Dow Rounds Out October on High Note

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The Right Stuff. Do the Right Thing. Keep on Truckin'.

John Glenn

has it, policymakers are trying and Wall Street did it today to complete the best month for blue-chip stocks since 1987. A stronger-than-expected

GDP

report and supportive action by the

Group of Seven

were the main catalysts for upturn today, as was the eagerness of portfolio managers to put idle cash to work before the end of funds' fiscal year tomorrow.

The wide majority of individual stocks and major groups were winners on the session, with financials, transportation and economically sensitive groups like chemicals and paper among the best performers. However, afternoon weakness in drug makers and some tech bellwethers had proxies retreating from intraday heights.

The

Dow Jones Industrial Average

closed up 97.07, or 1.1%, to 8592.10, but down from its apex of 8659.81. Still, the close is the Dow's highest since Aug. 25 and completes a month in which the blue-chip index rose 9.6%. The monthly rise is the highest for the Dow since January 1987, when it gained 13.8%, according to the statistics department at

The Wall Street Journal

. The Dow is now up 8.6% for the year, but still down 8% from its record high of 9337.97, set July 17.

American Express

(AXP) - Get Report

was the Dow's leading gainer, followed by

3M

(MMM) - Get Report

and

Interational Paper

(IP) - Get Report

.

The Dow's leaders accurately reflected leading sectors aiding the overall market. The

Philadelphia Stock Exchange/KBW Bank Index

rose 1.8%, the

S&P Chemicals Index

climbed 2.1% and the

Forest and Paper Products Index

gained nearly 5%.

Those groups, along with the surging transportation sector, sent the

S&P 500

up 12.74, or 1.2%, to 1098.67; the index rose 8% for the month. Meanwhile, the

Dow Jones Transportation Average

rose 91.40, or 3.3%, to 2891.92 and climbed 9.3% in October.

The

Nasdaq Composite

rose 14.20, or 0.8%, to 1771.39 and finished the month up 4.6%. For the second consecutive session, bellwether tech stocks struggled as the

Nasdaq 100

rose a modest 0.3%. Big Board tech residents, such as

Electronic Data Systems

(EDS)

also faltered, leaving the

Morgan Stanley High-Tech 35

up just 0.5%.

The

Russell 2000

rose 3.68, or 1%, to 378.16 to finish up 4% for the month.

In

New York Stock Exchange

trading, 779.8 million shares were exchanged while advancing stocks led declining issues 2,198 to 874. In

Nasdaq Stock Market

action, 924.9 million shares traded while advancers led 2,565 to 1,660. New 52-week highs led new lows 56 to 22 on the Big Board and 58 to 42 in over-the-counter trading.

"Everything closed off from their highs, and I would have liked to seen

the Dow close above 8600," said Robert Harrington, co-head of block trading at

PaineWebber

. Nonetheless, Harrington said the positives outweighed any disappointment at the lackluster close. "The market acted pretty impressive overall."

"It seemed like the rumor about the

IMF

getting the funding together for Brazil is gaining support, even though it's not a done deal," he said. "Also, people are feeling more confident about the economy -- that we're not going to have a recession."

Optimism about the economy was bolstered by the

Commerce Department

report that U.S. gross domestic product rose 3.3% in the third quarter, well ahead of the 2% increase expected and up from 1.8% in the second quarter.

Harrington suggested investors on the sidelines may now be forced to come back into the market, given the sentiment switch. But other market-watchers said that might not be such a prudent move.

The beginning of the end?

"Today is the last day of mutual-fund money-manager melt-up madness," said Scott Bleier, chief investment strategist at

Prime Charter

. "I think you sell into this. We won't pull back to the lows, but doing work in the low 8000s is definitely in the realm of possibility beginning next week."

Concern the

Federal Reserve

will not lower interest rates at its Nov. 17 meeting could be the

raison d'etre

for a pullback, Bleier said.

"With the market

nearing its all-time high and the S&P 500 P/E pushing 27 again, the Fed doesn't have to save the U.S. market," the strategist said. "The 30-year bond trading at 5.15% tells you they're not pushing the Fed to lower rates here."

Bond prices stumbled today in the wake of the GDP report and some apparently positive developments in the effort to prevent the world's economic crises from infecting Brazil. The price of the 30-year Treasury bond fell 1 to 105 9/32, pushing its yield up to 5.15%.

