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In The Money
NTT Completes Ownerships of Verio for $5.5B; Tech Heavyweights Set to Report; New Prey for 'Love Bug'; Remembering Cardinal O'ConnorAired May 8, 2000 - 11:00 a.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL TUCKER, CNN ANCHOR: We're talking technology on a tough morning for the Nasdaq. A number of tech heavyweights with earnings this week. We'll tell you what to expect and where you might want to invest.
DARYN KAGAN, CNN ANCHOR: Today brings new prey for the "love bug," as investigators move in on their target. We'll have details.
TUCKER: Around the world we go. How to invest overseas: putting your money in specific countries, or spreading it around? Five top international mutual fund picks for your portfolio.
KAGAN; And remembering Cardinal John O'Connor. Religious and political leaders will be among the thousands attending his funeral Mass today.
ANNOUNCER: From CNN and CNNfn, this is IN THE MONEY with Terry Keenan, Bill Tucker and Daryn Kagan.
TUCKER: Good morning, and welcome to IN THE MONEY. Terry is on vacation, but Daryn is in Atlanta keeping her eye on the news outside of business.
As for business news, don't you wish you owned Verio? The stock is up $22 per share this morning. We will get the story in just a moment.
But, as for the rest of the markets, well, it is more of a split decision. The Dow industrials looking strong today, up 45 3/4 points, 10621 the level there. Helping the Dow, American Express, stock up $3 1/2 a share; American Express due to split 3-for-1 at the close of trading on Wednesday. GE, we might remind you, split 3-for-1 after the close on Friday. It has begun the day today already split. J.P. Morgan also up strongly, up better than $4 a share.
Hurting the Dow, however, Hewlett-Packard, it is down more than two, and Intel losing more than three.
In fact, the selling in technology being reflected in the Nasdaq composite this morning. You can see the Nasdaq composite down 72 3/4 points.
More now on Verio and our other top stories this morning: Japan's NTT solidified its ownership of Web site manager Verio, paying $5.5 billion for the portion of the company that it didn't already own. NTT is paying $60 cash per share, that is about a 70 percent premium, to acquire the company outright after taking a 10 percent share two years ago.
We'll take a closer look at Verio later. It is our "Stock of the Day."
And in another deal, QLogic says it will buy fiber switch maker Ancor Communications in a $1.7 billion stock deal. Ancor at the moment up more than $10 this morning.
And CNN has learned Microsoft will ask for a trial delay of up to a half a year in its antitrust trial. The software company will reply by Wednesday to the government proposal to split Microsoft into two parts. Sources say Microsoft will also propose offering computer makers more freedom in deciding which software and partners to feature on PC deck tops. Microsoft's stock down a quarter of a point at 70 7/8.
Well, we have seen that the Dow is rallying. However, breadth of the market is negative, meaning that there are more stocks going down in price than going up.
For a check on the market action, let's turn to Susan Lisovicz. She is on the floor of the New York Stock Exchange.
Susan, bring us up to date.
SUSAN LISOVICZ, CNN CORRESPONDENT: Hello, Bill.
Well, we are continuing the rally, some would call it a surprise rally that we saw Friday after that key unemployment report, we are kind of faltering for a while, but, pretty much on terra firma at this point. Helped very much so by financial. You mentioned J.P. Morgan, which is up three, so is American Express.
But what's hurting the Dow, today, are certainly techs, yet again, continuing to see that weakness. One of the heaviest weights on the Dow right now, Hewlett-Packard, despite the fact that it announced it is going cutting prices, on desktop personal computers by as much as 21 percent. Hewlett-Packard down 2 1/2.
Also, weighed down today, no discernible reason that we can figure out right now is Intel. Intel down by more than 3 1/2. IBM is up fractionally, although there is a lot of apprehension about that particular bellwether tech. Lou Gerstner, the chairman and CEO, is going to do his annual talk or cheerleading in front of Wall Street tomorrow, and there are analysts complaining about it. Because for past couple of years, he has been talking about double-digit growth and in IBM's first quarter, Big Blue saw a five percent decline. IBM, however, is holding up fractionally today.
And so are transports, transports doing very well, today, up four percent. Utilities are up three percent. So both of those e-stocks are doing well. Financials, you mentioned Bill, are doing very well. J.P. Morgan up three, and American Express is up three. But Goldman Sachs, which is not on the Dow 30, took a hit. There a was delayed opening on that stock, it has recovered somewhat, it is down about 2 1/2.
I checked the post. No one there was talking about any specific reasons. There were some rumors floating about on the floor earlier today about inside selling. Couldn't get a confirmation on it, but that stock has recovered a little bit. And decliners, as you mentioned, Bill, beating advancers by a seven to five margin.
Back to you.
TUCKER: All right, Susan, thank you.
An article in "Barron's," the weekend financial newspaper, called into question Cisco's high-flying stock price. That's not only hurting the stock, it's dragging down the rest of the tech sector.
Let's bring in Charles Molineaux for our update on the Nasdaq -- Charles.
