Volume Soars and Records Fall as Tech and Biotech Keep Rocking

SAN FRANCISCO -- And now, for something completely familiar.

The Nasdaq Composite Index and Russell 2000 each eclipsed yesterday's record closes as investors continued to flock into technology and biotech stocks. Meanwhile, blue-chips struggled as further signs of economic strength and another jump in crude prices kept blue-chip investors focused on the potential for additional Federal Reserve rate hikes.

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 8.07 +0.1% 10,136.38 -11.8% S&P 500 12.83 +0.9% 1379.25 -6.1% Nasdaq 87.62 +1.9% 4784.31 +17.6% Russell 2000 10.64 +1.8% 588.35 +16.6% TSC Internet 16.67 +1.4% 1199.53 +3.9% TSC New Tech 30 51.32 +6.6% 833.43 +34.9% BOND CHANGE PRICE YIELD 30-Year Treasury 9/32 101 7/32 6.151%

The Russell climbed 10.64, or 1.8%, to 588.35, aided by smaller tech names and rampaging biotech stocks. The American Stock Exchange Biotech Index rose 5.4%. Additionally, the Russell's second-straight record close came amid improving breadth and huge volume.

In New York Stock Exchange trading, 1.274 billion shares were exchanged -- the busiest day in NYSE history -- while advancers edged declining stocks 1,558 to 1,481. In Nasdaq Stock Market action 2.100 billion shares traded -- the busiest session ever -- while gainers led 2,428 to 1,846. New 52-week lows bested new highs 145 to 119 on the Big Board while new highs routed new lows 511 to 85 in over-the-counter trading.

The Nasdaq rose 87.62, or 1.9%, to 4784.31 behind strength in bellwether names such as Intel (INTC Quote), Microsoft (Nasdaq Quote) and Sun Microsystems (SUNW Quote). The Nasdaq 100 gained 0.9%.

3Com (COMS Quote) rose another 4.9% amid continued excitement over the IPO of its Palm unit. Additionally, Apple (AAPL Quote) leapt 13.6% to an all-time high of 130 5/16. priceline.com (PCLN Quote) rose 15.5% after making positive comments at the Robertson Stephens technology conference here.

Among NYSE tech heavyweights, Qwest Communications (Q Quote) leapt 28% amid reports the company has held merger talks with Deutsche Telekom (DT Quote), which rose 5%.

Lucent (LU Quote) rose 14.5% after announcing plans to spin off three of its units. SG Cowen upped its recommendation on the company to buy from neutral.

Finally, Micron Technology (MU Quote) added another 6% to its already remarkable run after Morgan Stanley Dean Witter upped its price target. Still, the Philadelphia Stock Exchange Semiconductor Index rose just 0.2% to 1172.18 after trading at high as 1190.67.

TheStreet.com Internet Sector index rose 16.67, or 1.4%, to 1199.53 while TheStreet.com New Tech 30 gained 51.32, or 6.6%, to 833.43. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at http://www.thestreet.com/newtech/.

"It's tech's ball to lose," said John Manley, equity strategist at Salomon Smith Barney. "Portfolio managers faced with a tightening Fed are almost forced into tech stocks. If you're running big money you want to own big, liquidity stocks with good growth and positive earnings revisions. There's nothing like tech."

Manley -- admittedly not a momentum investor -- said some of the "outsized" gains in tech seem "irrational" but cautioned against underweighting the group.

"The valuations are very high but sometimes what appears to be excessive is an adequate appreciation of growth," he said. " As long as you keep seeing [earnings] numbers that are positive, people will move in that direction. Nothing succeeds like success."

Wither Dow?

Once again, the Dow Jones Industrial Average found itself relegated to the backburner of Wall Street's stove. The venerable index closed up 8.07, or 0.1%, to 10,136.38 after spending most of the day in a tight range around breakeven.

In addition to Intel, the Dow got its biggest boost from SBC Communications (SBC Quote), which rose 9.6% on news the company is considering combining its cell-phone operations with BellSouth's (BLS Quote). BellSouth rose 5.9%.

Timothy Heekin, director of equity trading at Thomas Weisel Partners in San Francisco, noted the Dow would have been down if not for SBC's rise. The overall action telecom names, notably Qwest and Lucent, was one of the "big drivers" of a session that otherwise "wasn't great," he said.

"I don't think today was anything extraordinary," Heekin said. "It's totally a rotational market. They continue to want to buy tech and sell big-cap value. Tomorrow you could have the Dow up 200 and Nasdaq down 100, but until I see a real concentrated move where they're knocking the stuffing out of the Comp, that's the only time I'll reverse myself."

The S&P 500 rose 12.83, or 0.9%, to 1379.25 as strength in tech favorites, energy and brokerage stocks overcame weakness in retailers, drug makers and cyclical stocks.

The American Stock Exchange Broker/Dealer Index rose 5.8% after Salomon Smith Barney upped estimates and price targets on Merrill Lynch (MER Quote), Paine Webber Group (PWJ Quote) and Morgan Stanley Dean Witter (MWD Quote). Additionally, Merrill Lynch upped its earning estimates on Lehman Brothers (LEH Quote), which rose 10.4%.

Another big story of the day was Aetna (AET Quote), up 29% before being halted after CNBC reported the insurer had received a takeover bid from Wellpoint Health Networks (WLP Quote) and ING Barings. Wellpoint was down 8.3% before being halted.

In economic news, the Commerce Department said construction spending rose 2.7% in January, its fastest pace sine June 1998 and wildly ahead of expectations. Also, the National Association of Purchasing Management's headline purchasing index hit 56.9 in February and the prices paid component came in at 74.1; both were slightly higher than expectations. Meanwhile, crude prices rose $1.27 to $31.70 amid conflicting reports about OPEC's plans to increase production.

In reaction, the Philadelphia Stock Exchange Oil Service Index rose 6.1% but the price of the 30-year Treasury bond fell 9/32 to 101 7/32, its yield rising to 6.15%.

Among other indices, the Dow Jones Transportation Average rose 8.91, or 0.4%, to 2397.77; the Dow Jones Utility Average fell 1.10, or 0.4%, to 287.38; and the American Stock Exchange Composite Index gained 28.72, or 3%, to a record 1001.95.

For coverage of today's top stocks in the news, see the Company Report, published separately.