On the Nightly Business Report Program..Market Monitor Section
Jeffrey Applegate chief investment strategist for Lehman recommends
Cisco
Nightly Business Report
Television's #1 Daily Business News Program
Transcripts from show aired 10/29/1999:
The NASDAQ Has A Record Run
Chicago Stock Exchange Begins After Hours Trading
Lockheed Continues To Lose Altitude With Investors
The Tokyo Auto Show Goes West
"Market Monitor"-Jeffrey Applegate, Chief Investment Strategist,
Paul Kangas' Wall Street Wrap Up
NBR Market Statistics
View transcripts from this week's shows
"Market Monitor"-Jeffrey Applegate, Chief Investment Strategist,
Lehman Brothers
SUSIE GHARIB: Our "Market Monitor" guest tonight has a bullish forecast for the markets, Dow
11250 by the end of this year. Joining me live here in New York is Jeffery Applegate. He is the chief
investment strategist at Lehman Brothers. Well, wow, what a great rally to end off the week,
especially for someone as bullish as you. If the Fed, though, raises interest rates in two weeks at its
meeting, will this damage the bullish mood?
JEFFREY APPLEGATE, CHIEF INVESTMENT STRATEGIST, LEHMAN BROTHERS: I
don't think necessarily. It's interesting, if you look at the history during prior periods when the Fed
has been tightening, the pattern is typically that the bond yield peak and the stock market trough is in
advance of the final tightening. So if the Fed goes on November 16, which we think they will, then it
would be keeping in history that actually the trough in stock prices and bond prices is already behind
us.
GHARIB: All right. And you are so bullish that your asset allocation has 0 percent cash, 80 percent
in stocks.
APPLEGATE: Right. Right. Which, if you look at the year so far, you've got the Dow Jones up 15
percent. The bond market's obviously been struggling all year. Returns are barely positive, and cash
has returned around 3percent. So that's been OK. But if you look at the environment we're in, we've
got terrific productivity, which Mr. Greenspan confirmed last night, low inflation, generally low
interest rates, double-digit profit growth, that's a pretty good brew for the stock market.
GHARIB: Let's go to some of our questions - ask the "Market Monitor." This first one comes from
River Falls, Wisconsin.
APPLEGATE: OK.
GHARIB: With all the talk surrounding Y2K, do you see investors pulling money out of their
investments as insurance towards the end of the year only to reinvest it immediately after January 1?
APPLEGATE: I guess that could happen to some extent. We're not planning to do that because I
think Y2K - it's a very novel event. The market is not going to be able to discount it. So we're not
going to try to market time around it. So - but people on the margin, I think, may get a little scared of
the whole scenario.
GHARIB: Would you advise people to do it?
APPLEGATE: I wouldn't, no. Because if you think about Y2K, the whole process we've been going
through now, with all this due diligence, we're sort of really looking for the needle in the haystack.
Well, on January 1, the needle is going to be sticking out. So you're going to fix it. So I don't think it's
going to be a protracted problem.
GHARIB: Here's another question for you. This one comes from Paul Ewe of New York City. With
the advent of broadband, do you think America Online will continue to be the leader of Internet
service in the future?
APPLEGATE: Yes, I think - you know, there has been a wrap with America Online that they will
not be in all the channels. But if you look at how they've been positioning themselves in terms of the
copper delivery system, fiber optics, wireless, et cetera, we think they will be positioned in the
channels, so they're well on their way, too, to building the best brands on the Net.
GHARIB: Would you be a buyer of AOL? It was up quite a bit this week. It's now at 129.
APPLEGATE: Yes, it was, and we've owned it for several years, and our price target is $200.
GHARIB: So it would be a buyer. OK, what else do you like?
APPLEGATE: Well, really, if you step back from stock specific and just look at what's going on, we
have this really interesting phenomenon called the Internet and the virtual economy. There was a
report out this week that the Internet is growing by 70 percent a year. Meantime, the real economy -
the global economy is only growing by 5 percent. So we'd argue it probably makes sense to be
positioned in stocks that are actively involved in either building or servicing the Internet.
GHARIB: Like what?
APPLEGATE: Well, Cisco, of course, is a prime example - switches, routers, servers. They're really
building the backbone of this new global utility. So that's one great example. You obviously got some
pretty good news from Intel, as you mentioned earlier on the show. And they're successfully transiting
their business, we think, into workstations and servers, more e-commerce. You've got a company
like MCI WorldCom, which used to be sort of a traditional long distance company. They're really a
global player in terms of voice and data transmission, and they had blow-out earnings reported. And
look at their revenues. Forty percent now come from the Internet. So there are lots of different ways
to be playing this.
GHARIB: All of those stocks that you named were up sharply today. Would you still buy them at
these levels?
APPLEGATE: We would still buy them. We still have them in the portfolio, which means we're
owners and buyers.