CHARLES MOLINEAUX, CNN CORRESPONDENT: Yes, Bill, we're down by 72 points right now, and Cisco is certainly playing a major role. It is the biggest of big caps here on the Nasdaq, and it was off by $3 or 4.7 percent. Yes, a big jolt on the weekend from "Barron's."
This actually happens a lot with both individual companies and whole industries mentioned in "Barron's." A really good or a really scary article in "Barron's" over the weekend can move the stocks on Monday, and that is certainly what happened today. "Barron's" says Cisco is a great company with great fundamentals, but it questions how expensive the stock has gotten and it questions some of its accounting techniques as well.
By the way, Cisco is scheduled to report its earnings tomorrow. Expectation is for a profit of 13 cents a share. We're also waiting to hear earnings from Dell Computer, which right now is down by $1.75 or 3.6 percent. Dell scheduled to report on Thursday. The expectation here is for a profit of 16 cents a share. Applied Materials, likewise, earnings coming out. It is now down by $1, almost $2; actually, 1.8 percent at $100 a share. Lehman Brothers is giving bullish comments about Applied ahead of its earnings. It's scheduled to report first-quarter results on Wednesday. The consensus forecast is for it to report a profit of 55 cents a share, Applied not looking so good.
And, in fact, chip stocks in general are down today about 2 1/2 percent. But also off are the computers, which are now down by 2 1/2 percent. We've got industrials down by 1 1/2 and telecommunications stocks are off by 1 percent as well. The one area that's doing well, banking stocks and financials. Financials are up fractionally and banking stocks are up by 1 1/2, so we're looking at a pretty decent performance for those stocks. But every single other sector on the Nasdaq is down. And you want to talk about that breadth of the market, the number of stocks going down here outnumber those going up by about 20 to 13. We are definitely looking at a lot of selling going on, and the Nasdaq composite now down by 72 points -- Bill.
TUCKER: A little bit of a negative feel to the market.
MOLINEAUX: Oh yes.
TUCKER: Thank you, Charles.
Well, our next guest says the volatile technology stocks don't bother investors anymore. In fact, he says investors have come to expect the swings. But should they be comfortable with the ups and downs of techs? That's my question. Salomon Smith Barney's Andrew Barrett doesn't think it's a problem. He joins us from San Francisco with his thoughts on where to invest in techs.
And, Andrew, welcome back to IN THE MONEY.
ANDREW BARRETT, SALOMON SMITH BARNEY: Thank you, Bill.
TUCKER: Well, we've got an interesting event going on here. We've got Cisco, Dell and AMAT all due to report earnings this week and they're already selling off in front of the numbers. What's going on?
BARRETT: Well, I guess the best way to put it: There's more sellers than buyers out there.
You saw simply a weak, anemic rally on Friday which was, again -- in the face of disturbing economic data, the Nasdaq's been rallying because it takes this fear of the unknown. The market wants to know what the Fed is going to do. It looks like the Fed will raise rates by 50 basis points. The market's fine with that just as long as they know what's going to happen. That's why the stocks rallying on Friday, we're getting a little bit of a selloff today. I think the strong earnings from both AMAT, Cisco, and even Dell, probably will bring the sector back midweek.
TUCKER: Yes, you mentioned anemic. That really goes for most of the market action. We've had a lot of light volume. It seems investors are pretty much content to stand, for the most part, on the sidelines until the Fed gets its meeting out of the way next Tuesday.
BARRETT: That's exactly what we're seeing: The volumes on the up days are very, very light and the volumes on the down days are very, very heavy. Most of the portfolio managers that we talk to out here are essentially doing that: staying on the sidelines. They're not going to act until the FOMC meeting on the 16th. If I had to make a guess, you would see a rally if we did see a 50-basis point move. It would get some people back into the mindset that the Fed is once again ahead the curve if they were to do that. TUCKER: Well, that being said, let's talk about some of the stocks you like in this market. One of them is a chip company. The theme, I guess, really is telecommunications, though.
BARRETT: Absolutely. There is several different themes within semiconductors. PMC-Sierra is one of the greater ways to play this. Now, we're hosting a semiconductor conference out here in Monterey Wednesday and Thursday of this week and we think most of these companies in the space are going to highlight what they did on their quarterly numbers, which was outstanding, absolutely stellar. And the recent action in April has brought many of these stocks into an oversold situation.
TUCKER: Well, the other stock you like is Nokia. Its chart looks a lot like PMC-Sierra. So my question to you, Andy, is there good upside surprise left to come or have these stocks already tired themselves out?
BARRETT: Well, over the very near term, because of the shaky economic data, the entire sector is still in this tug-of-war, essentially, between really strong fundamentals that both Nokia and PMC-Sierra are displaying and, of course, fears over higher interest rates. And this tug-of-war continues over the near-term. As we go out over the next six to nine months, investors will once again refocus on the precise reason why they're buying these stocks, and that is earnings growths. And these two names are participating in the sector that I think is going to do very, very well through balance of the year.
TUCKER: All right, Andrew, thank you very much for being on IN THE MONEY. Andrew Barrett, Salomon Smith Barney.
