Behind the Big Rally, Not All Is Rosy

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Wall Street usually runs between the East River and Trinity Church, but today it's in Missouri: "Nice run-up; show me it's real."

The

Dow Jones Industrial Average

leapt 232.31, or 3.1%, to 7674.39, enjoying its third-largest point gain ever. Other major indices sported similar surges, with the broad

S&P 500

up 24.37, or 2.7%, to 938.99; the tech-crowded

Nasdaq Composite Index

up 36.37, or 2.3%, to 1629.98; and the small-cap

Russell 2000

up 7.71, or 1.8%, to 440.97. Yet market mavens, left wary by last week's mad gyrations, were less than wildly impressed.

"It's probably just a one-day pop," one trader mildly observed. He said some of the rally may have come from a massive bout of short covering, which accelerated as the day's gains grew. "It was more the value guys buying all along, and probably some of the hedge guys playing the short bet," he said.

Despite the large point advance and strongly positive breadth, trading floors were less busy than they were almost any day last week. On the

New York Stock Exchange

, 2,335 advancers led 643 decliners on just-above-average volume of 568 million shares. Nasdaq advancers outpaced decliners by 2,882 to 1,634 on 651.2 million shares.

Gregory Nie, chief technical analyst at

Everen Securities

in Chicago, said he was pleased to see the Dow bust through the 7600 resistance level, but he cautioned that more ground needs to be recaptured before it's time to declare the current downturn over. "With the Dow industrials still the weakest chart of the market barometers, the immediate task is to avoid any reason to look at things from the sell side," he said. "Seventy-six hundred is a plus, because under 7600 you have to call the pattern on the short-term Dow a negative. But getting over it today and going under it tomorrow doesn't do it."

Nie said he's watching a higher figure to gauge when to feel more comfortable with the equity scene. "To get back above the 50-day moving average, which is 7854, would really feel like we're back to neutral on the Dow," he said.

One further sign of the market's continuing unsettled nature is the bond market's action today, as nervous money that fled into the fixed-income side last week flew back into equities amid today's rally. The bellwether 30-year Treasury bond fell 27/32 to 102 1/4 in price, yielding 6.21%.

Monday's market action

(earnings estimates from

First Call

):

Oregon Metallurgical

(OREM)

took a break from metallurgy to dabble in alchemy, turning in a solid-gold rise of 10 7/16, or 44.5%, to 33 7/8 on the news late

Friday that

Allegheny Teledyne

(ALT) - Get Report

plans to buy the company in a $560 million deal. Allegheny ascended 1 1/2 to 27 13/16.

Lockheed Martin

(LMT) - Get Report

climbed 4 1/16 to 99 1/8 after

General Electric

(GE) - Get Report

agreed to buy several businesses from the company for $2.8 billion in Lockheed preferred stock held by GE. GE rose 2 1/2 to 67 1/8. Among the interests GE is to receive is a stake in satellite-telephone company

Globalstar

(GSTRF)

, which popped up 3 1/2 to 49 3/4.

ITT

(ITT) - Get Report

added 1 15/16 to 76 5/8 after

Hilton

(HLT) - Get Report

crawled from the deal-making grave and raised its hostile takeover bid to $80 per share from $70. ITT has already agreed to an $82-per-share white-knight union with

Starwood Lodging Trust

(HOT)

, but the new Hilton bid features more cash. Just in case ITT is unable to overcome its extreme distaste for Hilton at any price, Hilton filed a lawsuit seeking to block the Starwood deal. Hilton gained 1 to 31 13/16 and Starwood fell 2 3/8 to 57 7/16. And

MGM Grand

(MGG)

dropped 1 1/2 to 42 1/2 as word emerged that Hilton never met with or talked with MGM about a merger.

Schroder

happened to initiate coverage of MGM at outperform. (

TheStreet.com

looked into the whole mess in a

story today.)

Warner-Lambert

(WLA)

gave up 4 1/4 to 139 1/8 after the

Food and Drug Administration

asked for a labeling change for the company's Rezulin diabetes drug to warn about liver damage.

Merrill Lynch

downgraded Warner-Lambert to near-term accumulate from buy, maintaining a long-term buy, but

Goldman Sachs

reiterated the company's placement on its recommended list.

Bristol-Myers Squibb

(BMY) - Get Report

, maker of the competing drug Glucophage, rose 2 13/16 to 90 11/16, and most other drug makers were up as well. (

TheStreet.com

examined Warner-Lambert's rise and stumble in a

story today.)

Sequana Therapeutics

(SQNA)

jumped 2 1/2, or 22.2%, to 13 15/16 after

Arris Pharmaceuticals

(ARRS) - Get Report

agreed to buy the company in a $166 million stock swap. Arris lost 5/8 to 11 1/8.