GHARIB: The one you didn't mention was Sun Microsystem. How about that?
APPLEGATE: We like Sun. Yeah, we like Sun. Sun's also in our portfolio, and that's obviously been
a huge player, as they say, "We put the "dot" in dot-com.
GHARIB: The last time you were on, you told us about Tyco International. You liked that. And of
course, Tyco has had a lot of bad news coming out, and the stock continues to be hammered again
today.
APPLEGATE: Right.
GHARIB: What's your view on Tyco? And is it still in your portfolio?
APPLEGATE: Yes, well, today's coup de grace was, as you mentioned, the New York Times
report. There have been a lot of allegations about accounting. We don't think that the company really
has been engaged in any fraud here and that there's really not an issue here. Obviously, the stock is
still under pressure
GHARIB: It's $39.
APPLEGATE: It's come down hugely. So we would still be buyers. We still own it in the portfolio.
GHARIB: What stock sectors are you staying away from?
APPLEGATE: Generally, I guess the biggest single underweight that we've got relative to the market
is probably consumer staples. The weight in the S&P, I think, for staples around 12 percent. We've
only got about 2 percent of the portfolio. And that's really a view that a lot of these big cap global
stocks in the consumer staples area, we think are just too richly priced. So we continue to avoid
them.
GHARIB: OK. Thank you so much. We appreciate you coming by to talk to us.
APPLEGATE: Pleasure. Good being here.
GHARIB: And we've been speaking with Jeffrey Applegate, the chief investment strategist at
Lehman Brothers, our "Market Monitor" guest tonight.
Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed
by
FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessarily represent the views
of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.
Information presented on Nightly Business Report is not and should not be considered as investment
advice.
(c)1999 Community Television Foundation of South Florida, Inc.
Paul Kangas' Wall Street Wrap Up
SUSIE GHARIB: The combination of those reassuring comments from Greenspan and reassuring
news from Intel put investors in the buying mood, and so stocks and bonds rallied all day long. The
Dow was a bit reserved at the open, up only 33 points. But the NASDAQ got off to a solid start,
skyrocketing 58 points with the Composite Index hitting a new record high. The resurgence
continued through the morning bolstered by a strong rally in technology stocks, and with AOL and
Intel leading the way. After just one hour of trading, the Dow surged 142 points, and the NASDAQ
was better by almost a 100. By late morning, the indices retreated from their early highs, but there
was no question about the bullish bias in the markets. During the lunch hour, stocks moved to new
session highs, market internals continued to improve, and volume was heavy, especially on the
NASDAQ. Late in the day, with an hour to go, volume on the NASDAQ had crossed 1.1 billion
shares. By the closing bell, there was lots to cheer about. The Dow finished up 107 points to 10729.
The blue chip average fell twice, but rose three times this week. It registered a weekly gain of almost
250 points. And for October, the Dow increased 392 points, or 3.8 percent. A gangbuster day for
the NASDAQ, it vaulted 91 points to a new record high 2966.
Big board volume strong today 1 billion shares there.
Another high flying day for Transports, up 45 points.
Utilities tacked another 1/3 of a point after a decent week of gains.
And the Closing Tick slightly bearish at -201.
Looking at the broader markets, the Standard & Poor's 500 jumped 20.
A 12 point gain on the S&P 100.
The MidCap added 8 1/2.
And the CRB Bridge Futures Price Index moved up a fraction.
The New York Stock Exchange Composite rose 7.
The Value Line up by 4.7.
The Russell2000 Small Cap better by about 6.
And the Wilshire 5000 climbed 220.
Well, the bulls also dominated the bond market today for a second day in a row. Many traders
interpreted those Greenspan comments last night as meaning there will be no rate hike by the Fed
next month. Others weren't so sure. But the bullish argument got more support from a report today
showing the number of new homes sold in September fell to the slowest pace in about two years.
And that's why corporate and tax free issues closed higher.
As for Treasuries, the 5-year notes rose 11/32.
The 10-year notes better by 22/32.
And the Bellwether 30-year bond jumped more than a point, pushing the yield down to 6.16 percent.
And the Lehman Brothers Long Bond Index added 17 points.
Another banner day for the markets. The NASDAQ was the star of the day with a new record, and
the blue chips also scored big with a triple-digit gain for the second day in a row. On the big board,
the Dow jumped 107 points to 10,729. For the second day in a row, advancers maintained their 2 to
1 lead over declining issues. And here's a switch120 new highs versus 90 new lows. Recently, the
bigger number has been on the bottom.
Tyco (NYSE:TYC) topped the list of most actives today, down 4 1/16. A new article in the New
York Times raised questions about the company's accounting policies connected to some recent
acquisitions. But Tyco said the article was both confusing and misleading.
