INDEX:

I. Market News: Cyclicals Take a Beating
II. Heroes: Macromedia, Bay Networks, Xylogics, Electro Scientific
III. Goats: LabCorp, Mylan, Caterpillar, Easco
IV. Investment News: Accounting For the Gooroos
V. Calendar: Wednesday's Economic Events

MARKET CLOSE

DJIA: 4767.04, down 13.37
S&P 500: 584.20, up 1.43 (RECORD)
NASDAQ: 1060.32, up 10.14

MARKET NEWS

A mixed picture for the major stock indices today. The Dow was dragged down on the worrisome earnings forecast by Caterpillar (see Goats), which carried over to a number of cyclical stocks today. The Nasdaq, however, posted a significant gain as technology stocks surged again and the S&P 500 rose to another record. Traders are still anxiously trying to predict what the Fed may do at the FOMC meeting next week, but today's sell-off in the cyclicals suggests that an easing of interest rates may have already been priced into these stocks. The dimming hopes of such an interest rate cut and the weaker anticipated earnings from a major company like Caterpillar pushed the group lower.

HEROES

Macromedia Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MACR)") else Response.Write("(NASDAQ:MACR)") end if %> up $6 to $58 1/4. Macromedia's CEO, John Colligan, claimed he is comfortable with earnings estimates for fiscal year 1996. Analysts are expecting between $0.99 and $1.10 on the year. Colligan told reporters he sees revenue growth of "13 to 14 percent."

Bay Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BNET)") else Response.Write("(NASDAQ:BNET)") end if %> up $5 to $56, and Xylogics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:XLGX)") else Response.Write("(NASDAQ:XLGX)") end if %> up $5 1/2 to $57. These companies which are slated to merge both enjoyed the technology sector's recovery today. The $330 million deal, under which Xylogics becomes an independent operating unit of Bay Networks, brings together two significant players in the networking arena.

Electro Scientific Industries Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ESIO)") else Response.Write("(NASDAQ:ESIO)") end if %> up $4 1/4 to $37 3/4. ESI reported record quarterly earnings of $0.06 per share, after a pre-tax acquired research and development charge of $6.0 million. The Portland, Oregon company designs and manufactures products used around the world in electronics manufacturing.

GOATS

Laboratory Corp. of America Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:LH)") else Response.Write("(NYSE:LH)") end if %> down $2 1/2 to $10. LabCorp leads our list today with a refrain sung by all of the Goats---a gloomy earnings forecast. Because of weakness in its Florida operations, President James Powell said that third-quarter earnings are likely to fall below last year's $0.16 a share. LabCorp was formed in April when National Health Laboratories and Roche Biomedical Laboratories merged.

Mylan Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MYL)") else Response.Write("(NYSE:MYL)") end if %> down $3 to $20 5/8. Mylan said its fiscal second-quarter results would fail to meet analysts' expectations and would be flat with last year's $0.24 a share. The company blames generic drug pricing pressures for the disappointment. Cowen lowered the stock's rating from "strong buy" to "buy" on the news.

Caterpillar <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CAT)") else Response.Write("(NYSE:CAT)") end if %> down $6 3/8 to $59. In a rare appearance for a DJIA stock in our Heroes & Goats section, Caterpillar joined the woeful chorus of earnings warnings. The company expects its first downturn in quarterly profits in two years and is reducing production schedules to keep its demand and inventory ratios in balance. The company believes the demand decline reflects a cyclical demand slowdown for the U.S. housing market and heavy construction projects around the world. A number of analysts downgraded earnings estimates on the announcement.

Easco Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ESCO)") else Response.Write("(NASDAQ:ESCO)") end if %> down $5 1/2 to $6 3/4. The company announced today that third-quarter earnings will be significantly lower than in the previous quarter, between $1.00 and $1.15 a share. Soft demand for products in its end-use markets and production troubles over the last year have hurt earnings for the second half of 1995. Oppenheimer downgraded the stock to "market performer" from "outperformer" as a result. Easco is among the largest extruders of soft alloy aluminum products in the United States and is a leading producer of painted extrusions.

INVESTING NEWS: The Words of the Wise

Regular readers of The Motley Fool know that we have little truck with Wall Street gooroos. We generally see them as hangers-on in the investment world, making money not by making money for clients or subscribers, but by getting their name mentioned frequently in the financial presses or on CNBC. Their wealth usually comes from their incredible marketing chutzpah. "I called the 1987 crash!" or "I tripled my money in so-and-so." The implication is that they'll do it again and again for you, for a hefty fee.

And since The Daily News's favorite target, CNBC's Dan Dorfman, has been on assignment for a couple of days and not broadcasting his rumour du jour, we'll have to turn our eyes to the Fools' second-favorite target, Michael Murphy, who simple keeps asking for our attention.

Murphy is behind at least two newsletter services, The California Technology Stock Letter and the Overpriced Stock Service (a title too ripe with ambiguity for a Fool to overlook). Murphy is frequently quoted in Investor's Business Daily, The Wall Street Journal, Worth, and on CNBC. In other words, he's a big-shot. His name recently surfaced again in our forum in, of all places, the Sonic Solutions folder. After Sonic showed signs of strength last week, one of our readers reported in the folder that Michael Murphy was taking credit for the move in the stock. Apparently, on his recorded hotline number (no doubt carrying a hefty price tag as part of his newsletter "service"), Murphy explained the move in Sonic by telling his listeners that he had mentioned the stock to a roomful of 200 AAII members. The fact that Sonic Solutions had recently announced two important product developments, of course, couldn't have caused the stock's advance, could it?

Not too long ago, The New York Times ran a story which actually examined Murphy's record rather than his image. By now you may not be surprised to learn that his record over the last five years, according to The Times, boasts an 88% LOSS! In other words, a $100,000 investment placed in Murphy's care five years ago would now be worth $12,000 (excluding commissions and spreads). The amazing thing is that he continues to be invited to speak as an investment "expert" and continues to be quoted in all of the major financial sources.

If this isn't Foolish caution enough to do one's own research and make one's own investment decisions, nothing will be. Regardless of where you get your information---from the gooroos, from the Fools, from your barber---follow it up and look for yourself. The fact that Murphy's track record hasn't stopped him from being a public investment figure tells us something about the state of accountability in the investment world. Continue to rise above it, Fools.

CALENDAR: Wednesday's Economic Events

---July Merchandise Trade Balance (8:30)

Byline: Befumo/Sheard (MF Templar/MF DowMan)