Two days ago, the stock market was mired in a seemingly endless rut many players said was the harbinger of a huge selloff. Now, after displaying vim and vigor unseen since the beginning of the year, the

Dow Jones Industrial Average

stands in record territory, while other major proxies have also shaken recent trepidation.

The Dow jumped 268.68, or 2.8%, to 9736.08, eclipsing its previous closing best of 9643.32 set

Jan. 8. Today's gain is the fifth-best point rise in the Dow's history, though it's not significant in percentage terms.

Taking into account

yesterday's advance, the venerable index gained 460.20 points in two days, its best-ever two-day advance, beating the 447.98-point rise for the two days ended Oct. 16. Percentagewise, however, the advance did not crack the top 100, according to

The Wall Street Journal's

statistics department.

The only possible criticisms of the rally are that other major proxies failed to match the Dow's record-setting pace and that trading volumes weren't overwhelming. But market players were impressed for several reasons: The rise encompassed several market sectors, breadth heavily favored of advancers and stocks' gains were accompanied by a rallying bond market.

The bond market was revived by the

employment report, which was not as strong as some feared. Nonfarm payrolls rose by 275,000 for the month, exceeding the 245,000-job consensus but below traders' worst expectations. The unemployment rate, expected to stay flat, ticked up to 4.4% from the 29-year low of 4.3%. Additionally, average hourly earnings rose by just 0.1%, the smallest increase since February 1996.

In reaction, the price of the 30-year Treasury bond rose 1 15/32 to 95 1/32, its yield falling to 5.59%.

"The concern specifically over last couple of days was the economy is growing way too quickly," said Phil Orlando, chief investment officer at

Value Line

, who reported hearing "whisper" numbers regarding payrolls "north" of 350,000. "The concern was there would be wage pressures and a drop in the unemployment rate, which would suggest inflation and a

Fed

increase were going to follow close behind. I think this does put those fears aside for now."

"The reason we're seeing this rally today is stocks, particularly tech stocks, got dramatically oversold," Orlando continued. "Now, there's a realization the Fed is on hold, bonds will rally, P/Es will expand, and we're not going into an earnings recession."

The investment chief remains bullish on both stocks and bonds, believing the Dow can attain 10,500 by year-end. "From where we started this morning, that's a

roughly 1000-point rally over the next nine months," he said. "We just did 20%."

The

S&P 500

closed up 28.83, or 2.3%, to 1275.47. The index traded as high as 1275.73 but couldn't surpass its all-time best of 1279.64, set

Jan. 29. The

Russell 2000

rose 3.99, or 1%, to 398.01.

Gainers within varying sectors contributed to the S&P 500's rise, namely retailers, financials, energy and consumer favorites. The

American Stock Exchange Retailing Index

rose 2.8%, the

Philadelphia Stock Exchange/KBW Bank Index

gained 2.3%, the

American Stock Exchange Oil Index

rose 2.1% and the

Morgan Stanley Consumer Index

climbed 2.2%.

Tech Back on Track

Technology also played a big part in the upswing.

IBM

(IBM) - Get Report

was the biggest Dow gainer (followed by

American Express

(AXP) - Get Report

), while chip makers

Micron Technology

(MU) - Get Report

and

Texas Instruments

(TXN) - Get Report

gave the S&P 500 a big lift. The

Philadelphia Semiconductor Index

gained 6.2%.

The majority of

Nasdaq Composite Index

bellwethers also rose, sending the index as high as 2339.21 before it closed up 44.22, or 1.9%, to 2337.11. Having recently lost as much as 10% from its record close of

Feb. 1, the tech-laden index remains well below its all-time high of 2510.20.

News

Intel

(INTC) - Get Report

will acquire

Level One Communications

(LEVL) - Get Report

for $2.2 billion helped the tech sector overcome a profit warning from

CompUSA

(CPU)

, which fell 21.5%. Intel gained 1.1%, while Level One soared 65.8%.

Internet names also participated in the upswing.

TheStreet.com Internet Sector

index climbed 10.95, or 2.1%, to 534.34, while

TheStreet.com E-Commerce Index

edged up 1.02, or 1.1%, to 95.52. The E-Commerce Index was

revised after yesterday's close.

