Tech-Sparked Rally Sets Records but Leaves Some Worried

There's something about Mondays. For the second consecutive one, stocks stormed out of the weekend in impressive fashion, sending major market gauges to record highs.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 174.82 +1.8% 10,007.33 +9% S&P 500 27.40 +2.1% 1321.12 +7.5% Nasdaq 66.69 +2.7% 2560.06 +16.8% Russell 2000 3.55 +0.9% 402.29 -4.7% TSC Internet 25.69 +3.9% 683.12 +68% TSC E-Commerce 7.11 +6.1% 123.23 +44.8% TREASURY BOND CHANGE VALUE YIELD 30-Year 4/32 95 3/32 5.589%

Unlike last Monday, when energy names set the pace, technology stocks led today's stampede. The Nasdaq Composite Index climbed 66.69, or 2.7%, to 2560.06, notching its first record-setting close since hitting 2510.09 Feb. 1.

Technology's bellwethers rose in near unanimity, lifting the Nasdaq 100 3.4%, the Philadelphia Stock Exchange Semiconductor Index 4.3% and the Morgan Stanley High-Tech 35 higher by 5%.

Internet favorites, led by Yahoo! (YHOO), which gained 21.9%, also rocketed ahead.

TheStreet.com Internet Sector index gained 25.69, or 3.9%, to an all-time high of 683.12 while TheStreet.com E-Commerce Index climbed 7.11, or 6.1%, to a record 123.23.

The Dow Jones Industrial Average rose as high as 10,023.15 before closing up 174.82, or 1.8%, at 10,007.33, eclipsing its previous best of 10,006.78 set a week ago.

Fittingly, tech components IBM (IBM) and Hewlett-Packard (HWP) were among the Dow's best performers, joined by American Express (AXP) and Chevron (CHV).

The S&P 500 gained 27.40, or 2.1%, to a record 1321.12, besting its previous high of 1316.55 set March 18 .

The Russell 2000 remains well short of its all-time high but surpassed the psychologically important (?) 400 barrier, up 3.55, or 0.9%, to 402.29.

The extent of the rally was best reflected in the new-high list, which was littered with finely pedigreed names.

In New York Stock Exchange trading, America Online (AOL), General Electric (GE), Texas Instruments (TXN), Sprint (FON), and American International Group (AIG) each set new 52-week highs (just to name a few).

In over-the-counter activity, Sun Microsystems(SUNW), Microsoft (MSFT), broadcast.com (BCST), and EchoStar Communications (DISH) each raced to all-time highs.

Online brokers stood out, soaring in reaction to a favorable report by Credit Suisse First Boston.

Ameritrade (AMTD) rose 46.5%, E*Trade (EGRP) gained 19.1%, and Charles Schwab (SCH) jumped 9.7%; each established a new high.

Donaldson Lufkin & Jenrette (DLJ) also established a new best, rising 6.1%. The American Stock Exchange Broker/Dealer Index gained 5.4%.

However, market internals did not reflect the euphoria.

"I think if there's a fly in the ointment, it's the volume," said Jim Herrick, managing director of trading at Robert W. Baird in Milwaukee. "The breadth was another negative. But you look at the tech and Internet names there was some good volume, that obviously fueled the rally. Short-covering also contributed."

In NYSE trading, 701.2 million shares were exchanged -- fewer than in Thursday's preholiday session -- while gainers led losers 1,689 to 1,302. In Nasdaq Stock Market activity 983.2 million shares were exchanged while declining issues led 2,163 to 1,909. Moreover, new 52-week lows bested new highs 81 to 66 on the Big Board and by 178 to 123 in over-the-counter trading.

"You would like to have confirmation on the volume side, but overall we closed above 10,000, the S&P and Nasdaq are at a record, so it was a good day," Herrick said. "I think the nonfarm payrolls being lighter than expected means any hint the Fed might [tighten] is put to rest, so you can justify valuations based on earnings that will be forthcoming. That's the bottom line."

Pundits Alternately Impressed and Aghast

The bond market was quiet today -- the price of the 30-year Treasury rose 4/32 to 95 3/32, its yield dipping to 5.59% -- but equity investors pounced on the benign employment data, which sent bond yields tumbling Friday while stock markets were shuttered in observance of Good Friday.