BARRETT: Thank you, Bill.
TUCKER: Still to come up on the show: NTT snaps up Verio. But should you? The Web site company is our "Stock of the Day."
And here in New York, thousands gather at St. Patrick's Cathedral to honor and pay their last respects to Cardinal John O'Connor.
TUCKER: A "Wake-Up Call" about Levi Strauss this morning. The jeans maker revealed some rips and tears in its business in a filing with the Securities and Exchange Commission. Levi's profits fell to $5.4 million last year, down from $102 million in 1998. And as of last November, its long-term debt totalled $2.4 billion. In recent years, Levi has let go over 18,000 employees, closed 29 plants, the company citing a host of reasons for doing all of that, including poor presentation, and problems in the supply chain.
This is the first filing in 14 years for Levi's. The privately- held company had to file with the SEC to allow bond holders to resell $800 million of notes to the public.
And as long as we are talking clothing, another well-known retailer is feeling some profit pressure too. So much so that it might be leaving Wall Street. After nearly a decade of sagging profits, Oshkosh B'Gosh may go private in a leveraged buyout. Although its 1999 sales were up 1.5 percent, Wall Street's lost interest in the thinly-traded stock, which now hovers around $16 a share. Oshkosh is trying to boost its sales through a Web site and two new stores. Its stock today up about seven-thirty-seconds at almost $17 a share.
Well, it is a time for a look at other stories making the news headlines today. And for that, we turn to Daryn in Atlanta.
And good morning, Daryn. I think love tops the news again today.
KAGAN: Can't get rid of this love thing, Bill.
HEMMER: That is good.
KAGAN: Yes, the "Love Bug." Cyber investigators in the Philippines are questioning a 27-year-old Manila man, this in connection with the infamous "Love Bug" computer virus. The 23-year- old girlfriend Areo Malramourus (ph) is expected to be questioned later.
Philippine agents seized a computer from the couple's home. The woman actually owns the computer, but investigators say, at least two different accounts exist on the machine. They are examining the device to sort out who may have created the "Love Bug" virus.
(BEGIN VIDEO CLIP)
MICHAEL VATIS, FBI: In these types of cases in particular, you can't assume that you have nailed it down until you really get the evidence off of somebody's hard drive, and collate all the different leads that we have been examining around the world. So, I'm optimistic that we have made significant progress over the last couple of days, but it is still premature to say that we have the ultimate suspects here.
(END VIDEO CLIP)
KAGAN: Investigators say the highly destructive virus many have been a scam designed to give its creator free Internet access.
In other news, Microsoft head Bill Gates, citing this unchecked spread of the e-mailed "Love Bug" virus as an additional reason why he believes Microsoft should not be broken up. He wrote an essay for "Time" magazine, and in it, he says the Justice Department's plan to divide Microsoft into two companies would hurt the development of technology.
For the eighth straight year, serious crime is down in the U.S., that according to the FBI, which is reporting total incidents of both violent and property crime in 1999 were down seven percent nationwide from the year before. Broken down by region, crime fell 10 percent in the West, eight percent in the Midwest, four percent in the South, and was down seven percent in the Northeast. There is a flip side to this. Crime was actually up in 36 of the 225 cities listed in that report.
Opening statements begin today in Houston in the trial of Angel Maturino Resendiz. The Mexican drifter is believed to be the so- called "railway serial killer," suspected of killing nine people in three states. Resendiz is being tried for murder in the death of a Houston-area physician. If he is convicted, he could face the death penalty.
The Pan Am 103 bombing trial is in its second week. Two Libyan men are being tried by a Scottish court in the Netherlands for the 1988 attack which killed 270 people. Today, testimony centered on the collection, labeling and storage of evidence by police. That trial is expected to last as long as a year.
President Clinton will be among those attending today's funeral services for New York Cardinal John O'Connor. O'Connor died last Wednesday after a long battle with brain cancer. He was 80 years old.
Our Deborah Feyerick has more on today's memorial for the city's influential spiritual leader.
Deborah, good morning.
DEBORAH FEYERICK, CNN CORRESPONDENT: Good morning, Daryn.
Well, President Clinton did leave the White House about half an hour ago. He is on his way here to St. Patrick's Cathedral on 5th Avenue in midtown Manhattan, a lot of other people making their way here. Many people are milling outside the cathedral, some people kneeling in prayer almost spontaneously. The cathedral was closed this morning right after the morning mass. At that morning mass, several hundred people who came to offer a final prayer to Cardinal O'Connor, among them several police officers who are assigned to the cathedral. They lit a quick candle and said a quick prayer. But after that, the building was closed. And a police spokesperson tells us, the reason that was done, the Secret Service needed more time to do a complete sweep of the building.
Now there are a lot of dignitaries who are expected here, President Clinton, former President George Bush, Texas Governor George Bush, as well as Vice President Al Gore. We did get word a short while ago that the U.N. secretary-general and Secretary of State Madeleine Albright, they will not be coming, as had earlier been reported.