In

New York Stock Exchange

trading 835 million shares traded, while advancers whipped declining stocks 2,065 to 912. In

Nasdaq Stock Market

activity, 864.8 million shares were exchanged while gainers led 2,182 to 1,775. An 84-minute midmorning outage of Nasdaq's

SelectNet

and

SOES

trading systems depressed that exchange's volume. New 52-week highs led new lows 75 to 38 on the Big Board, but new lows led 79 to 54 in over-the-counter trading.

Flying in the Face of the Rally

If negative sentiment contributed to the rally today (as many claimed), bulls should take heart that (among others) Gail Dudack, equity market strategist at

Warburg Dillon Read

, maintains a long-held dour view.

"I'm surprised the market has done as well as it has with interest rates above 5.50%. I think over time that's going to weigh heavily on stocks," Dudack said. "I'm not surprised there is the rally, because the market got really oversold, but I am surprised it got the Dow to a new high."

But the fact the Dow is alone in record territory is "kind of a warning this rally is not going to be long-lasting," she said, noting "the base of the rally since October has not been very broad."

"We haven't had any earnings growth in the macro sense in the last four quarters," Dudack continued. "If not earnings, the market has to be driven by lower interest rates, but in reality interest rates are back to where they were last June and July. Plus, money flows have reflected a declining rate of interest in stocks by the general public."

Dudack acknowledged the action of the past two days could reinvigorate mutual fund inflows, but not enough to reconsider her defensive posture.

Asked what it would take to make her bullish again, Dudack replied: "There have been times where valuations are too rich but money flows or technicals positive. But all three are waving yellow flags."

If so, investors are doing a fine imitation of

Jeff Gordon

and ignoring the cautions.

Among other indices, the

Dow Jones Transportation Average

rose 57.61, or 1.8%, to 3312.79; the

Dow Jones Utility Average

gained 4.40, or 1.5%, to 301.51; and the

American Stock Exchange Composite Index

closed up 8.89, or 1.3%, to 707.41.

For the week, the Dow industrials leapt 429.50, or 4.6%; the S&P 500 gained 37.14, or 3%; the Nasdaq Comp rose 49.08, or 2.1%; the Russell 2000 rose 5.75, or 1.5%; TheStreet.com Internet index gained 23.79, or 4.7%; TheStreet.com E-Commerce index slid 1.59, or 1.6%; the Dow transports rose 105.36, or 3.3%; the Dow utilities added 7.64, or 2.6%; and the Amex Composite rose 9.12, or 1.3%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

jumped 146.40, or 2.3%, to 6415.11 and the

Mexican Stock Exchange IPC Index

leapt 109.78, or 2.6%, to 4327.80. For the week, the TSE 300 rose 102.50, or 1.6%, and the IPC rose 67.00, or 1.6%.

Friday'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 noted above, Level One Communications soared 17 13/16, or 65.8%, to an all-time high of 45 after Intel agreed to acquire the company for $2.2 billion in stock last night. Intel lifted 1 1/4 to 114 5/8. Today,

Credit Suisse First Boston

cut Level One to hold from buy, saying there may be some risk to the company's current model beginning in the second quarter.

TheStreet.com

looked at the deal in a

piece last night.

Mergers, acquisitions and joint ventures

AEP Industries

(AEPI)

jumped 1 7/8, or 9.9%, to 21 after announcing it's getting out of the oriented polypropylene business. The company expects to incur a $27 million loss as a result. AEP will sell selected assets associated with the business to

Applied Extrusion Technologies

(AETC)

, which added 1/8 to 6 13/16, for $13 million.

Century Communications

(CTYA)

expanded 3 5/8, or 10.3%, to an all-time high of 39 after

Adelphia Communications

(ADLAC)

agreed to buy the company for $5.2 billion, including $1.6 billion in debt. Adelphia lowered 2 5/16 to 54 1/2. The deal -- which will make Adelphia the fifth-largest cable TV system operator in the country -- calls for Century's Class A stockholders to receive $9.16 a share in cash and 0.61 of a Adelphia Class A common share for every Century Class A share. Century's Class B stockholders will receive $11.81 in cash and 0.64 of a Adelphia Class A share for every Century Class B share.

