midday12-29-99
TheStreet.com's MIDDAY UPDATE
December 29, 1999
http://www.thestreet.com
Market Data as of 12/29/99, 1:01 PM ET:
o Dow Jones Industrial Average: 11,520.75 up 44.04, 0.38%
o Nasdaq Composite Index: 4,017.27 up 45.16, 1.14%
o S&P 500: 1,463.83 up 6.17, 0.42%
o TSC Internet: 1,161.05 up 39.08, 3.48%
o Russell 2000: 492.85 up 4.37, 0.89%
o 30-Year Treasury: 95 28/32 up 14/32, yield 6.428%
In Today's Bulletin:
o Midday Musings: Qualcomm Keeps Nasdaq Above 4000 Amid Overall Strength
o Wrong! Tactics and Strategies: Piecing Together a Propensity to Sell
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"THESTREET.COM" MILLENNIUM EDITION:
Special Times!
TheStreet Recommends
Jan. 1 at 6 p.m. ET and Jan. 2 at 11 a.m. ET
A special edition of "TheStreet.com" looks at investing in the new millennium. Special guests include
Ryan Jacob
, CIO of the
Jacob Internet Fund
,
Gene Walden
, author of
The 100 Best Stocksto Own in America
, and
Ken Schapiro
from
Condor CapitalManagement
.
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Midday Musings: Qualcomm Keeps Nasdaq Above 4000 Amid Overall Strength
By
Eileen Kinsella
Staff Reporter
12/29/99 1:05 PM ET
Stocks were higher at midday, as the
Dow Jones Industrial Average
was busy working its way to another record, while the
Nasdaq Composite Index
had its eyes once again on the 4000 prize.
Investors wasted little time jumping back in the tech-stock pool after
yesterday's late-day selloff, albeit a mild one, left the Comp at 3972, about 30 points short of its desired goal. Lately it was keeping a tight grip on a gain of 44, or 1.1%, to 4016, though off its intraday high of 4025.92.
The dip yesterday gave investors an "opportunity to buy the big names in the Nasdaq," said Brian Belski, chief investment strategist at
George K. Baum
in Kansas City, Mo. Belski said investors were likely adding to positions and padding portfolios as the trading year winds down. One interesting aspect of today's internals, he points out, is the positive breadth amid lighter volume. (See internals below.)
The biggest newsmaker on the Nasdaq was
Qualcomm
(QCOM)
flying 106 1/8, or 21.1%, to 609 1/16 after
PaineWebber
analyst Walter Piecyk slapped a 1,000 price target on the highflying stock.
"It's the same thing: tech, tech and more tech," said Gary Kaltbaum chief technical analyst at
GSG Securities
in Orlando, Fla. "Things are very extended. The good news is that the rest of the market is starting to broaden."
Kaltbaum cited the visible strength in cyclicals as a sign of that broadening. The
Morgan Stanley Cyclical Index
was rising 1.8%, helped by gains in
Dow Chemical
(DOW)
and
Goodyear
(GT)
among others. The
Philadelphia Stock Exchange Forest & Paper Products Index
was lifting 1.3%.
"The economy is still strong and eventually it gets to the cyclicals," said Kaltbaum. "It's just onward and upward." He said the fact that a lot of stocks are "gapping up," closing at 50 and opening the next day at 60, for instance, indicates "a lot of buying pressure."
Kaltbaum said his optimistic outlook at extends into the year ahead. "I'm into the contrarian thing," he said. "I am hearing too many people say that (the market's strength) will end in January. I need to see some signs of it. This is all going on with a bad bond market. What if you had a good bond market?"
Indeed, the 30-year Treasury bond was showing some muscle today, lately up 17/32 to 95 30/32, its yield easing to 6.43%. (For more on the fixed-income market, see today's early
Bond Focus.)
The Dow was lately up 43 to 11,520, helped by
Home Depot's
(HD)
rise of 2.7%.
Basic material stocks were on fire, with
Alcoa
(AA)
jumping 2.4% after bouncing off an intraday record of 82 7/16.
Union Carbide
(UK)
was up 3.3%, also hanging in record territory.
News of solid future earnings and record trading volume from
Charles Schwab
(SCH)
was lifting the stock 12.6%. A number of other e-finance stocks jumped on for the ride, including
Ameritrade
(AMTD)
, up 10.4%, and
E*Trade
undefined
, rising 9.2%.
TheStreet.com E-Finance Index
was jumping 5.5%.
Market Internals
Breadth was positive, particularly on the Nasdaq, on moderate volume.
New York Stock Exchange:
1,746 advancers, 1,240 decliners, 322 million shares. 71 new 52-week highs, 183 new lows.
Nasdaq Stock Market:
2,184 advancers, 1,817 decliners, 663 million shares. 177 new highs, 78 new lows.