But just to give you an idea of the scope of how huge this is going to be, St. Patrick's fits about 2300 people, 3500, as many as 3500, are expected. There will be more than a dozen cardinals, there will be about 150 bishops, and almost 900 priests, and that is not including the family and not including other dignitaries who have also been invited. So this is going to be a very large funeral. The streets in this area all will shut down so that there can be a formal procession, which will go into main door of the cathedral.
Reporting live, Deborah Feyerick, CNN, New York.
KAGAN: Deborah, thank you, and, those services that begin at 2:00 p.m. Eastern, 11:00 a.m. Pacific will be seen live here on CNN.
That is a quick check of the headlines. Now back to Bill in New York.
TUCKER: Thanks, Daryn. As solemn an occasion as that funeral mass will be, it means one thing to anybody thinking about coming into New York today, don't do it.
Just ahead on IN THE MONEY: NTT is a paying a 70 percent premium for Verio. But how much would you be willing to spend? Verio is our "Stock of the Day."
And the world of WEBS, and we aren't talking about the Internet. We will explain how to use WEBS to invest overseas.
TUCKER: All right, looking at a live shot of the New York Stock Exchange, the rally in the Dow beginning to fade just a bit, the Dow pulling back, now up only 28 points. American Express still looking very strong; stock splits three for one after the close of trading on Wednesday. GE trading post three-for-one split at 52 1/2, down about 3/16. Tech stocks looking weaker, as you can see, the Nasdaq composite down better than 70 points.
Well, in today's "Stock of the Day," we're taking a closer look at Verio. NTT Communications is buying the remaining shares it doesn't already own in the U.S. Internet company for $5 1/2 million. That is a 67 percent premium over Verio's closing price on Friday of 35 15/16. The Japanese telecom giant already owns 10 percent of Verio. With Verio fetching such a huge premium, we decided to make it our "Stock of the Day."
LISA BARRON, CNN CORRESPONDENT (voice-over): NTT's $5.5 billion purchase of Verio is the first step in a business plan to move full force into the American and European markets.
HENRY LEE, HENDALE ASIA: Clearly this is a move to essentially consolidate their position within the Internet world. And I think what this typifies is the fact that the first-generation Internet business models will find their homes in short order.
BARRON: The deal is one of the largest cash purchases of an Internet services provider. NTT is paying $60 U.S. a share. But analysts say it's worth it even though the price tag represents nearly a 70 percent premium over Verio's current share price.
YVONNE CHEN, MCKINSEY & COMPANY: Compared to what Verio was valued at before the Internet bubble, as we say, caused the shakeup in Nasdaq, it seems fairly reasonable. Verio does not have any debt and is, in fact, in a very good position to make money and build up on what it has.
BARRON: Verio's high-speed Internet line gives NTT, which already has the most advanced mobile operations in the world, the additional ability to offer Web-hosting services. Analysts say the move also demonstrates NTT's commitment to playing an active role in the global market. It's the Japanese telecom giant's first 100 percent overseas acquisition.
CHEN: NTT has been criticized in the past for being slow-moving, not being fast enough to get into acquisitions, and not being fast enough to get into high-technology acquisitions. Now, this will turn a lot of the attention in the industry towards NTT and where it's going.
BARRON (on camera): It will also turn attention to the Asian Internet industry where, analysts say, expect a lot more tie-ups like NTT and Verio.
Lisa Barron, CNN Financial News, Hong Kong.
TUCKER: And shares of Verio trading strongly higher -- that's an understatement -- up 22 9/16 at a price of 58 1/2. Shares of NTT, which trade here in the United States, are down 11/16 at 65 9/16. NTT stock closed up at almost 3 percent in Tokyo. And it might be worth noting that Exodus and PSINet, competitors of Verio's, trading higher in sympathy, up better than $2 a share.
Now, that raises the question: Does all of this make Verio a good stock for us to add to our IN THE MONEY portfolio?
Joining us now to help us make a decision is Manny Recarey. He's the Internet and communications analyst with Fahnestock & Company.
And, Manny, thanks for being on IN THE MONEY.
MANNY RECAREY, FAHNESTOCK & COMPANY: Thank you.
TUCKER: Is this a no-brainer? Do we buy it at 58 1/2? It doesn't seem like there's much upside left in this stock.
RECAREY: I agree with you. I don't think there is a lot of upside left. They're paying $60 in cash. It's not a stock for stock deals, so that's pretty much your upside, is $60. What I think you want to do is look at some of the other companies in this sector.
TUCKER: I got to ask you, though, is there any chance -- and there doesn't seem to be any indication that anybody's going to fight this, meaning the NTT-Verio deal, only because, you know, the stock had a high of almost $85 a share in the past year. Is there any chance that anybody will challenge the price of this deal?
RECAREY: I don't think anyone's going to challenge the price because we're in a different market environment today than we were in six months ago. So I think the valuation premium that NTT paid is reasonable and certainly worth it. But I don't expect anyone to come in with a significantly higher offer.
TUCKER: We know Exodus and PSINet are alternatives. Anybody else you want to throw into the hat there full of names?
