performance will impact these businesses next year. We rank the leading players.
Dear Dagen: Dear Dagen: Beyond Bowl Games -- Financial Sponsorships of the Future
Plus, an updated list of fund company distributions.
Midday Musings: Bonds' Battering Weighing Down Equities' Juggernaut
12/14/99 1:16 PM ET
It's been a while since stocks have paid much mind to bond yields. But though the carnage that is today's Treasury market was starting to turn more than a few heads in the equity market, the serious rubbernecking has yet to start.
Weighing on the bond market today was a stronger-than-expected spike in
, which the Census Bureau said rose 0.9% in November from a revised 0.3% clip the previous month. Excluding automobiles, sales rose a more moderate 0.4%. But the headline number was big enough to spook the bond market -- economists polled by
were looking for sales to grow 0.5%.
All this despite a quite benign
Consumer Price Index
. The CPI rose 0.1% overall, a tenth of a percentage point below expectations. The core CPI, which excludes food and energy prices, rose just 0.2%, matching estimates.
The 30-year Treasury was off 1 10/32 to 97 20/32, its yield rising to 6.29%. The March bond futures contract, which equity players typically watch more closely than the cash bond, was down 1 8/32 to 93 2/32. (For more on the fixed-income market, see today's early
"The U.S. economy remains strong," said Peter Boockvar, equity strategist at
. "Today's sales figures confirm that. And as long as the economy remains strong, that raises the possibility that the
will have to do something."
The bond market was helping to keep the equity proxies underwater. Technology and Net shares were getting the worst of it, with the
Nasdaq Composite Index
off 44.02 to 3614.15 and
TheStreet.com Internet Sector
index down 28.13 to 1125.88. But the broader big cap market was faring better: The
Dow Jones Industrial Average
was up 18.96 to 11,211.55 while the
was off 2.41 to 1412.81.
Boockvar was surprised to see the selling as muted as it was.
"It's interesting how well the market trades relative to bonds," he said. "The yield is getting close to 6.30% again and the market's barely down. I don't know whether the market doesn't care or whether it thinks this is a short-term thing."
It's not that technology stocks weren't getting roundly hammered today. It's just that the extent to which those losses were linked to the Treasury market's performance is unclear.
"Technology is starting to show some chinks in the armor," Boockvar said. "
today is down 10,
reaffirming last week that Q4 and Q1 will be affected by Y2K and concerns about rising inventories in the semiconductors."
Computer maker Solectron was selling off after its first-quarter results revealed disappointing revenues, which analysts chalked up to component shortages. The stock lately was off its session lows, down 7 1/16, or 7.8%, to 83 15/16.
The broader sector proxies weren't faring much better. The
Morgan Stanley High Tech 35
was down about 2%. And a note from
saying that inventory buildups are putting semiconductor stocks at near-term risk was helping send the
Philadelphia Stock Exchange Semiconductor Index
But, unbeknownst to those unable to take their eyes of the Nasdaq, the broad large-cap market has been in a narrow range for the past month -- ever since the last
Federal Open Market Committee
meeting. Specifically, the S&P 500 has been bouncing between 1390 and 1430, with few signs of making a convincing breakout.
"There's not a good deal of direction right now," said Richard Dickson, technical analyst at
Scott & Stringfellow
in Richmond, Va. "What direction there was had been up, but what we're seeing right now is a market that, on a two- to four-week basis, is extremely overbought. But on a one-week basis, it's neutral to moderately oversold.
"That produces this push/pull effect," Dickson continued. "It tries to rally, but it's overbought. So it goes down, but there's really no reason to be going down," because of the better short-term condition of the market. "I think we'll churn around until we can work off this two- to four-week overbought condition," he said.
The weakness in bonds was sending banks and brokers into tailspins. The
Philadelphia Stock Exchange/KBW Bank Index
was down 1.4%, while the
American Stock Exchange Broker/Dealer Index
had fallen 2.8%.
In other sector news, oil and oil service stocks were moving higher. The
Philadelphia Stock Exchange Oil Service Index
was up 2.6%, while January crude futures were up a scant 16 cents to $25.54.
Paper stocks were absolutely ripping. The
Philadelphia Stock Exchange Forest & Paper Products Index
was up 2.9%.
Small caps were shaving off points from their recent resurgence. The
was down 5.26 to 465.12.
Breadth was solidly negative on strong volume.
New York Stock Exchange:
1,067 advancers, 1,879 decliners, 592 million shares. 46 new 52-week highs, 393 new lows.
Nasdaq Stock Market:
1,444 advancers, 2,467 decliners, 902 million shares. 156 new highs, 102 new lows.