AOL (NYSE:AOL) surged another 3 points or so on top of a 6-point gain. Investors euphoric about
AOL's plans for a two-for-one stock split.
Compaq (NYSE:CPQ) edged up a fraction.
And so did Citigroup .
And Lucent (NYSE:LU) ended up more than a point.
Lockheed Martin (NYSE:LMT) nose-dived 2 11/16 or about 12 percent on that management
shake-up we just told you about and also that big earnings warning.
A good day for some of the Dow stocks. AT&T (NYSE:T) added 3/4.
Philip Morris (NYSE:MO) up 3/16.
And a big day for Big Blue. IBM (NYSE:IBM) up 3 5/16.
And Unisys (NYSE:UIS) gained 2 5/16.
Among the widelies, American Express (NYSE:AXP) got hammered, down 6 1/4.
Morgan Stanley cut its rating from a "strong buy" to "outperform."
And Cypress Semiconductor (NYSE:CY) gained 2 3/4. A jury ruled in favor of the company in a
case on patent claims.
Delta Air (NYSE:DAL) moved up 2 5/16. Business Week, in its November 8 edition, suggests it
might buy out SkyWest (NASDAQ:SKYW).
Electronic Data (NYSE:EDS) exploded by more than 4 points on a strong earnings report 51 cents a
share, which beat Street estimates by 2 cents.
GM (NYSE:GM) advanced 2 1/4.
And a lot of fanfare for Home Depot (NYSE:HD), up a 13/16. Remember, on Monday it will be one
of the new stocks in the Dow index.
Running down the big movers Reinsurance Group of America (NYSE:RGA) jumped 5 5/8. Third
quarter earnings before gains grew 26 percent.
And Boise Cascade (NYSE:BCC) rose 4 3/4, and that's after Merrill Lynch raised year 2000 and
2001 earnings estimates on a couple of paper companies.
Fair Isaac's (NYSE:FIC) climbed 4 1/8. Investors applauding its better than expected results and a
decision to get out of some unprofitable businesses.
And Boyds Collection (NYSE:FOB) tumbled 4 1/4. Merrill Lynch believes its collectibles could be
shelved for some time because of an industry slowdown, and also its third quarter earnings only
matched Street estimates.
Two earnings disappointments here. Fourth quarter numbers for Gartner Group (NYSE:IT) came in
at 20 cents a share. That was 4 cents below estimates. The stock dropped 3 13/16.
And Burns International (NYSE:BOR) lost 3. The company confirmed in its latest profit report that it
won=92t meet its fourth quarter forecasts.
Over on the NASDAQ, the composite index closing in on the 3000 level. It surged 91 points today
to a record 2966. For the week, the composite was up about 150 points.
Volume also hit record levels 1.4 billion shares.
And today, 588 more stocks were up than down.
Just take a look at the high-tech stalwarts. Microsoft (NASDAQ:MSFT) up 2 11/16.
Intel (NASDAQ:INTC) tacked on 5 1/4.
MCI WorldCom (NASDAQ:WCOM) jumped 2 3/16.
Cisco Systems (NASDAQ:CSCO) up over 3.
And Sun Microsystems (NASDAQ:SUNW) advanced 7 3/16.
A good day to go public. Akamai Technologies (AKAM) skyrocketed 119 points from its 9 million
share offering priced at $26 a share. The company monitors Internet traffic, and we see investors ran
stop signs to get in on it.
Yahoo! (NASDAQ:YHOO) jumped more than 4 points.
Dell (NASDAQ:DELL) ended up 1 5/8.
And JDS Uniphase (NASDAQ:JDSU) surging 14 7/16, thanks to a glowing report by C.T.
Securities.
And Applied Materials (NASDAQ:AMAT) climbed to more than 6.
Here is another IPO that did well today. Charter Semiconductor (NASDAQ:CHRTV) shot up 13
3/16. The
Singapore-based firm became public at $20 a share.
But U.S. Oncology (NASDAQ:USON) fell about 3 1/2.
And American Xtal Technology (NASDAQ:AXTI) dropped 9 1/2.
In AMEX trading, the composite index cleared the 800 level with a gain of 7 1/4.
Diodes (AMEX:DIO) rose 1 3/4 after yesterday's 2 1/4 point run on excitement over the successful
investments in China.
SJW Corp. (AMEX:SJW) gained 11 1/4 on news that it will be acquired by American Water
Works (NYSE:AWK) for $128 a share cash.
And finally, all of the index shares in positive territory.
And those are some of the stocks making news today.
Nightly Business Report transcripts are available on-line post-broadcast. The program is transcribed
by
FDCH. Updates may be posted at a later date.
The views of our guests and commentators are their own and do not necessarily represent the views
of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT.
Information presented on Nightly Business Report is not and should not be considered as investment
advice.
(c)1999 Community Television Foundation of South Florida, Inc.
View transcripts from this week's shows
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