Wednesday's Midday Watchlist
By
Tara Murphy
Staff Reporter
Those who thought things couldn't get any more interesting with super-stock Qualcomm, think again.
PaineWebber
analyst Walter Piecyk initiated coverage of Qualcomm with a 12-month price target of 1,000 on the stock. The analyst started coverage with a buy rating, stating that "we believe it represents an appropriate way to invest in the long-term growth trends of wireless and data." Qualcomm is the developer of the wireless technology code division multiple access, and Piecyk wrote that he believes "by the end of the next decade, 85% of phones sold will use CDMA technology (up from 18% today)." Shares of Qualcomm were sky rocketing 108 1/16, or 21.4%, to 611.
Mergers, acquisitions and joint ventures
Chesapeake
undefined
said it would extend its offer for
Shorewood
undefined
until Jan. 20. Yesterday, Shorewood's board asked shareholders to turn down the hostile $500 million offer from Chesapeake, calling it inadequate. Shorewood requested that shareholders vote against replacing its current board with members hand picked by Chesapeake. Shorewood said it has held preliminary negotiations with other interested buyers but said that the company is not for sale. Shares of Chesapeake were advancing 5/8 to 30 7/8, while Shorewood was sliding 7/32 to 18 13/16.
News Corp.'s
(NWS)
Fox
(FOX)
division and
Time Warner's
(TWX)
cable unit entered a new long-term agreement, which calls for Fox stations' programming to be carried by Time Warner Cable, according to a report in
The Wall Street Journal
. Shares of News Corp. were lifting 3/16 to 38 3/4, Fox was up 1/16 to 24 7/16 and Time Warner shares were adding 1/4 to 69 7/8.
Niagara Bancorp
(NBCP)
is buying
CNY Financial
undefined
for $87.9 million. Shares of Niagara Bancorp were unchanged at 10 1/4.
Earnings/revenue reports and previews
(
Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified.
)
Charles Schwab
(SCH)
was bouncing 4 1/16, or 11.8%, to 38 3/8 after it said it expects to post fourth-quarter net income of 19 cents to 20 cents a share, which would put it ahead of the 13-analyst estimate of 17 cents and above the year-ago 12 cents. Schwab also expects full-year earnings to come in between 69 cents and 70 cents a share, which would put it ahead of the 13-analyst estimate of 67 cents and the year-ago 42 cents.
Analyst actions
Banc of America Securities
upped its price target on
Analog Devices
(ADI)
to 150 from 100 and raised its fiscal 2000 earnings estimate to $2.32 a share from $2.20. Shares of Analog Devices were advancing 4 1/16 to 87 5/16.
Warburg Dillon Read
upped its fourth-quarter earnings estimates on
Calpine
(CPN)
to 41 cents a share from 36 cents. Shares of Calpine were edging up 9/16 to 60 7/16.
Donaldson Lufkin & Jenrette
upped its six-month-to-12-month price target on
DoubleClick
undefined
to 300 from 190. Shares of DoubleClick were leaping 21 1/4, or 9.6%, to 242 5/16.
Lehman Brothers
sliced its price target on
Coca-Cola Enterprises
(CCE)
to 26 from 36 but raised it fiscal 1999 EPS estimate to 26 cents a share from 23 cents and its fiscal 2000 earnings estimate to 45 cents a share from 42 cents. Shares of Coca-Cola Enterprises were gaining 13/16 to 20 7/16.
Merrill Lynch
analyst Jeffrey Kauffman cut his intermediate-term rating on shares of
Eagle USA Airfreight
(EUSA)
to neutral from accumulate. Eagle USA was falling 5 1/8, or 10.8%, to 42 5/8.
Credit Suisse First Boston
started coverage of
Fifth Third Bancorp
(FITB)
with a hold rating. Shares of Fifth Third Bancorp were mounting 5/8 to 72 3/16
Lehman Brothers
said it maintains its
Hershey
(HSY)
buy rating but cut its fourth-quarter estimate to 69 cents a share from 74 cents and its 2000 estimate to $2.45 from $2.50. Yesterday, the company said slow December sales and distribution problems could trim its fiscal 1999 earnings by 10 cents a share.
PaineWebber
reduced its price target on the stock to 48 from 54, while
Merrill Lynch
cut its fourth-quarter estimate to 69 cents from 81 cents a share. Merrill lowered its 2000 EPS estimate to $2.25 to $2.35 a share from a range of $2.40 to $2.50. Lately, Hershey was sinking 13/16 to 47.
Goldman Sachs
sliced its rating on
Sodexho Marriott
(SDH)
to market perform from market outperform and cut its fiscal 2000 estimates to 95 cents a share from $1.05. Last night, Sodexho Marriott warned investors that first-quarter earnings would be roughly 5% below the two-analyst consensus estimate of 47 cents a share. The company blamed softer-than-expected operating margins in its corporate services business, start-up costs for new contracts and Y2K expenses for the disappointing results. The company said its disappointing first quarter could cause fiscal 2000 earnings to fall roughly 5% below the three-analyst consensus estimate of $1.05 a share.
