Street Life
Thursday, December 3, 1998, 7:15 p.m.
Real Worries for U.S. Investors
By Nelson Schwartz
Blame it on Rio. After showing some initial strength on
news of rate cuts in Europe, stocks fell sharply
Thursday as investors once again got the jitters over
Brazil's fragile economy. The prospect of a devaluation
of Brazil's currency, the real, sent the Dow down
184.86, to 8879.68, while the S&P fell 21.11, to
1150.14. The NASDAQ, which had been up 10 earlier in
the session, fell 40.88, to 1954.33. Here's what we've
been following:
GET REAL.... If you think stocks got banged up here,
check out Brazil's market. The Bovespa index dropped
8.8% Thursday after Brazil's congress rejected a
crucial part of the government's $23.5 billion fiscal
reform plan. U.S. investors were rattled because
everyone had pretty much stopped worrying about Brazil,
following the approval of a big bailout package for the
country last month. Well, as we learned with Asia,
emerging-market problems don't just disappear
overnight. Another reason for bargain-minded investors
to stay close to home.
TECH U-TURN.... Talk about whiplash. Just a few hours
before the close, Intel was up over 2 points. By 4
p.m., the chip giant was down 4 1/16, at $109 1/2. The
story was the same across the tech sector--Microsoft
closed down 4 5/8, at $122 1/8, while Yahoo! fell 13
5/16, to $183 3/4. Lucent, which I just recommended in
our new 1999 Investor's Guide, managed to hold on to a
1 5/8 point gain, closing at $88 3/8. The weakness in
tech didn't hold back shares of a new IPO, Ticketmaster
Online-CitySearch (yes, that's the name). It closed at
40 1/4, up 188% from its offering price of $14. We'll
see how long this bit of madness lasts.
UP, UP AND AWAY.... Despite the big drop Thursday, I
can't get over the recent move in Intel. It's risen
more than 30% in two months. So I decided to check in
with the preeminent Intel bull on the Street, Morgan
Stanley's Mark Edelstone. Turns out he's still very
bullish, despite the run-up. Says PC industry demand is
only getting stronger, and has a 12-month price target
of $130. Tom Kurlak, where are you?
WASHINGTON WATCH.... The market will be closely
watching the November unemployment numbers set to come
out Friday morning. The Street is looking for
unemployment to remain flat at 4.6%, with an increase
in November payrolls of 165,000. Anything substantially
stronger than that will disappoint traders hoping for
yet another rate cut. Stay tuned.
Loose Change
Expect a big drop in shares of PairGain Technologies on
Friday. The company warned after the close that Q4
earnings will be below expectations.... Cabletron,
which warned of disappointing earnings on Wednesday,
dropped another 1 3/4, to $9. With Cisco, Intel, and
Microsoft near record highs, why would anyone mess with
smaller-cap techs? I know, I know--valuation. But
what's a low PE worth if it's only going to keep going
lower? My money is on the big boys.... I know some
people are tempted by Boeing. Yes, it's cheap and it
will eventually recover. But you've got to ask yourself
whether you really want to wait until things get
better. There are plenty of other companies out
there--Microsoft, Lucent, etc.--with much better
prospects in the near-term.... Hey, remember the
Georgia Satellites? They rock.... Have any of you out
there been to an island off Puerto Rico called Culebra?
I'm planning on going between Christmas and New Year's
and I'd be interested in any info you've got. Hotels,
advice, etc. Please e-mail me at
nelson_schwartz@fortunemail.com. Thanks.
Talk Back to Street Life....
Why let Serwer, Amy, and Nelman have all the fun?!
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