Another factor in the market's upturn was a bullish report by Bruce Steinberg, chief economist at Merrill Lynch.

"We are becoming more optimistic about earnings outlook as negatives associated with global crisis recede," he wrote in a research report published today. "We now expect S&P 500 operating [earnings per share] to rise 8.5% to $48 in 1999 and to $51 in 2000. Prior estimates were $47 and $50, for 1999 and 2000, respectively. These new estimates are above consensus."

Similarly, the economist lifted gross domestic product forecasts to a rise of 3.5% in 1999 and 3% in 2000, versus previous predictions of 3% and 2.6%, respectively.

Steinberg has spearheaded the "growth recession" mantra at Merrill. Thus, his positivism was greeted with cheers (plus a few "about time" comments). Steinberg did not return calls seeking comment.

Still, other doubters remain fervently so.

"It's just a mania. All the classic signs are there," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "Most of these stocks that are booming here -- of a lot of them -- there's no market maker. It's just a lot of individuals flipping shares. I'm watching the Nasdaq tape and there are no real companies trading."

Demonstrating more open-mindedness than some investors doubtless give him credit for, Meehan said the performance of AOL -- which rose 11.2% and continues to confound other prognosticators -- is understandable.

"At least that's the one with a business plan that has earnings at the end of it," he said. "Even at the beginning of Internet mania I put that aside from other stocks that don't seem to have a realistic way to justify market caps. A lot of portfolio managers use that as their 'safe' way to get exposure to the Internet and it's just exploded from there."

As for what will spark the broader downturn he sees as inevitable, the strategist conceded "that's the $64,000 question. There's a lot of things out there that could trigger it. The situation in Kosovo is being given short shrift [because] it seems to me the only logical conclusion other than pulling out altogether is ground troops, which I don't think would be met terribly well."

Also, some emerging markets and Japan are starting to recover which could foster some "capital shift" out of the U.S., Meehan noted. Finally, "if I were a foreign investor, I would be a little concerned about the trade deficit, even if valuations were reasonable," he said.

Among other indices, the Dow Jones Transportation Average rose 44.24, or 1.3%, to 3353.40; the Dow Jones Utility Average gained 2.22, or 0.8%, to 297.23; and the American Stock Exchange Composite Index climbed 9.94, or 1.4%, to 721.24.

Elsewhere in North American equities, the Toronto Stock Exchange 300 jumped 114.89, or 1.7%, or 6739.70 and the Mexican Stock Exchange IPC Index soared 171.59, or 3.5%, to 5101.94.

Monday's Company Report

By Heather Moore
Staff Reporter

(Earnings estimates from First Call; new highs and lows on a closing basis unless otherwise specified. Earnings reported on a diluted basis unless otherwise specified.)

As note above, online brokerages shot up on word from Credit Suisse First Boston that online trading volume rose 30% to 35% to about 450,000 trades a day during the first quarter. The firm also said E*Trade, which lifted 11 5/8, or 19.1%, to an all-time high of 72 5/8, and Ameritrade, which lifted 29 1/16, or 46.5%, to an all-time high of 91 5/8, might beat earnings targets. Charles Schwab flew 9 1/8, or 9.7%, to an all-time high of 103 3/8; Siebert Financial (SIEB) flew 4 13/16, or 20.6%, to 28 1/8; and National Discount Brokers (NDB) flew 4 9/16, or 16.6%, to 32.

Elsewhere in Netland, Yahoo! soared 39 5/16, or 21.9%, to 219 1/8 after reaching a deal by which its content and services will be optimized and delivered to personal digital assistants and Internet appliances through Online Anywhere's Author Once, View Anywhere service. Still elsewhere, online bank Net.B@nk (NTBK) jumped 25 1/2, or 33.8%, to an all-time high of 101 11/16 after saying it opened a record 8,000 new accounts during the first quarter.

Amazon.com (AMZN) surged 15 3/8, or 9%, to 186 1/2 on news it and Wal-Mart (WMT) agreed to settle all claims and counter claims related to Amazon.com and drugstore.com's hiring practices. In October, Wal-Mart filed suit against Amazon.com, drugstore.com, Kleiner Perkins Caufield & Byers and former Wal-Mart executive Richard Dalzell, alleging Kleiner Perkins improperly recruited Wal-Mart employees. Wal-Mart picked up 2 1/8 to 95 3/8.

