Smiles, Everyone! Smiles! It's No Fantasy: Dow Tops 11,000 Again

We've got breadth. We've got earnings. We've got lower rates -- who could ask for anything more? Who could ask for anything more!

Major Indices INDEX CHANGE % VALUE YR TO DATE Dow 253.16 2.33% 11,119.86 -3.3% S&P 500 26.71 1.78% 1527.35 +4.0% Nasdaq 75.94 1.56% 4940.69 +21.4% Russell 2000 2.60 0.46% 573.79 +13.7% TSC Internet -17.39 -1.37% 1253.27 +8.6% NOTE CHANGE PRICE YIELD 10-Year Treasury 9/32 103 2/32 6.082%

The Dow Jones Industrial Average, at least today, reminded everyone how far a little bit of strong earnings indications (remember those?) can take an average. The Dow closed up 253.16 to 11,119.86, closing above 11,000 for the first time since Feb. 3, led by General Electric (GE) and Nasdaq stalwart Microsoft (MSFT), which helped pull the Nasdaq Composite Index to an impressive rise of 75.94, or 1.6%, to 4940.69.

The S&P 500 advanced smartly, finishing up 26.71, or 1.8%, to a record 1527.35.

"It was another bull session across the board," said Matt McDermott, a trader at Cantor Fitzgerald. "It's basically being attributed to first-quarter outlooks that are pretty good. "

Translation: It's all about GE. The stock surged again today after a Lehman Brothers upgrade. The company's been a tank this week, after saying two days ago that it expects to exceed first-quarter estimates, and it rose 8 5/8 to 159 1/2 today, contributing 42 points to the Dow's gain.

Meanwhile, Microsoft (MSFT) rose 9, or 8.7%, to 111 7/8 after The Wall Street Journal reported this morning that the company was reportedly moving closer to a settlement in its federal antitrust case. (TheStreet.com/NYTimes.com joint newsroom wrote a story on this earlier.)

But Microsoft's news is germane mostly to that stock. The continued strength in GE as a stock and as a company, amid the Fed's efforts to slow the economy and a full year of higher interest rates, has positive implications for the broader market, because the company has its hands in many pies.

"Frankly, GE in a lot of ways is the market," said Mike Vogelzang, president and CIO at Boston Advisors, a subsidiary of Advest. "When a company with that much exposure to the economic environment says its profits are tracking ahead of plan, well, it's bleeding into everything that's out there."

Include among those groups basic industries, banks and consumer products. And each of those sectors had its own good news today: Morgan Stanley Dean Witter (MWD) reported stronger-than-expected quarterly earnings, pacing that stock and other banks and brokers. That stock rose 5% to 94 3/4. J.P. Morgan (JPM) gained 7 1/16 to 136 1/8, American Express (AXP) rose 8 1/8 to 155 7/8 and Merrill Lynch (MER) gained 5 to 109 15/16.

Sherwin-Williams (SHW) said its earnings would exceed consensus estimates, and it brushed on an additional 9/16 to 21 15/16.

Preannouncement Season Painless So Far

These positive reports, coming after a number of choppy weeks in the market, are heartening at a time when the market is entering the earnings preannouncement period. That can be a nerve-racking, volatile period, as corporate executives swallow their pride and let the world know why the company accountants have been sobbing themselves to sleep or getting in bar fights.

"We're bracing for a choppy period and it's turning into a good-news period," said Vogelzang.

The overall year-over-year earnings comparison is likely to come out favorably, because the first quarter of 1999 was still a period of suffering for companies coming out from the 1998 emerging-markets crisis. But that doesn't alter the current picture that market participants are garnering of the economy -- that the Federal Reserve, for all its bluster about current stock prices, is focused on incrementally slowing the economy to ward off inflation. Strategists, right or wrong, believe the ballyhooed "soft landing" will be achieved.

"Market participants are convinced that we're looking forward to another soft landing, which is a positive," said Syl Marquardt, research director at John Hancock Funds. "The market is correctly sniffing out the end of rate hikes and a slowdown in the next few months, and they're discounting that."

That's partially evidenced in the strength in the banks in recent weeks, which respond favorably to lower interest rates. Chase Manhattan (CMB), a strong banks that rebounded easily from the late-February decline in financial stocks, reached a new closing high today, up 6 15/16 to 98 1/2. The Philadelphia Stock Exchange/KBW Bank Index closed up 4% today, gaining 17% during the last month.

General Motors (GM) rose 5 1/4 to 87 today, partially motivated by a CNBC news report indicating that News Corp. (NWS) would attempt to buy the company -- yes, buy the whole company, as a way to get GM's Hughes Electronics (GMH) unit. News Corp., which lost 1 3/4, denied the report.

The New York Stock Exchange's most active was Compaq (CPQ), which finished the day down 3 to 29 1/4 on 54 million shares.

Among the Nasdaq's other leaders were the big-cap technology names, including Cisco (CSCO), which was the Nasdaq Stock Market's most active, added 5 15/16 to 77 13/16 on 76.8 million shares; Oracle (ORCL), which rose to a new closing high today of 86 7/8, a 3 1/8 gain, and Sun Microsystems (SUNW), which gained 1 1/16 to 97 13/16.

Telecommunications names were also stronger, led by Nextel Communications (NXTL), up 5 3/16 to 159 1/16 and Level 3 Communications (LVLT), rising 4 7/8 to 110 7/8.

Not All Upside

It was a lousy day for a couple of the Nasdaq's most prominent sectors. Biotechnology and semiconductors were stuck in a rut for the duration.

The Philadelphia Stock Exchange Semiconductor Index finished down 1.5%. Rambus (RMBS) lost 3%.

The Nasdaq Biotechnology Index fell 3%. Protein Design Labs (PDLI) continues to trade like a company that hasn't been eating enough of them, losing 8%; Amgen (AMGN) lost 4 3/16 to 57 11/16.

The Internet lost its mojo late in the day, with bellwethers such as Yahoo! (YHOO) finishing down 5 7/16 to 191. TheStreet.com Internet Sector index lost 17.39 to 1253.27. The Russell 2000, meanwhile, rose 2.6 to 573.79.

The Dow Jones Transportation Average rose 69.11 to 2720.76, while the Dow Jones Utilities Average gained 1.94 to 288.95.

The Treasury market was rocked on words from Treasury Undersecretary Gary Gensler, who told a Congressional committee that so-called agency debt's line of credit is largely "symbolic." While bonds of Fannie Mae (FNM) and Freddie Mac (FRE) fell, the benchmark 10-year Treasury bond rallied, gaining 9/32 to 103 2/32 to yield 6.082%. The 30-year bond rose 22/32 to 104 22/32, to yield 5.914%. (For more on the fixed-income market, see today's Bond Focus .)

Market Internals

Breadth was strong on heavy volume.

New York Stock Exchange: 1,830 advancers, 1,157 decliners, 1.06 billion shares. 99 new highs, 34 new lows.

Nasdaq Stock Market: 2,179 advancers, 2,062 decliners, 1.68 billion shares. 109 new highs, 63 new lows.For a look at more stocks in the news, see the Company Report, published separately.

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