Tuesday's Midday Watchlist
was sinking 23 3/8, or 9.5%, to 223 and
fell 3.3%, to 104 1/8, despite saying they entered into a sales initiative.
were rising about 3, or 5.1%, to 66 7/8 after the company said it will spin off its 83% interest in computer services company
. AMR will distribute 107 million shares of Sabre common stock to AMR shareholders, who will receive 0.7 shares of Sabre for each common stock of AMR. Sabre also named William Hannigan as its new president and CEO, effective immediately. Hannigan was formerly president of SBC Global Markets at
Mergers, acquisitions and joint ventures
slipped 0.8% to 70 13/16 after it said it is well-positioned to acquire the financially floundering
, citing past relations between the two companies, said a GM spokesperson Kay Lee. Lee said that executive vice president Louis Hughes and GM Korea president Alan Perriton launched a proposal, headed by
Korea Development Bank
, to Daewoo Motor's local creditors. According to Lee, the proposals indicate GM's assessment of Daewoo's assets and debt but do not offer a price.
was unchanged at 53 9/16 after it said it has entered a $980 million cash and debt agreement to acquire the telecom products division of
lost 1 1/4 to 50 3/8 after it said it has agreed to provide content for
Silicon Valley Group
gained 1 5/16, or 9.8%, to 14 3/4 after it said it won a $100 million order for its Micrascan 193 lithography system from an unnamed chip maker.
has brought antitrust lawyer Stephen Axinn on board to examine
planned $115 billion acquisition of
, indicating that the acquisition will be scrutinized by federal regulators,
The Wall Street Journal
reported. Shares of WCOM fell 1 1/8 to 78 1/16, while Sprint was down 1 3/4 to 66 1/4.
started coverage on MCI with a buy rating and set a 12-month price target of 122 a share.
slipped 0.4% to 33 3/4 and
lost 5/8, or 16.1%, to 3 3/8 after the companies said they will merge their oil and gas assets in the Permian and San Juan basins to form a new publicly traded exploration and production company called
Pure Energy Resources
Unocal will control 65% of the new company upon completion of the merger, which is expected in the first quarter. The new company will have 50 million common shares outstanding, and should result in cost savings of at least $5 million per year, the companies said in a statement.
On a pro forma basis, the new company will have reserves of 175 million barrels of oil equivalent, and will produce approximately 40,000 barrels of oil equivalent per day, 60% of which is natural gas.
lost 7/8 to 43 1/2 after it said it has purchased a 14% interest in
for $10 million. Shares of BigStar gained 1 7/16, or 25.8%, to 7 1/8.
Earnings/revenue reports and previews
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
gained 3/16 to 8 11/16 despite
warning investors after yesterday's close that it expects to post fourth-quarter earnings of 10 cents a share, missing the five-analyst estimate of 19 cents a share. AutoNation said it would shut down 23 of its used-car megastores and combine six other stores with new vehicle businesses. The closings, which will cut the companies' work force by 1,800 jobs, along with previously announced restructuring changes, will have the company assuming a fourth-quarter pretax charge of $430 million to $490 million.
In addition, the company said it has added $500 million worth of common stock to its current share repurchasing plan.
Morgan Stanley Dean Witter
sliced its rating on the stock to a neutral from outperform.
dropped 4 1/8, or 7.9%, to 47 1/2 after it reported third-quarter earnings of 37 cents a share, missing the 16-analyst estimate of 38 cents but up from the year-ago 25 cents.
gained 5/8 to 31 1/16 after it posted first-quarter earnings of 70 cents a share, beating the five-analyst estimate of 65 cents, but down from the year-ago 75 cents a share.
slipped 3/8, or 9.2%, to 3 11/16 after it warned investors that fourth-quarter results would miss the two-analyst estimate of a 45-cent loss. The company expects to post a fourth-quarter loss between $1.15 and $1.30 a share, down from the year-ago $1.62 loss. The company blamed tough operating conditions for the disappointing results.
gained 2 3/16 to 49 11/16 after it said it sees fourth-quarter operating net at $1.60 to $1.65 a share, above the current eight-analyst estimate of $1.48 a share. FMC said it sees 1999 operating net at $5.95 to $6.00 a share, also above the eight-analyst estimate of $5.81 a share.
slipped 1/16 to 148 3/4, despite an announcement from Chairman and CEO Jack Welch, who said the company is comfortable with the 13-analyst consensus estimate of $3.22 a share and expects to post fiscal 2000 EPS at $3.70 a share. GE's fiscal 2000 estimate is a penny better than the 13-analyst consensus number. Welch said the company is set to make $20 billion to $25 billion in acquisitions in 1999 and said that it has "no intention" of selling its
Pier 1 Imports
slipped 3/8, or 5.9%, to 6 despite reporting third-quarter earnings of 16 cents a share, beating the 16-analyst estimate of 14 cents a share, but down from the year-ago 19 cents a share.