RECAREY: Sure, I'd throw in Globex, symbol GBIX, and Applied Theory, symbol ATHY. They're a little smaller than PSI and Exodus, but I think they are well-positioned to have significant growth going forward, and their valuations are very reasonable.
TUCKER: All right, Manny, thank you very much.
Manny Recarey of Fahnestock & Company.
RECAREY: Thank you very much.
TUCKER: Well, now that you've heard about the deal and you've heard about Verio, be sure to go down to the bottom of our home page at CNNfn.com and vote on whether we should add it to our portfolio or not.
As for Genentech, Friday's "Stock of the Day," 59 percent of you voted to buy this stock. But that means, under our 2/3 majority rule, no shares get bought. But it was a close vote, closer than we've seen in a while. Shares of Genentech up 13/16 at 124 3/4.
Still to come on IN THE MONEY, Big Game and big bucks: How high will the nation's largest-ever lottery jackpot go? And the few, the brave, the IPOs: Few companies are willing to risk going public in this tumultuous market. We'll take a look at some of those who are just saying, what the heck, and go for it.
TUCKER: And there you have it, the view south from our offices, Financial District to the right, World Trade Center.
Beautiful day here in New York and welcome back to IN THE MONEY. I'm Bill Tucker. Terry Keenan is off this week.
In just a few moments, we'll be taking a look at the initial public offering pipeline, but I warn you in advance, this week's pickings are slim with the fewest offerings since early January.
But first, let's get you caught up on today's top business stories. Two hours into the trading day, we have a turnaround in the blue chips, the techs remain weak. The Dow at the moment showing a fading rally, it is up 17 1/4 points.
A good strong performance, though, continues by American Express, it is the techs the are the weakest, Hewlett-Packard down more than two, Intel down more than three. That weakness in Intel reflected in the Nasdaq. Cisco taking a big hit today, down about $4 a share. The Nasdaq composite currently down 76 3/4.
Sources tell CNN that Britain's advertising group, WPP, will announce sometime this week that it is buying American rival Young & Rubicam for about $5 1/2 billion in stock. Talks of the two merging sent shares of Young & Rubicam soaring nine percent on Friday. Today, it's down more than $2.
Philippine investigators are questioning a 27-year-old man in connection with the "ILOVEYOU" computer virus that swept much of the world last week and this weekend. The man's girlfriend is also expected to be questioned.
And Cisco Systems is under pressure this morning, down better than $3 after a "Barron's" article called into question the stock's stock price.
Meanwhile, among our other top stories: Microsoft may be looking to delay the final judgment in its antitrust trial until after the inauguration of a new president. The software company has until Wednesday to file its proposed remedy with a federal judge.
And as Steve Young reports, the proposal could include six more months of legal maneuvering.
STEVE YOUNG, CNN CORRESPONDENT (voice-over): Microsoft's reply to the government's proposal to break up the company and end its predatory monopolistic business practices is likely to include a request for a half-year delay in the landmark antitrust trial. The company has to file its response with the federal judge by Wednesday.
In the only official comment, a Microsoft spokesman says quote: "We are still developing our proposals." But the source tells CNNfn, the company may propose a so-called "mechanism" for judging competitors' complaints that Windows interfaces are not properly documented; allow computer makers more freedom to decide which software and partners to feature on the Windows desktop; request a range of trial delays before Judge Thomas Penfield Jackson enters his final judgment.
The company is believed ready to move to that stage in a few weeks to a month or two if the remedy is limited to changes in Microsoft's business practices. But it would want six months to gather evidence for counter arguments if the judge does consider splitting the company in two.
YOUNG: None of the state attorneys general who joined in the federal suit will comment on the record. But one said, quote: "I would imagine the judge will want more from the company than they seem to be saying that they'll do" -- Bill.
TUCKER: You know, there's a lot of interesting things about this case to talk about. But one of the most interesting is the idea of Microsoft proposing its own remedy, because it is not as if they haven't been here before, they...
YOUNG: Yes, they say, look, we don't agree with the conclusions of law, we don't agree with the findings, we are going to appeal this, but -- and we don't agree with the breakup. But we will, you know, do these minimal, I guess, de minimus as they say in the law, breakup proposals. One of the even more interesting things is that: as detailed as the government proposal is, it's silent on a whole bunch of stuff like; how do you split up the Microsoft brand? the Microsoft real estate?
And one the most curious things, the government wants Microsoft to be able to issue Windows in versions that have features you can just switch off. Well, if the computer manufacturers switch them off, the government wants Microsoft to give them a discount, by how much? The government is not going to be in the pricing game. So it says: Well, by the size of the code, like, you know, if it is a big chunk that they don't use, then you get a big discount. But people who design software say the whole trick of software is to make it small, not big. So the government, they say, has got it backwards.
TUCKER: If you're out there handicapping it, what are people saying? Will they get the delay or not?
YOUNG: People are saying that this judge does not want to be reversed on appeal so that he will probably give them some time, but by no means the six months that they apparently are going to ask for.
TUCKER: All right, Steve, thank you very much.