Teledata Communications

(TLDCF)

powered up 5 3/4, or 18.7%, to 37 1/4 after

UBS Securities

initiated coverage at buy with a 12-month price target of 60.

Orbotech

(ORBKF)

leapt 8, or 18.6%, to 51 after reporting third-quarter earnings of 70 cents per share. That beat the five-analyst consensus estimate by 9 cents and doubled the year-ago 35 cents.

Fluor

(FLR) - Get Report

plunged 3 7/8, or 9.4%, to a seven-year low of 37 1/4 after saying it expects to miss fiscal 1998 earnings estimates by about $100 million. That translates to a shortfall of 75 cents to $1 per share versus the range of estimates from $3.30 to $3.75 per share, according to

Reuters

. The six-analyst First Call expectation called for $3.52, compared with an estimate of $1.52 for fiscal 1997 and an actual $3.17 in fiscal 1996.

Healthsouth

(HRC) - Get Report

improved 2 1/4, or 8.8%, to 27 13/16 after

Integrated Health Services

(IHS)

agreed to buy Healthsouth's

Horizon

long-term care assets for $1.2 billion. Integrated gained 1 7/16 to 33 3/16.

ACC

(ACCC)

ran up 4 1/2, or 10.4%, to a 52-week high of 43 7/8 after

Tel-Save

(TALK)

late

Friday adjusted its merger offer for the company. Tel-Save originally sought to scuttle ACC's planned merger with

US WATS

(USWI)

by saying it would pay less for ACC if that deal were to go through, but Tel-Save changed its mind and confirmed a solid $50-per-share offer. US WATS lost 7/32, or 11.7%, to 1 21/32 and Tel-Save slipped 1/16 to 21 5/16.

Newbridge Networks

(NN)

led a solid networking sector, up 5 1/4, or 9.9%, to 58 1/4 after

J.P. Morgan

upgraded it to buy from long-term buy.

3Com

(COMS)

rose 1 15/16 to 43 7/16 ahead of its earnings report tomorrow, and other gainers included

Bay Networks

(BAY)

, up 2 5/8 to 34 1/4,

Cisco

(CSCO) - Get Report

, up 2 11/16 to 84 3/4, and

Fore Systems

(FORE)

, up 1/2 to 16 3/4.

Ascend

(ASND) - Get Report

, however, slid 11/16 to 26 5/16 after saying it expects several quarters of unpredictable growth.

Retail stocks were among the day's stronger performers, with a couple benefiting from analyst upgrades.

Sears

(S) - Get Report

jumped 3 7/16, or 8.2%, to 45 5/16 after

Bear Stearns

upped it to buy from attractive, and

Nordstrom

(NOBE)

rose 2 to 63 1/8 after Merrill Lynch raised it to near-term accumulate from neutral. The firm maintained a long-term accumulate. Among other hot retailers today were

J.C. Penney

(JCP) - Get Report

, up 2 5/16 to 61,

Gap

(GPS) - Get Report

, up 1 9/16 to an all-time high of 54 3/4, and

Dayton Hudson

(DH)

, up 3 1/2 to an all-time high of 66 1/2.

The big banks were big gainers as well, also in part on analyst moves.

BankAmerica

(BAC) - Get Report

advanced 1 5/16 to 73 3/16 after

Morgan Stanley Dean Witter

upgraded it to outperform from neutral, and

NationsBank

(NB)

improved 2 1/8 to 61 15/16 after

BT Alex. Brown

upped it to strong buy from buy. Elsewhere in the industry,

Citicorp

(CCI) - Get Report

rose 4 5/16 to 129 3/8,

Chase

(CMB)

rose 3 1/4 to 118 11/16 and

J.P. Morgan

(JPM) - Get Report

rose 3 11/16 to 114 1/16.

Chrysler

(C) - Get Report

revved up 1 1/8 to 36 3/8 despite reporting a 13.3% decline in October car sales and a 6.2% drop in truck sales.

Ford

(F) - Get Report

was up 2 5/8 to 46 5/16 and

General Motors

(GM) - Get Report

was up 2 15/16 to 67 1/8.

Boeing

(BA) - Get Report

was the only Dow component to decline, losing 5/16 to 47 11/16 after it said it would take a fourth-quarter charge as it phases out some

McDonnell-Douglas

aircraft. Also damaging Boeing was the news that

US Airways

(U)

plans to buy 400 planes from archrival

Airbus Industrie

. US Airways was up 1 1/2 to 48 3/8 in a robust airline sector.

Molex

(MOLX)

ascended 3 3/4, or 10%, to 41 1/2 after its chairman told a conference the company expects sales to grow 12% to 17% in fiscal 1998, ending June.

Recent issue

American Italian Pasta

(PLB)

improved 1 1/4 to 22 1/4 after BT Alex. Brown initiated coverage at strong buy and Goldman Sachs initiated coverage at market outperform.