Banc of America sliced its first-quarter earnings estimates on the stock to 44 cents a share from 46 cents and its fiscal 2000 EPS to $1.04 a share from $1.06. Shares of Sodexho Marriott were declining 11/16 to 13 1/2.
Lehman Brothers sliced its fiscal 1999 estimate on
W.W. Grainger
(GWW)
to $2.10 a share from $2.20 and its 2000 estimate to $2.35 a share from $2.60. Shares of W.W. Grainger were losing 3/4 to 47 3/4.
PaineWebber
raised its price target on
Xceed
undefined
to 65 from 36. Shares of Xceed were hopping 3 5/8, or 10%, to 39 7/8.
Miscellany
AT&T
(T)
and
Covad Communications
(COVD)
have asked a
U.S. District Court of Appeals
in the District of Columbia to throw out a
Federal Communications Commission
decision letting
Bell Atlantic
(BEL)
provide long-distance service in New York. AT&T and Covad are trying to push back Bell Atlantic's debut as a long-distance carrier in New York until their dispute is resolved.
According to the 1996 Telecommunications Act, Bell Atlantic cannot be a long-distance voice and data-service provider for any of the 13 states in which it offers local service until it allows competitors into its local networks. The FCC gave its approval to Bell Atlantic, saying it provided rivals with equal access into 14 key areas of the local network in New York. AT&T and Covad claim that Bell Atlantic has not offered them an entrance into areas of the network they wanted to lease to compete in the local market. Shares of AT&T were climbing 1 3/16 to 51 7/8, while Covad was popping 2 5/8 to 55 5/16. Bell Atlantic was slipping 1/4 to 62 1/16.
Ireland's
Elan
(ELN)
submitted a new drug application to the
Food and Drug Administration
for ziconotide, a potential treatment for intractable pain. Shares of Elan were tacking on 3/4 to 28 15/16.
Wall Street analysts who write research reports criticizing companies have run the risk of being derided by institutional investor clients, blocked from company conference calls and even fired, but now libel suits from these companies are posing a new problem for analysts, the Heard on the Street column in
The Wall Street Journal
said. The column pointed to a defamation suit filed by
Sunrise Technologies International
(SNRS)
against both
Sturza's Institutional Research
and
Avalon Research Group
, two firms that issued separate reports on Sunrise this summer questioning the profit potential of the company. Shares of Sunrise Technologies were losing 1/4 to 12.
For more on Sunrise, check out
TheStreet.com's
coverage of
the
company. Also
TSC's
Herb Greenberg has
written
extensively
on
Sunrise.
Wrong! Tactics and Strategies: Piecing Together a Propensity to Sell
By
James J. Cramer
12/29/99 8:59 AM ET
I've spent the better part of my trading career trying to get into the heads of the sellers. The problem is that most of the sellers I have come across have been of the institutional variety. I pretty much know how the mutual funds play things. Hedge funds? I know those, too. Takes one to know one there.
But this market doesn't lend itself to that kind of easy analysis. In this market, you have to get into the heads of the venture capitalists and figure out what they are going to do. Mistakenly, traders presume that the VCs are always sellers. That's just plain wrong.
Join the discussion on
TSC
Message Boards. Sometimes they are, and sometimes they are not. Some have more of an inclination to bail than others. Some are strictly short-timers and others want to see their investments grow to fruition.
Let's take
Yahoo!
(YHOO)
. The Street, meaning the consensus view of guys like me, pretty much figured that the VCs who started it and the VCs behind the companies that got bought by Yahoo! would all head for the hills at first light. They didn't. They didn't bail. That's how you got outsized gains in this one. Why didn't they? I have one theory: They all loved Yahoo!'s business model and its management. They genuinely bought in.
Now let's take
eToys
undefined
and
priceline
undefined
, two stocks that have been in free fall of late. My take is that the VCs here have been much more willing to go. Maybe they don't like the business model or the execution. I don't know. But all you did need to know about these stocks were that the VCs bolted.
So, where does this take us to? I would think that we are going to get more sophisticated about who owns stock in a company when we make our bets. I think we will soon be gauging venture capitalists as inclined to bail vs. long-termers. We will begin to see that certain venture capitalist-owners are a red flag. Others are money in the bank.
I would hope that news organizations would point us toward who has the propensity to sell. It will become an important piece of the puzzle. For example, I think that the betting line on the Street is that the VCs will all bail from
Commerce One
undefined
as soon as possible. But what if they don't?
To me, that is a more important piece of information than any 10 press releases that Commerce One might put out in the next few weeks.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at
jjcletters@thestreet.com.
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:
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