Well, let's go back down now to our market mavens now, Susan is at the New York Stock Exchange, Charles Molineaux over at the Nasdaq marketsite in Times Square.
Susan, let's start with you. Take it away.
LISOVICZ: Hey, Bill, well, it is not the most convincing rally for the blue chips right now, the Dow is only up 12 points. But we are really seeing some pockets of strength, namely in transports. We mentioned before, as a group up four percent. Federal Express and Delta each up one point. Pharmaceuticals are mostly higher today. Warner-Lambert is up two. Merck is up a half a point. And Pfizer, which is the number-two most-actively traded issue on the Big Board is up three-quarters.
Financials doing well today. DLJ is up one. Citigroup is up fractionally. American Express and J.P. Morgan up three.
And then finally, utilities, which is not the most exciting of categories. but they are on fire today, up three percents.
Techs are seeing some weakness, however. Motorola is down one. Intel is down three. AOL, which is one of the top-five most actively traded issues, down 1 1/2.
And for more on what is moving in the tech sector, let's throw it over to Charles Molineaux at the Nasdaq marketsite.
Hey, Charles. MOLINEAUX: Hey, Susan, well, we actually saw an attempt to rally out of the big losses that we've seen on the Nasdaq so far today, and didn't seem to work very well because we are sliding back downward again. The Nasdaq is again off by 84 points at 3732, and a half a billion shares traded. So not a very positive picture, and apparently no rally is going to happen.
But take a look over here. Our big story of the day is, of course, Cisco Systems, which is now down 5 1/2 percent at $64 a share after an article appeared over the weekend in "Barron's," an article that can best be described as skeptical about Cisco's stock price.
Meanwhile, computer stocks are up by three percent as a whole. Telecoms down by 1.2. Biotechs down by a percent. Industrial stocks are down by almost two percent. But check out banking and financial stocks, they are actually up. The bank stocks are up by 1 1/2 percent right now. So there is some smart pocket of strength, namely right around finance and banking.
But otherwise, that is about it for these companies, as we do see the Nasdaq's breadth does continue to be very negative, that is the number of stocks being sold versus the number of stocks being bought, and the number of stocks going down outnumber those going up by 21 to 13 -- Bill.
TUCKER: All right, Charles, thank you very much.
With the markets topsy-turvy these days, investors aren't the only ones refraining from jumping in. Companies slated to go public are hesitating as well. Thirty-six companies have either postponed or withdrawn their offerings since April, when the Dow and the Nasdaq both fell sharply. Digitalwork.com and Qualstar are just two of the initial public offerings planned this week. Both were scheduled to debut last week, decided to hold off until now.
But the one garnering the most attention is Sequoia Software. For more on the IPO market, we are joined now by Kathy Smith, she is the portfolio manager at IPO Plus Aftermarket Fund.
And Kathy, welcome to IN THE MONEY.
KATHY SMITH, IPO PLUS AFTERMARKET FUND: Thank you, Bill.
TUCKER: The pickings are very slim, and I'm kind of surprised of the fact to see these wandering out into this market. Sequoia does seem to be gathering the attention though.
SMITH: Sequoia is an XML-based software company, which is a hot area. We look at that company as a smaller company, and typically we highlight an IPO that we think is attractive every week on our Web site, which is IPOHome.com, and the one that we are highlighting is New Focus. It is a company that makes optical components, and has nice sales pattern, and good growth, and it is similar to Book'em Technology (ph) and Avanex, two optical component companies that have recently gone public.
TUCKER: Is that due to go this week, New Focus?
SMITH: That will not be this week, it will be the following week.
TUCKER: Now my question is, with trading volume having been so light, and with the offering scaling down, does this make it easier or more difficult for investors to get in on these IPOs?
SMITH: It is easier for an investor to get in on an IPO, and also to purchase these IPOs at favorable prices in the aftermarket. This is a stage that we are going through, which is a regrouping stage. It is setting the stage for some strong future performance in IPOs. We saw this happen in 1998, and at that time, for long-term investors, the market proved to be a good one. Our fund in 1998 was up 18 percent at the end of the year, and in 1999 we were up 115 percent. So it is a time, if you are a long-term investor, to take a look at IPOs, pick the very good ones, and we think that there will be success in that.
TUCKER: So there is life after IPOs, I ask, of an aftermarket IPO portfolio manager?
SMITH: Certainly, in fact, this is also a time to look at purchase in the aftermarket, and ,any institutional investors are doing that, which is why, as we go that you this restructuring of the IPO calendar there is a lot of activity right now in purchasing already public new companies at pretty good prices, and seeing the returns come back on those companies.
TUCKER: All right, Kathy, thank you very much.
SMITH: Thank you.
TUCKER: Kathy Smith has been our guest.
Still to come on IN THE MONEY: Fires set by the National Forest Service rage out of control in the western United States. We'll have the details.
And after a decade-long ban, Persian rugs are set for a comeback in the United States. But can the rugs recapture the market that they once dominated?
