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The good news that wasn't
The labor market finally improves and stocks yawn. Plus: Tracking those biotech IPOs.
November 7, 2003: 6:12 PM EST
By Adam Lashinsky, CNN/Money Contributing Columnist

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NEW YORK (CNN/Money) - It's the spoilsport question that needs to be asked: If the economic news was so good Friday, why did stocks budge so little?

For starters, the data was good, but not that good. And much of it already is priced into stocks, which have had a splendid year on the assumption of good news before it happened.

Hence a trading session Friday that was flatter than an Iowa interstate highway.

The economic data in question was the surprisingly strong job creation and unexpectedly low unemployment. The government said the economy created 126,000 jobs, compared with the 58,000 or so economists had predicted.

Unemployment clocked in at 6.0 percent, versus the 6.1 percent seers had sought.

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But this all needs to be put in perspective, which is exactly what the market did Friday.

The jobs growth was an improvement from earlier in the year, not to mention the two-plus-million jobs lost since the economy went south in 2001.

Still, 126,000 is probably shy of what's needed to keep up with economic growth. And it's nowhere near what President Bush promised earlier in the year: 300,000 new jobs per month.

Now, the market didn't have a violent reaction to the employment data. It merely yawned. This is a year when Washington has provided every piece of stimulus it could think of. Income tax cuts. Dividend cuts. Dividend spending. You'd be worried if the market weren't up on that.

If the jobs-creation figure starts doubling -- and stays there -- stocks will rejoin the party. And I won't have to play the spoilsport.

Its and bits, Part I: IPO sizzle

In a recent Fortune piece I noted that a good sign of investors' appetite for risk would be revealed by how a bevy of highly speculative biotech IPOs do this fall. (Sorry, you'll need a Fortune or America Online subscription to read that article.)

Sounds to me like investors are actually behaving prudently, at least according to Richard Peterson, major domo of IPO data at Thomson Financial.

"The biotech IPOs issued to date have posted an average first-day gain of 2.7 percent and an average aftermarket gain of 2.4 percent," he writes. "Non-biotech issues have registered a first-day gain of 14.4 percent and 35.7 percent gain from their offer price."

Its and bits, Part II: What price Novell?

Shares of software maker Novell (NOVL: Research, Estimates) are up sharply on the week because it announced Tuesday that IBM is investing $50 million in it in the form of convertible preferred stock.

With the shares moving fast, I wondered what IBM's conversion price was so I could say where individual investors might find their interests aligned with IBM's. That information wasn't in the news release or a simultaneous SEC filing, however.

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A Novell spokesman tells me the terms are still being negotiated.

Huh? The market bids up Novell shares but investors don't know at what price IBM makes money?

I'd wait until you find out how much conviction IBM has on this stock before buying it yourself. In other words, if IBM's conversion price is below $6.05, the pre-announcement price, that stinks.

Have a great weekend.


Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.