Harvey Entertainment

(HRVY)

shot up 1 3/8, or 26.8%, to 6 1/2 after last night saying its founder and former chairman and chief executive, Jeffrey A. Montgomery, made an offer to acquire the company. Under the proposed agreement, shareholders would receive three-year senior secured notes and five-year common-share purchase warrants of Montgomery's

Harvey Acquisition

in exchange for their shares.

St. Joseph Light & Power

(SAJ)

scored 3 1/2, or 20.7%, to an all-time high of 20 3/8 after agreeing to be acquired by

UtiliCorp

(UCU)

for $23 a share, or $190 million. UtiliCorp picked up 5/8 to 35 3/4.

North Face

(TNFI)

sliced off 3 7/16, or 20.8%, to 13 1/16 after withdrawing a tender offer for its own shares because of delays preparing its 1998 audited financial statements. But the sportswear seller said it stills plans to take the company private.

Earnings/revenue reports and previews

IDX Systems

(IDXC)

tanked 11 1/2, or 44.2%, to an all-time low of 14 1/2 after warning it expects to post a first-quarter loss of 22 cents to 28 cents a share because of an unexpected deferral of purchasing decisions by its customers. The 22-analyst consensus called for earnings of 35 cents vs. the year-ago profit of 28 cents. Credit Suisse First Boston dropped the stock to hold from buy, and

Merrill Lynch

lowered it to near-term neutral from accumulate while keeping it at long-term buy. Other health-care information stocks felt IDX's pain:

QuadraMed

(QMDC)

lost 4 1/4, or 27.1%, to an annual low of 11 7/16;

Cerner

(CERN) - Get Report

lost 1 5/16, or 8.4%, to 14 3/8; and

Shared Medical Systems

(SMS)

lost 3 13/16, or 7.2%, to 49 7/16.

McKesson HBOC

(MCK) - Get Report

lost 4 5/8, or 7%, to 61 1/4 after

Morgan Stanley Dean Witter

separately downgraded it to outperform from strong buy.

ABC-Naco

(ABCR)

dropped 1 1/4, or 8.6%, to 14 after last night announcing second-quarter earnings of 5 cents a share, 7 cents below the five-analyst forecast and behind the year-ago dime.

ABR Information Services

(ABRX)

rose 1 5/8, or 8.5%, to 20 13/16 after last night reporting second-quarter earnings of 20 cents a share, 2 cents higher than the five-analyst expectation and above the year-ago of 15 cents.

Allied Waste

(AW)

plunged 5, or 25%, to an annual low of 15 despite posting fourth-quarter earnings of a quarter a share, in line with the nine-analyst estimate and up from the year-ago 12 cents.

Anchor Gaming

(SLOT)

gave up 4 3/8, or 10.9%, to an annual low of 35 15/16 after last night saying it sees third-quarter earnings coming in at $1.10 to $1.20 a share due to a reduction in the number of income-generating gaming machines placed by its stand-alone propriety games operations. The six-analyst view called for a repeat of the year-ago $1.33. Today,

Prudential Securities

lowered the stock to hold from accumulate.

Castle Dental

(CASL)

advanced 7/16, or 7.8%, to 6 1/4 after reporting fourth-quarter earnings of 17 cents a share, above both the five-analyst estimate of 15 cents and the year-ago 9 cents.

CompUSA tumbled 1 3/4, or 21.5%, to an annual low of 6 3/8 after last night warning it sees a break-even third quarter and a fourth-quarter loss because of lower-than-expected sales. Today,

Salomon Smith Barney

downgraded the stock to neutral from outperform,

Goldman Sachs

lowered it to market performer from outperformer, and both Credit Suisse First Boston and

NationsBanc Montgomery Securities

slashed it to hold from buy.

Hovnanian Enterprises

(HOV) - Get Report

excelled 1/2, or 7%, to 7 5/8 after recording first-quarter earnings of 30 cents a share, 4 cents ahead of the three-analyst view and above the year-ago 21 cents.