And AOL climbed 16 15/16, or 11.3%, to an all-time high of 166 15/16 on market chatter of a linkup with CBS (CBS). The San Jose Mercury News reported that the two companies have been holding talks over the past year. CBS scored 1 3/4 to an all-time high of 41 7/8. Meanwhile, AOL said it bought When.com, a provider of free Internet calendaring and event services, for an undisclosed amount of AOL stock.

Mergers, acquisitions and joint ventures

Ameritech (AIT) tacked on 2 3/8 to 62 5/8 on news it will sell 20 Midwestern cellular properties for $3.7 billion in cash to a venture of GTE (GTE) and Georgetown Partners. Ameritech said the move meets Justice Department conditions for approval of its merger with SBC Communications (SBC), which added 1 1/16 to 50 13/16. GTE slipped 9/16 to 60 3/16. On Thursday, Federal Communications Commission Chairman William Kennard said he has "serious concerns" about whether the planned $61 billion merger of SBC and Ameritech is in the public interest.

Hanger Orthopedic Group (HGR) swelled 1 7/8, or 14.4%, to 14 7/8 after agreeing to buy the orthotics and prosthetics division of NovaCare (NOV) in a deal valued at $455 million. NovaCare expanded 7/16, or 36.8%, to 1 5/8.

Mosaix (MOSX) advanced 2 5/8, or 32.3%, to 10 3/4 after Lucent Technologies (LU) agreed to acquire the company in a stock swap valued at about $145 million, or $10.77 a share. Lucent grew 3 1/16, or 5.5%, to 58 15/16.

Rental Service (RSV) vaulted 5, or 29%, to 22 1/4 after United Rentals (URI) launched an unsolicited $22.75-a-share cash tender offer for all the company's outstanding shares. United Rentals shed 15/16 to 27 13/16.

SkyTel Communications (SKYT) rocketed 3 15/16, or 26.1%, to 19 1/32 after Business Week reported that MCI WorldCom is considering taking over the wireless messaging company. MCI WorldCom (WCOM) surged 3 3/16 to 92 1/2.

Telewest (TWSTY) flourished 3 3/8, or 7.3%, to an all-time high of 50 1/4 after The Wall Street Journal said Britain's Cable & Wireless (CWP) is mulling over a proposal to merge the residential assets of its cable TV division with the company. Cable & Wireless pulled in 1 to 37 3/4.

Tyco (TYC) rose 2 to 73 7/8 after completing its acquisition of AMP and naming Juergen Gromer president.

Earnings/revenue reports and previews

Aspect Development (ASDV) tanked 14 13/32, or 64.6%, to an all-time low of 7 15/16 after warning first-quarter earnings will miss estimates due to large contract delays. The 13-analyst forecast called for earnings of 12 cents a share vs. the year-ago 7 cents. BT Alex. Brown lowered the stock to market perform from buy, and Credit Suisse First Boston cut it to hold from strong buy.

Aspen Technologies (AZPN) tumbled 3 1/8, or 23.8%, to 9 15/16 after saying it expects to post a "significant" operating loss in the third quarter. The five-analyst estimate called for earnings of 18 cents a share.

Axent Technologies (AXNT) halved, falling 11 7/8 to an all-time low of 8 1/16, after saying it expects to post a first-quarter loss of 5 cents to 10 cents a share before nonrecurring charges associated with the acquisitions of Internet Tools and PassGo. The 14-analyst consensus called for earnings of 18 cents vs. the year-ago 12 cents.

Centennial Healthcare (CTEN) skidded 4 1/16, or 48.5%, to an all-time low of 4 5/16 after reporting fourth-quarter earnings of 24 cents a share, a nickel below the three-analyst estimate and behind the year-ago 32 cents. Also, privately held Welsh Carson Anderson & Stowe canceled its proposed $300 million acquisition of Centennial, citing a federal investigation into the company.

Eagle USA Airfreight (EUSA) shot up 2 11/16, or 8.4%, to 34 13/16 after saying it expects to post earnings of 27 cents to 29 cents a share in the second quarter, which would be above the current eight-analyst view of 24 cents.