The outlook for Brazil was brightened by the G7's commitment to provide a "precautionary" line of credit to countries "pursuing strong

IMF approved policies," along with other measures. The line of credit can be tapped by any qualifying nation, but Brazil was clearly an intended beneficiary and the Bovespa climbed 7.8%.

"Only time will tell if

government officials make the right decisions, but the fact things are being done has definitely taken us back from the precipice," Bleier said. "The worldwide house of cards that is the financial systems is still standing upright."

Hoping for a chillout

But Bleier, who correctly called the market bottom during the Aug. 31 selloff, believes the market rally peaked today and suggests 8000 is "fair value" for the Dow industrials.

"The fundamentals do not change as fast as the market thinks they do," he said, describing earnings visibility as "suspect" for corporate America. "The pendulum swung from really oversold to really about as positive as you can get in the space of 30 trading days. It's wishful thinking, but I'm hoping the market chills out and bores us to tears."

The strategist is doubtful that will occur, however, because professional traders "make their daily bread on volatility, as do Internet and day traders." That breeds confusion among long-term investors, Bleier said, while expressing concern the professionals did not absorb enough lessons during the harsh selloff.

"We're swinging back to greed instead of preserving capital as the prime objective," he said. "If this selloff didn't teach us anything, then we're going to be in trouble. We're going to go through the same cycle where we'll get too hot and too heavy and go too far, and then something will come out of the woodwork to really hurt people."

Among other indices, the

Dow Jones Utility Average

gained 3.59, or 1.2%, to 301.45, and the

American Stock Exchange Composite Index

rose 7.93, or 1.2%, to 645.41.

For the week, the Dow industrials gained 139.81, or 1.7%; the S&P 500 gained 28, or 2.6%; the Nasdaq Comp jumped 77.53, or 4.6%; the Russell 2000 climbed 11.11, or 3%; the Dow transports rose 114.91, or 4.1%; the Dow utilities were unchanged; and the Amex Composite gained 23.71, or 2.7%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

jumped 92.86, or 1.5%, to 6208.27 and the

Mexican Stock Exchange IPC Index

rocketed 167.13, or 4.3%, to 4074.86. For the week, the TSE 300 gained 366.29, or 6.3%, and the IPC rose 81.63, or 2%. For the month, the TSE ran up 594.13, or 10.6%, and the IPC leapt 504.98, or 14.1%.

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last night recording third-quarter operating earnings of 35 cents a share, a penny above the 21-analyst view but below the year-ago 50 cents. Initial reports put EDS' earnings at 44 cents, but that included a one-time gain of 9 cents.

Infoseek

(SEEK)

drooped 3 9/16, or 10.8%, to 29 5/8 after late yesterday posting a net loss of 8 cents a share, including costs associated with the integration of the company with

Starwave

and joint ventures. The eight-analyst forecast called for an operating loss of 6 cents vs. the year-ago loss of 19 cents. The company did not provide an operating figure. (

TheStreet.com

receives Internet hosting services from Starwave.) This morning,

Deutsche Bank Securities

lowered the stock to hold from accumulate.

Earnings/revenue reports and previews

Loral Space & Communications

(LOR) - Get Report

shot up 2 3/8, or 14.5%, to 18 13/16 after posting a third-quarter loss of 8 cents a share, including charges related to

Globalstar Telecommunications

(GSTRF)

and a gain for the purchase of additional Globalstar partnership interests. The eight-analyst view called for a loss of 20 cents vs. the year-ago loss of 6 cents. Excluding the items, the company beat estimates by about 3 cents. Loral also said it expects to meet earnings expectations for the year.

Business Objects

(BOBJY)

tumbled 7 15/16, or 24.1%, to 25 after warning it sees second-quarter earnings falling below the year-ago 46 cents a share and the eight-analyst outlook of 53 cents. The nation's largest wholesale bakery company blamed lower selling prices for the news.

Earthgrains

(EGR)

lost 6 1/8, or 17%, to 30 in sympathy.

Metro Information Services

(MISI)

sliced off 2 5/8, or 10%, to 23 3/4 even after late yesterday reporting third-quarter earnings of 27 cents a share, topping analysts' forecasts by 1 cent.

MicroStrategy

(MSTR) - Get Report

shed 3 9/16, or 12.8%, to 24 3/8 after

last night recording third-quarter earnings 1 cent a share ahead of estimates but 36 cents below the year-ago figure.

Micros Systems

(MCRS)

shaved off 5 5/8, or 20.4%, to 22 1/16 after last night missing first-quarter estimates by 2 cents a share.