Information Advantage

(IACO)

stumbled 1 15/16, or 15.8%, to 10 5/16 after last night reporting fourth-quarter earnings of 7 cents a share, in line with the nine-analyst view and up from the year-ago 2 cents. The company also announced it adopted a shareholder rights plan but not in response to any known takeover threat.

Rawlings Sporting Goods

(RAWL)

skidded 2 1/8, or 17.5%, to 10 after last night saying it expects to post second-quarter earnings of 38 cents to 43 cents a share because of delayed orders that may be placed closer to baseball season, financial problems at several retailers and competitive pressure. The two-analyst estimate called for 66 cents vs. the year-ago 61 cents.

Sunrise Assistant Living

(SNRZ)

surged 3 1/2, or 9.4%, to 41 3/16 after last night reporting fourth-quarter earnings of 36 cents a share, topping both the 21-analyst estimate for 32 cents and the year-ago 11 cents.

WinStar Communications

(WCII)

expanded 2 1/2, or 7.7%, to 35 1/8 after last night posting a fourth-quarter loss of $3.80 a share, 6 cents narrower than the 14-analyst expectation but wider than the year-ago loss of $2.18.

Offerings and stock actions

Boyds Collection

(FOB)

closed unchanged at 18 after

Donaldson Lufkin & Jenrette

priced its 16 million-share IPO low-range last night. The company makes stuffed animals. Elsewhere in new offerings,

Neon Systems

(NESY)

popped up 10, or 66.7%, to 25 1/16 after DLJ priced its 2.7 million-share IPO above range last night. The software company is based in Sugarland, Texas.

Wal-Mart

(WMT) - Get Report

lifted 3 7/8 to an all-time high of 93 1/4 after last night setting a 2-for-1 stock split, increasing its buyback program by $1.2 billion to $2 billion and boosting its annual dividend to 40 cents a share.

Analyst actions

Altera

(ALTR) - Get Report

grew 3 5/8, or 6.7%, to 57 9/16 and

Microchip

(MCHP) - Get Report

grew 3 11/16, or 13.1%, to 32 after Morgan Stanley Dean Witter raised the stocks to strong buy from outperform.

Circuit City

(CC) - Get Report

advanced 5 1/2, or 8.7%, to an all-time high of 68 3/4 after DLJ pushed up its price target for the company to 90 from 75 a share. Yesterday, the retailer said its February same-store sales jumped 12%.

Delphi Financial

(DFG)

shed 12 3/8, or 30.7%, to an annual low of 28 after Goldman Sachs lowered it to outperform from its recommended list.

Medimmune

(MEDI)

rose 3 1/16, or 5.4%, to 59 1/2, matching an all-time high, after Morgan Stanley Dean Witter increased its price target for the company to 70 from 60 a share.

Meditrust

(MT) - Get Report

climbed 1 3/16, or 10.2%, to 12 7/8 after

PaineWebber

upped it to buy from attractive.

Nokia

(NOKA)

added 7 11/16, or 5.6%, to 145 15/16 after

Thomas Weisel Partners

initiated coverage with a buy.

Rexall Sundown

(RXSD)

shot up 2 1/16, or 13.9%, to 17 after Salomon Smith Barney started coverage with a buy and a 12-month price target of 20 a share.

Starwood Hotels

(HOT)

surged 2, or 6.3%, to 34 after Credit Suisses First Boston initiated coverage with a strong buy.

Yahoo!

(YHOO)

vaulted 8 5/16, or 5.5%, to 159 13/16 after

Hambrecht & Quist

upgraded it to buy from hold.

Miscellany

Magainin Pharmaceuticals'

(MAGN)

plummeted 2 3/32, or 54.9%, to an all-time low of 1 23/32 after last night an advisory panel to the

Food and Drug Administration

rejected its

Locilex

, a topical treatment for infected foot ulcers. Today, H&Q cut the stock to hold from buy.

7thStreet.com

(SEVL)

-- no relation to this publication or its parent company -- powered up 2 5/16, or 85.1%, to 5 after the

oft-wrong Inside Wall Street column in

Business Week

said the tiny Internet content provider was preparing to announce a pact with

America Online

(AOL)

. Shortly before the closing bell, the company said it would indeed offer its tutorials.com service on AOL, which tacked on 11/16 to 86 15/16.