Offerings and stock actions
popped 4 1/16, or 9.1%, to 48 13/16 after its
division, maker of the Palm Pilot, filed with the
Securities and Exchange Commission
to raise up to $100 million in an initial public offering.
Morgan Stanley Dean Witter
are serving as the deal's underwriters.
According to the prospectus,
said they will buy shares through a private placement equal to up to 4.5% of Palm stock. AOL lost 3 7/8 to 90 1/8, Motorola dropped 4 13/16 to 123 7/8 and Nokia shed 8 3/16 to 158 7/8.
climbed 3/4 to 18 7/8 after it set a share-repurchasing program for 15% of its common stock.
lost 1/4 to 55 5/8 after it filed with the
Securities and Exchange Commission
to split off the rest its
unit once the stock price hits $20. Blockbuster was unchanged at 15 3/4. In August, Viacom held an IPO for 20% of the movie rental chain, with plans to split off the business. However, Blockbuster's stagnant $15 stock price has analysts wondering if Viacom will follow through with its intentions.
Morgan Stanley Dean Witter
downgraded shares of
to neutral from outperform. Shares of Ahold slipped 1 1/2, or 5.1%, to 27 3/4.
Salomon Smith Barney
said it initiated coverage of
Barnes & Noble
with outperform ratings. Analyst David Strasser pegged Barnes & Noble's 12-month price target at 26, and Borders' at 19. Barnes & Noble slipped 1/8 to 21 1/8 while Borders inched up 1/16 to 15 1/4.
rolled out coverage of
, placing the stock on its recommended list. Merrill Lynch also began coverage with an intermediate, long-term buy rating. Shares of Classic Communications were popping 2 1/16, or 7.1%, to 30 7/8.
Salomon Smith Barney upped its rating on
to a buy and set a 215 price target. Shares of Exodus Communications were climbing 2 1/4 to 170 3/16.
dropped 9 5/8, or 10.1%, to 83 1/16 after Morgan Stanley Dean Witter cut its rating to outperform from a strong buy.
Banc of America Securities
upped its rating on several retail stocks, including
Ames Department Stores
and Whitehall Jewelers, to strong buys from buys.
Shares of Dayton Hudson were mounting 1 7/16 to 69 7/8, while Kohl's was sliding 1/2 to 65. Shares of Ames Department Stores were bouncing 2 1/2, or 9%, to 30 1/4 and Fred's was gaining 2 11/16, or 19.3%, to 16 1/2.
Morgan Stanley Dean Witter downgraded shares of
to outperform from strong buy. Shares of Hughes Electronics were sinking 3 to 89 1/8.
Merrill Lynch sliced its rating on
to intermediate-term neutral from accumulate. Shares of Orbital were losing 2 1/8, or 16.3%, to 10 7/8.
began coverage of
as a market performer. Shares of Quaker Oats were slightly lower to 64 1/4.
Goldman Sachs added
Rohm & Haas
to its recommended list. Shares of Rohm & Haas were hopping 2 5/16, or 6.2%, to 39 1/4.
began coverage of
with a buy rating. Shares of Scient were skidding 4 1/8 to 96 3/4.
Morgan Stanley sliced its rating on
to neutral from outperform. Shares of SCI Systems were stumbling 4 to 81 1/2.
First Boston rolled out coverage of
with a buy rating and a price target of 40. Shares of Symyx Technologies were adding 5/8 to 28 1/2.
First Boston reinstated coverage of
with a strong buy rating. Viant shares were bouncing 1/2 to 118 5/8.
First Boston started coverage of
with a buy rating and a price target of 85. Shares of Xircom were hopping 1 11/16 to 64.
was losing 1 11/16, or 19.1%, to 7 1/16 after it said CEO Gary Lauer is departing the company to join another firm.
was shedding 1/8 to 7 15/16 after it said it would pay
$18.75 million to settle a suit brought on by the sneaker cushion supplier. The lawsuit claimed that Reebok violated its agreement with Supracor when it bought material from one of the material supplier's competitors. Reebok said it plans to assume a fourth-quarter charge as a result of the settlement and legal fees.