New Era of Networks

(NEON) - Get Report

advanced 9 5/16, or 23.4%, to an all-time high of 49 1/4 after late yesterday posting third-quarter earnings of 20 cents a share, topping the seven-analyst outlook of 9 cents and the year-ago loss of 1 cent.

North Face

(TNFI)

skidded 1 11/16, or 12.5%, to 11 15/16 after late yesterday reporting third-quarter earnings 8 cents a share below analysts' outlook. Today,

BT Alex. Brown

cut it to buy from strong buy.

Oak Technology

(OAKT)

slipped 15/16, or 20.8%, to 3 9/16 after posting a first-quarter loss of 17 cents a share, better than the single-analyst expectation for a loss of 21 cents but below the year-ago profit of 15 cents. The company also said it expects to report a net loss next quarter because of flat sales. The estimate calls for a loss of 17 cents vs. the year-ago profit of 11 cents.

Olin

(OLN) - Get Report

took in 1 3/8, or 5.2%, to 27 11/16 after last night reporting third-quarter earnings in line with forecasts.

Parlex

(PRLX)

lowered 2 11/16, or 22.2%, to 9 5/16 after late yesterday recording first-quarter earnings of 4 cents a share, below expectations for 16 cents.

QRS

(QRSI)

jumped 5 3/8, or 17.1%, to 38 after late yesterday whipping third-quarter estimates by 2 cents a share.

Sonic Solutions

(SNIC)

more than doubled, blasting up 2 23/32 to 5 13/32, after late yesterday reporting it lost 6 cents a share in its second quarter, in line with expectations. In the year-ago period, the maker of high-speed local area network systems lost 19 cents.

Starbucks

(SBUX) - Get Report

expanded 4 1/8, or 10.5%, to 43 3/8 after last night saying its October same-store sales were 5% higher than a year ago.

Additional earnings news is compiled in a separate table

.

Mergers, acquisitions and joint ventures

British Airways

(BAB) - Get Report

rather than accept the

European Commission's

demand that it surrender hundreds of takeoff and landing slots at

Heathrow Airport

. AMR rose 3 1/16 to 67.

Ciena

(CIEN) - Get Report

spiked up 1 11/16, or 10.9%, to 17 3/16 amid continued takeover speculation. Today's

Options Buzz noted that traders made the company's November 17 1/2 calls the most heavily trafficked contract on the

Chicago Board Options Exchange

.

Data General

(DGN)

flew 3/4 to 16 13/16 after

Business Week's

often-

mistaken Inside Wall Street column named the company as takeover bait. The column also listed

Storage Technology

(STK) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

,

Hewlett-Packard

(HWP)

and

IBM

(IBM) - Get Report

as possible acquirers.

Transaction Network Services

(TNSI)

dropped 2 1/8, or 7.3%, to 27 3/8 after

Gtech Holdings

(GTK)

said it ditched its plans to buy the company and instead will boost its stock repurchase program to $90 million from $50 million. Gtech hopped up 1 3/4, or 7.9%, to 24.

Offerings and stock actions

Allmerica Financial

(AFC) - Get Report

surged 2 15/16, or 6.2%, to 50 after last night announcing a repurchase program of up to $200 million worth of its stock. The company also reported third-quarter earnings 6 cents a share short of estimates.

Analyst actions

Pegasystems

(PEGA) - Get Report

fell 5 7/16, or 34%, to 10 9/16 after

Goldman Sachs

dropped the stock to market performer from market outperformer. Late yesterday, the company reported a third-quarter profit of 17 cents a share, up from the year-ago loss of 6 cents.

Union Acceptance

(UACA)

lifted 5/8, or 11.6%, to 6 despite being downgraded to attractive from buy by

Bear Stearns

.

Wendy's

(WEN) - Get Report

tanked 3 1/2, or 14.3%, to 21 after

Lehman Brothers

downgraded the stock to neutral from buy and lowered its price target to 23 from 30 following

yesterday's disappointing earnings report. Goldman Sachs slashed Wendy's to market performer from outperformer.

Morgan Stanley Dean Witter

lowered its 1998 and 1999 earnings estimates for the company while maintaining a strong buy.

Miscellany

PhyCor

(PHYC)

leapt 31/32, or 15.5%, to 7 1/4 after a

Wall Street Journal

report that the company is considering going private in response to its depressed stock price. This afternoon, the company -- which called off an $8 billion merger with

MedPartners

(MDM)

earlier this year -- said it's considering a number of strategic alternatives but that it hasn't had any serious discussions.