First Union Real Estate (FUR) closed flat at 4 after reporting fourth-quarter earnings of 18 cents a share, a penny shy of the three-analyst outlook and below the year-ago 21 cents.

National Research (NRCI) lost 1, or 27.6%, to an all-time low of 2 9/16 after saying it expects delays converting to a automated production system to "significantly" hurt first-quarter revenue. A three-analyst estimate calls for first-quarter earnings of a dime a share, vs. the year-ago 8 cents, and 52 cents for 1999.

Pediatrix Medical Group (PDX) fell 9 1/2, or 35.7%, to annual low of 17 1/8 after saying it sees first-quarter earnings of 45 cents to 48 cents a share. The 15-analyst view called for 49 cents vs. the year-ago 39 cents. The company blamed increased accounting and legal expenses. Pediatrix also said government officials in Arizona and Colorado are seeking billing-related documents and information from the company.

Software AG Systems (AGS) soured 2 3/16, or 29.7%, to an annual low of 5 3/16 after warning of first-quarter earnings of 16 cents to 18 cents a share because of a decline in product license revenue and softness in Y2K remediation work.. The six-analyst outlook called for 21 cents vs. the year-ago 17 cents.

Synopsys (SNPS) sloughed off 7 1/8, or 13.4%, to 46 despite saying it expects to post second-quarter results in the range of prior expectations. The 16-analyst estimate calls for earnings of 60 cents a share vs. the year-ago 50 cents. But, according to Reuters, John Barr of Needham told clients the company has missed several major customer orders.

Offerings and stock actions

The Wall Street Journal's Heard on the Street column said Gartner Group's (IT) plan to spin off most of the 47% of Gartner stock owned by IMS Health (RX) has upset some Gartner shareholders. Some non-IMS shareholders argue that the plan benefits only IMS while hurting other investors by costing them their majority vote in electing Gartner's board, the column reported. Gartner lost 1 3/4, or 7.7%, to 21 1/16; IMS Health added 5/8 to 33 1/8.

General Instrument (GIC) picked up 1 3/16 to 32 5/8 after saying it will repurchase 5.3 million shares of its stock owned by two partnerships affiliated with Forstmann Little for $148.4 million. In a separate transaction, Liberty Media (LMGA) agreed to purchase 10 million General Instrument shares from the Forstmann Little partnerships for $280 million. Also, General Instrument said it expects Forstmann Little to sell additional General Instruments shares in a block transaction that will reduce its ownership interest in the company to about 1%. Liberty Media, a unit of AT&T (T), picked up 1 1/8 to 55 7/8. AT&T gave up 1 1/16 to 77 7/16.

Separately, News Corp. (NWS) expanded 3 5/16, or 10.8%, to an all-time high of 33 7/8 after The Wall Street Journal reported that Liberty Media plans to eventually take a 7.5% stake the company worth $2.1 billion.

Gillette (G) slid 1 1/2 to 57 3/4 after Kohlberg Kravis Roberts announced plans to sell more than 25 million shares, worth more than $1.5 billion, in halving its profitable investment in the household goods concern.

Analyst actions

CKE Restaurants (CKR) shaved off 1 7/8, or 9.5%, to 17 7/8 after BancBoston Robertson Stephens lowered it to buy from strong buy.

Jabil Circuit (JBL) jumped 3 3/4, or 9.2%, to an all-time high of 44 7/16 after Morgan Stanley Dean Witter began coverage with an outperform.

QuadraMed (QMDC) sank 2 25/32, or 39.7%, to an all-time low of 4 1/4 after Bear Stearns lowered the stock to attractive from buy, Warburg Dillon Read downgraded it to hold from buy, and CIBC Oppenheimer cut it to hold from strong buy.

Qualcomm (QCOM) rose 11 7/16, or 8.3%, to an all-time high of 148 7/8 after First Albany upped it to accumulate from neutral.

Miscellany

Medtronic (MDT) lowered 2 11/16 to 67 15/16 after warning doctors who have implanted the company's GEM SR single-chamber defibrillator that a specific component may lead to early battery drain.

MMC Networks (MMCN) hopped up 3 3/4, or 22.4%, to 21 after naming former 3Com (COMS) executive vice president Douglas Spreng as its president.

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