Herb on TheStreet: Trying to Justify Qualcomm at These Levels
12/14/99 6:29 AM ET
, our guest on "TheStreet.com" on
Fox News Channel
over the weekend, looks like the ultimate genius after recommending
, which at the time traded at 391 1/2 with a market value of $64.6 billion. It rose another 26 1/16 yesterday, but not because of his comments on the show. It rose because Qualcomm agreed to sell its mobile communications system to two of China's largest transportation companies.
But still, isn't all of the good news already priced into the stock? And what about comments from the
, which I raised in a weekend
Cutting Room column -- gratis
earlier story on
-- that in three years Qualcomm will be lucky if its technology captures even 15% of the market?
Luskin said Monday he believes he'll be glad he held onto the stock -- even at its current levels -- three months from now and three years from now. "To me, the bet on Qualcomm is the bet on a megawave in cellular, which is the idea behind wireless telephony. Half the people in the world have never made a phone call, and when they do it'll be on CDMA, and Qualcomm has all the patents -- much the way
Herb's Latest: Join the discussion on
TSC message boards
What about that Yankee Group study? Says Luskin: "Those who can, do. And those who can't, consult. And those who can't consult, become technology consultants." (Such a yukster.)
And this FYI: One other longtime Qualcomm hedge fund holder told me yesterday he has sold most of his position. Unlike Luskin (showing there's more than one way to interpret this story), he believes much of the good news is already priced into the stock. But he did say if Qualcomm sells its telephone division (which is on the block) to either
, the stock would probably go higher on that news alone.
One press release too many?:
Rules of thumb from this column include the warning to never blindly fall in love with a company that issues too many press releases; to be extra careful if that same company does too many stock splits; and to start worrying if those stock splits occur when the stock price is in the single digits.
Which brings us to
, an online data provider. (The following story is true!) Since Oct. 25, Track Data has issued a news release almost every day -- so many that on Nov. 17 it actually issued a press release that apologized for
issuing a press release on that day. "Track Data announces no press release today," blared the headline. CEO Barry Hertz was quoted as saying: "I want to apologize to our faithful stockholders who are looking each morning for our latest corporate developments. Rest assured that we do not take this lack of news lightly."
That string of press releases included one, on Nov. 1, when the stock was 4 47/64 (split-adjusted), announcing a 2-for-1 stock split. Then, yesterday, with the stock at 9 1/4, the company declared
2-for-1 split. The news releases announcing both splits were almost identical, with Hertz declaring, "With only 25% of our common stock owned by the public, we believe the stock split will provide greater liquidity for our stockholders, as well as attract institutional investors.''
Excuse me, Mr. Hertz, but the capitalization of a company doesn't change after a split, which means that after the split three-quarters of your stock will
be held by insiders.
Any comment? Track Data's spokeswoman didn't return my call. (Yep, I know, based on Track Data's stock price, what Hertz has done has worked. Doesn't mean it's right.)
Anyone seen the pit crew?:
As this column
noted last week,
announced that Chris Besing, former Action CFO, had unexpectedly (and without explanation) left the company's
subsidiary, where he was CEO. goracing's president, Lonnie Boutte, also left.
On the same day it disclosed Besing's and Boutte's departure (to counter the bad news?) Action, which makes die-cast
replicas, announced that Howard Jacobs, who joined Action in July from
, "will become Action's chief marketing officer for Action and all of its domestic and international subsidiaries."
Well, Action hasn't issued a press release,
, yesterday the company confirmed to my associate,
, that Jacobs is no longer with the company. When did he leave, where did he go, why did he leave? Action declined comment, but not through its normal spokesman, Scott Williamson. When Martinez called Williamson's direct line, it rang into voice mail for Jacobs. (Huh?) Where was Williamson? That's what Mark wanted to know, so he called CFO David Husband's office, where a receptionist issued a flat, "No comment."
L&H, the saga continues:
The news is so good at
Lernout & Hauspie
that last week
analyst Brian Skiba cut his fourth-quarter earnings estimates from 27 cents to 21 cents. That's not all. Skiba, in a note to clients, said that Lernout's new deal with Microsoft ain't all that big a deal. The deal calls for Lernout's document translation service to get a button on Microsoft's Office Update Web site. One page of translation is free; additional pages require a fee. "With regard to the Microsoft relationship, in our view, this does not really take it onto a new level," Skiba wrote. Skiba pointed out that Lernout paid a fee to be included on the site just as other companies like
The size of the fee? Neither Lernout nor Microsoft would say, but according to sources at companies that were offered the same deal, Microsoft has been offering similar deals to other translation companies for $25,000 per month, plus commissions on any revenue generated on its site. Skiba reiterated his neutral rating on the stock.
If you missed
yesterday's revival of the
, take a peek. The more questions we get, the more frequently it will run.
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