TUCKER: All right, there you see it, a shot of the Big Board, the Dow industrials up 22 points. But on the overall market, there are more stocks going down in value than going up in value. And you have the Nasdaq composite down better than 80 points at the moment. Weakness in the bond market, part of the reason. But check the transports out, up 42 points. That is a gain of 1 1/2 percent.
And that gives a convenient time to check in with Daryn in Atlanta with the latest in some other news stories today. Because Daryn begins with part of the reason for that rally in transports -- Daryn. KAGAN: We are talking your gas tank, Bill. Simple, yes, average gasoline prices across the U.S. are holding pretty steady. The cheapest pump prices are right here in Atlanta, Georgia, where drivers are paying just under $1.30 a gallon. The highest rate in San Francisco, in the Bay Area, $1.80 for self-serve regular. According to the latest Lundberg survey, nationwide, the average price of a gallon of gas is $1.4823, if you can do that. That's down one-eight of a cent since April 21.
In other news today, hundreds of residents in southern New Mexico are waiting out wildfires in evacuation centers. Thick orange flames fanned by high winds have blackened at least 1,000 acres near the town of Ruidoso. The fire also threatens the city of Los Alamos. So far, one mobile home has been destroyed by flames. Firefighters battling the blaze from the air with flame retardant chemicals. They also are fighting eradicate winds in that area, trying to keep that fire away from Los Alamos Nuclear Laboratory.
In eastern Missouri, damage assessments are under way today in the wake of devastating floods. At least two people died over the weekend when storms dropped up to 14 inches of rain in two counties west of St. Louis. Authorities say levels in some of the rain-swollen rivers are dropping. Hundreds of people were evacuated from the region. Search crews are borrowing boats from local residents to check for other possible flood victims.
The nation's largest-ever lottery prize could be getting even bigger, if you can believe that. Officials will decide today whether weekend sales of the seven-state "Big Game" lottery justify raising tomorrow night's record prize to $300 million. Nobody won Friday's prize of $250 million. Officials predict, because of the sheer volume of players, if there is a winner, more than one person will share the winnings.
But Bill, these are the same people who said there was no way it was going to get past last Friday. So who knows? Anything goes. So go ahead and dream away.
TUCKER: Exactly. And you know what, Daryn, I have bought my ticket already, ahead of the crowd.
KAGAN: Did you actually cross over into New Jersey to buy a ticker.
TUCKER: I live there, so it is easy. Saturday morning, I go to buy my paper, I bought the lottery ticket as well.
And coming tomorrow, Daryn, probably I want to pay attention because we will talk to a financial planner about what to do with that $300 million when I win it.
KAGAN: Good to know. Good to be ready, be prepared.
TUCKER: Thanks, Daryn.
Still ahead on IN THE MONEY: Thinking about investing overseas, but don't know where or how to start? We're spanning the globe. A look our guest's top five international mutual funds picks, and we'll show you how you can bet on individual country's stocks as well. And is investing in fine carpets really a good use of your money? Picking a Persian, ahead on IN THE MONEY.
TUCKER: All right, there you have it, a look at the financials on the New York Stock Exchange, they are moving nicely today, particularly J.P. Morgan and American Express. American Express splitting three-for-one after the close of trading on Wednesday, effective for trading on Thursday.
Let's take a look at the movers on the Nasdaq, see how they are faring today. Well, there you see it. Amazon.com down in the market today. The biggest Nasdaq mover not up there is Cisco. The stock under pressure, down almost $4 a share after that negative article in "Barron's" over the weekend.
Well, two good reasons you should think about investing overseas: one, diversifying your portfolio; and pumping up your returns with high-growth opportunities possible in international markets.
We have two guests today. We begin with one who suggests putting yours money into WEBS. What is a WEB? Well, they are World Equity Benchmark Shares. WEB Shares are country-specific index funds traded on the American Stock Exchange. WEB Shares provide investors with an easy and cost-efficient ways to access global equity markets.
And joining us now is Salomon Smith Barney's Michael Porter.
And, Michael, thanks for being on IN THE MONEY.
MICHAEL PORTER, SALOMON SMITH BARNEY: Thank you for having me.
TUCKER: Very interesting way to invest overseas without even having to go overseas. Are these funds very difficult to buy? Can you call your broker up, or how do you find out more about them?
PORTER: As you mentioned, they're very simple, efficient and easy to purchase. They trade on the New York Stock -- on the American Stock Exchange and the only cost to the investor is the cost of the commission to the broker.
TUCKER: What are the tax implications? These aren't stocks, but they're not mutual funds. Is there something we should be aware of there?
PORTER: Well, they have the elements of both stocks and mutual funds. They are SEC registered mutual funds -- country funds, if you will. But as passive index funds, they have very low cost structures and also very low turnover rates, so people consider them very tax- efficient funds. And as you know, turnover in a mutual fund often generates capital gains taxes that the shareholder of a mutual fund would have to pay, and these are minimized with the WEB structure.
TUCKER: Are there any other risks involved with these funds.
PORTER: Well, you have all the standard risks tended to international investment, such as currency, political and natural disasters and whatnot. But generally speaking, they're diversified and subject to all the IRS, SEC regulations governing mutual funds.
