Song Remains the Same: Market Spins a Toe-Tapping Tech Rally Tune

SAN FRANCISCO -- Federal Reserve Chairman Alan Greenspan said last night there's something "profoundly different" about the economy, but today's stock market looked awfully familiar.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 140.55 +1.2% 11,722.98 +2% S&P 500 15.48 +1.1% 1465.16 -0.3% Nasdaq 107.13 +2.7% 4064.34 -0.1% Russell 2000 6.37 +1.3% 507.56 +0.6% TSC Internet 10.29 +0.9% 1108.24 -4% TSC New Tech 30 4.14 +0.7% 587.32 -4.9% BOND CHANGE PRICE YIELD 30-Year Treasury 12/32 92 26/32 6.685%

Buoyed by benign inflation data -- namely the Consumer Price Index -- and strong corporate earnings -- namely from Intel (INTC Quote) -- stock proxies soared, with tech names leading the charge.

Also keeping to recent form, bonds fell, reacting to both the more cautious comments in Greenspan's speech and the fact money was flowing into equities. The price of the 30-year Treasury bond fell 12/32 to 92 26/32, its yield rising to 6.69%. (The bond market closed today at 2 p.m. EST ahead of Monday's Martin Luther King Day observance, for which all U.S. financial markets will be shuttered.)

The Dow Jones Industrial Average sauntered into the long weekend with a gain of 140.55, or 1.2%, to 11,722.98, another all-time high.

The Dow got its biggest boost from Intel, which leapt 13.2% to an all-time high 103 1/16 in the wake of its earnings report last night. Although some questioned the quality of Intel's earnings, several analysts issued positive comments about the chip giant. Furthermore, Intel's news sparked solid gains for most tech bellwethers.

The Nasdaq Composite Index jumped 107.13, or 2.7%, to 4064.34 as stalwarts such as Microsoft (MSFT Quote), Oracle (ORCL Quote), Sun Microsystems (SUNW Quote) and Applied Materials (AMAT Quote) joined Intel on the upside. The Nasdaq 100 rose 2.6%.

Microsoft rose 4.2% after last night's change at the top. Applied Materials gained 8.9%, benefiting from both Intel's good fortune and its acquisition of Etec Systems (ETEC Quote), announced late Wednesday.

The tech advance was not all-encompassing, however. Lucent (LU Quote) fell 5.8% amid rumors -- denied by the company -- that it is the subject of an inquiry by the Securities and Exchange Commission into its accounting practices.

Still, chip and equipment makers and PC manufacturers followed Intel's lead, notably Advanced Micro Devices (AMD Quote), Apple (AAPL Quote) and Texas Instruments (TXN Quote). The Morgan Stanley High-Tech 35 gained 1.5%.

Additionaly, Motorola (MOT Quote) rose 9% following upgrades by Lehman Brothers and PaineWebber. (The company is scheduled to report earnings Monday, despite the holiday.) The Philadelphia Stock Exchange Semiconductor Index rose 8.1%.

Internet stocks also rallied, led by Yahoo! (YHOO Quote), although the enthusiasm for the group was relatively restrained. TheStreet.com Internet Sector index rose 10.29, or 0.9%, to 1108.24.

Similarly, TheStreet.com New Tech 30 rose a modest 4.14, or 0.7%, to 587.32. Unveiled Jan. 5, the TSC New Tech 30 is an expanded index designed to replace the Red Hots index: The market-cap-weighted index remains focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the new index components is available at http://www.thestreet.com/newtech/.

As if Intel's earnings and the weaker-than-expected CPI report weren't enough, stocks also got a boost from merger news. The drug sector was high on word SmithKline Beecham (SBH Quote) and Glaxo Wellcome (GLX Quote) are in merger talks, plus yesterday's reports Warner-Lambert (WLA Quote) will consider Pfizer's (PFE Quote) heretofore hostile offer. The American Stock Exchange Pharmaceutical Index gained 1.5%.

Also, financial stocks such as Dow components American Express (AXP Quote)and J.P. Morgan (JPM Quote) advanced. The Philadelphia Stock Exchange/KBW Bank Index rose 3.5%.

Reflecting the broad participation, the S&P 500 rose 15.48, or 1.1%, to 1465.16 -- a hair below its all-time closing high of 1469.25 -- and the Russell 2000 gained 6.37, or 1.3%, to a record 507.56.

Rather than CPI or Greenspan, "today had more to do with earnings," according to Jay Meagrow, vice president of trading at McDonald in Cleveland. "It's a great day ahead of next week," when earnings announcements begin en masse.

Intel was a "huge driver" but there were also a slew of upgrades and raised estimates on some "big names" by "big firms" that spurred today's advance, Meagrow said, noting Motorola and Lands' End (LE Quote), which gained 7% following positive comments from Goldman Sachs and Credit Suisse First Boston.

In New York Stock Exchange trading, 1.081 billion shares were exchanged while advancers bested declining stocks 1,611 to 1,394. In Nasdaq Stock Market action, 1.64 billion shares traded while gainers led 2,396 to 1,758. New 52-week highs bested new lows by 119 to 59 on the Big Board and by 265 to 59 in over-the-counter trading.

Not So Fast

While the stock market obviously ignored the hawkish elements of Greenspan's speech, even some avowed bulls say caution is warranted.

Greenspan is "trying to walk a fine line," said Philip Tasho, CEO at Riggs Investment Management in Washington and long one of the Street's most bullish strategists. "He's not looking at a crash like when he first came in, in 1987, but he's trying to mute returns in the stock market for this year to dash expectations. He'll continue to [tighten] until he gets what he wants," which is both a slowing economy and a dampening of consumer confidence and investors' expectations.

Investors focus today on "robust earnings expectations" after Intel's report is akin to when the Titanic hit the iceberg "and people still had a few hours until reality hit," he said. "Here, we're still enjoying the party."

Despite references to that famous disaster, Tasho is not looking for a "dramatic fall" in stock prices but expects modest returns this year for major averages in 2000 of below 10%. He believes "long-term investors should always stay invested" but foresees bonds, interest-rate-sensitive stocks, and "more stable" growth names such as health care as being better alternatives in 2000 than those with exceedingly high valuations.

Among other indices, Dow Jones Transportation Average slid 1.26 to 2891.63; the Dow Jones Utility Average gained 2.44, or 0.8%, to 302.24; and the American Stock Exchange Composite Index added 3.11, or 0.4%, to 869.74.

For the week, the Dow rose 1.7%, the S&P added 1.6%, the Nasdaq leapt 4.7%, the Russell climbed 3.9%, the DOT gained 2.2%, the TSC New Tech 30 fell 1.3%, the Dow transports slid 2.5%, the Dow utilities rose 1.5% and the Amex Composite rose 0.7%.

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Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately.