The Dow builds up its resistance
Also, signs of IPO life; Goldman and the Fed; the real meaning of
Dimon's departure; and more
By Bethany McLean
moneydaily.com
Editor's note: With this issue, Money Daily welcomes a new lead
author. She is Fortune writer Bethany McLean, who until recently
was backing up Andy Serwer on Fortune.com's Street Life. Now
Bethany, supported by Pablo Galarza and Duff McDonald of Money,
will contribute a daily summary of news and market highlights
titled MarketRap -- first installment below. Money Daily also
debuts a new reader email column today. And Money.com will
continue to report on other stories of interest to Web-savvy
investors.
So Wall Streeters are using phrases like "resistance level" when
they talk about Dow 9,000. And resist the Dow did, at least for
today, falling over 100 points -- horrors! -- before recovering a
tad to close down 77.5 at 8897.96. (The Nasdaq actually closed up
a smidge -- see the figures at right.) So near, but yet so far
away! Everyone is saying that we got too much, too soon. What?!?
No such thing!
Still, you can't blame battered traders for taking some profits
today, especially since worries are growing that the Fed won't cut
rates again on November 17th. Needless to say, that would not be
pleasant.
SIGNS OF LIFE.... Is the IPO market coming back? Well, a teeny
tiny bit, at least for big, profitable, well-known companies. Like
life insurer MONY (the country's oldest and biggest mutual
insurance provider -- aren't you excited now?) which actually
increased -- yes, increased -- its pricing range, from
$18.50-$21.50 to $21.50-$23.50. The deal should price on Thursday.
Fox (Titanic! Ally McBeal! A far sexier deal!) should follow next
week with a $2 billion or so offering. But Internet software
company InterWorld withdrew its IPO plans today. We're still a
long way from last summer's euphoria. But that's a good thing.
Right?
TO EASE OR NOT TO EASE.... Goldman Sachs says the Fed will
continue to ease, due to an impending slowdown in the U.S.
economy. In fact, chief economist William Dudley said a fed funds
rate of 4% is likely in 1999. Part of Dudley's rationale is that
slower appreciation in equities -- around 7% annually -- may slow
consumer spending. No, Dudley is not exactly a raving bull. So is
Goldman trotting out the more restrained Dudley in an effort to
quiet the voice of Abby "Super Bull" Cohen? And do the hefty
yields on corporate bonds represent a buying opportunity, or are
they a sign that equities have gotten ahead of themselves?
BANK MERGERS: REALITY AND ILLUSION.... The reality is a mess, as
evidenced by Citigroup's (NYSE: CCI)struggles. Even the
announcement of a $2 billion stock buyback couldn't hoist the
ostensible financial juggernaut higher. Citi fell another $1 1/4
on this morning's news that its global head of equities, Steve
Black, is following his guru Jamie Dimon out the door. A source
inside the bank says that the real issue with Dimon's departure
may be Citi's huge army of brokers, who "absolutely worshipped"
Dimon. This source says that Dimon would return any broker's phone
call, right away, and that management at Citi may not understand
how important that was and how hard it is to replace.
Disillusioned salespeople? Uh-oh!
And the illusion? Well, it's just that JP Morgan (NYSE: JPM)fell
3.5% after investors began to question the takeover rumors that
pushed the stock higher last week. Yes, this marks about the
zillionth time that Deutsche Bank or someone else was going to buy
JP Morgan and didn't. Do you think a little bit of skepticism is
in order?
SAMPLES
Tobacco lawyers are desperately trying to weaken rogue ciggy exec
Bennett Lebow's testimony. Lebow says that his company's internal
documents convinced him smoking does indeed cause lung cancer,
emphysema and heart disease. Hey, don't forget impotence!...So
here's why the Nasdaq closed up: In a word, Dell (NASDAQ: DELL).
Yes, it's only Monday, but SuperDell moved up 5.1% in anticipation
of good news when it reports earnings on Thursday. Oh, and 'Net
frenzy is back! Excite (NASDAQ: XCIT) said it's introducing a new
e-commerce software, named Excite Express, that will allow
customers to enter billing info for multiple purchases with
retailers listed on Excite's site. The stock rose over 20%. Other
Internet icons like E-bay (NASDAQ: EBAY) also soared... First Call
says that 274 S&P 500 companies reported third quarter earnings
above a year ago, versus 164 below, for year-over-year shrinkage
of 3.2%....Brown Brothers Harriman downgraded Motorola (NYSE: MOT)
to "neutral." In case you didn't know, a rating of "neutral" is
like someone referring to a date as "nice"... The Supreme Court
says that securities industry employees can sue for discrimination
under the federal civil rights law, rather than use arbitration.
Of course, the Street is less than pleased......Supposedly, the
smart money is moving back into the oil patch. At least you can't
argue with the fact that these stocks are cheap...Did you know
that in Iowa, women hold 20% of seats on corporate boards? That's
still atrocious, but it's better than the 11.1% national
number...According to Sung Won Sohn, Wells Fargo's chief
economist, banks supply 80% of the credit to businesses in Japan
and 70% in Germany, versus 30% in the U.S. So we're less dependent
on banks, but more dependent on the capital markets. Pick your
poison! Or as Mark Twain once said: "Beautiful credit! The
foundation of modern society!"...Speaking of lawsuits, Dow Corning
filed a bankruptcy reorganization plan that includes a $3.2
billion settlement with 170,000 women who received breast
implants, although women who don't choose to participate can still
sue the company....Merrill increased Big Blue's (NYSE: IBM) price
target from $165 to $175 per share...It's an AT&T (NASDAQ: T)
lovefest! Lehman and PaineWebber both said "buy" today... But the
airlines are flying the unfriendly skies. Goldman slashed its
ratings on American, America West (NYSE: AWA), and US Airways
(NYSE: U); BT Alex Brown cut British Air (NYSE: BAB)....Casino
news! MGM Grand is buying Primadonna, which owns hotel-casinos
like New York-New York. And Mirage's (NYSE: MIR) earnings turned
out to be just that -- a mirage! OK, I'm overstating it, but the
company did miss estimates by a whole four cents... Hershey (NYSE:
HSY) wants to sell its pasta business in order to focus on
chocolate. Sure sounds smart to chocoholic me.
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