TUCKER: We've got your picks up on the screen there, Michael. It's fairly diverse. You're not really focused in any one part of the world. Well, I would say, generally speaking, I'm more positive on the mathematics of investment in Asia, which I think has a terrific long-term economic and corporate profit outlook, and where valuations look pretty good. But we also see opportunities in Europe, especially in Germany and Austria. And we also like Mexico.
TUCKER: All right, Michael, thank you very much.
Michael Porter of Salomon Smith Barney.
Well, our next guest says WEBS are great if you've got an irresistible itch to invest in just one country at a time. But he says if you want a global portfolio, international mutual fund might be an easier and better way to go. It's just sort of one-stop shopping, as it were.
Joining us now with some of his favorite international funds is "Money" magazine's mutual fund columnist, Jason Zweig.
And Jason, welcome back to IN THE MONEY.
JASON ZWEIG, "MONEY" MAGAZINE: Good to be here, Bill.
TUCKER: Now, Michael's got an approach that he's talking about that is really single-country oriented. You want to talk about maybe really diversifying that international exposure.
ZWEIG: I think it's important, Bill, because what Michael's driving at is if you want to make a rifle shot, if you're convinced that Italy or Mexico or Singapore or the other countries that he mentioned are where you want to have your money outside the U.S., then a WEB is the way to go. But if you're not really sure and you just want to diversify away some of your U.S. risk, then you want a diversified fund that invests everywhere outside the U.S.
TUCKER: What are some of the funds that you like or that give you that?
ZWEIG: Well, the simplest and most basic approach would be something like Vanguard Total International Stock Index where you would buy a stake in just about every market outside the U.S. imaginable. And that way you cover the whole globe and you've, in one step, insured yourself against some of the risk of having all your money here at home.
TUCKER: Now, we were going to give people your top-five picks. Have we got a screen that -- to go with this and take a look at? There we are: Scudder International; Loomis; Tweedy, Browne; T. Rowe Price. What kinds of returns do these sort of funds offer right now, Jason?
ZWEIG: Well, last year, international funds returned somewhere in the mid-20s, which is very respectable considering what most funds did here in the U.S. And over time, you would expect international funds and U.S. stock funds to deliver returns that are approximately equal, but you'll get them at different rates at different times. For a long-term investor, it's a good way to combine and get a better balance of risk and return.
TUCKER: So it depends on your goals. If you want that rifle shot, a WEB is the best way to go. But if you're looking to diversify those investments, go with an international mutual.
ZWEIG: Yes, I would suggest that for people who really want to balance out the specific risk of living here, working here, getting paid in U.S. dollars, it's a good idea to have some of your money outside the U.S. and to diversify broadly.
TUCKER: All right, Jason, thank you very much.
Jason Zweig of "Money" magazine, appreciate it.
ZWEIG: Thanks, Bill.
TUCKER: All right, and finally, after a 13-year ban on imports of Iranian luxury goods, the United States is allowing everything from caviar to Persian rugs back into the country. So, should you think about investing in a Persian rug?
Allan Dodds Frank has some words of caution and a recommendation.
ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Persian carpets have been treasured for centuries. They are often viewed as a form of great wealth and luxury and are considered among the finest rugs in the world. Each rug has its own character and charm.
But Persian carpets made in the last 13 years have suffered from the U.S. embargo against Iran. Without the major American market and few buyers within Iran, carpetmakers did not have the ability to buy items such as quality dyes and wool to make their rugs. Still, antique Persians have retained their value and are considered by many to be the best of the best.
BEN CHAFIEIAN, CHAFIEIAN ORIENTAL RUGS: I think it's very important that they lifted the embargo because now we can go purchase the antique carpet from Persia, from many, many places, and bring it back to America.
FRANK: When buying antique Persian rugs, experts suggest always buy from a reputable dealer and get a guarantee in writing so you can return it if you are not satisfied with your purchase. And make sure you understand how to tell the basic difference between a hand-made rug and a machine-made one. Generally, hand-mades are better in quality and are more valuable. UNIDENTIFIED MALE: Each knot on a hand-made rug is individually tied. And if you part the pile, you will be able to see an individual knot on the bottom of the pile. If you turn the carpet over, there will be an irregularity to the weaving that you won't get in a machine made carpet, where it's absolutely perfect.
FRANK: Allan Dodds Frank, CNN Financial News, New York.
TUCKER: All right, that rally we're looking at in the Dow is looking kind of tenuous right now. It's faded way off its highs, and, at the moment, as you can see, is only up about 16 3/4 points. Real news today is the transports. With a drop in energy prices, we've got the transports up, oh, now 1 1/2 percent, a gain of 43 points. Utilities looking stronger. Techs, however, continue to show weakness. Hewlett-Packard on the big board is down more than $2 a share, Intel on the Nasdaq down more than 3, Cisco being hurt by questions being raised in a "Barron's" article over the weekend about its stock, and that stock trading down about $4.
And that's it for today's edition of IN THE MONEY. I'm Bill Tucker. We'll see you all tomorrow.
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