Market Closes Rough Month With an Upswing

The long and winding week ended with a rare exacta, as stocks finished with both a bang and a whimper. Led by drug makers and tech stocks, major proxies rose across the board today but volume was predictably muted ahead of the much-anticipated, long-awaited, whatta-you-mean-you-don't-have-plans-yet? holiday weekend.

The

Dow Jones Industrial Average

rose 92.81, or 0.9%, to 10,559.74 while the

S&P 500

grew 20.43, or 1.6%, to 1301.84. The

Nasdaq Composite Index

climbed 51.37, or 2.1%, to 2470.52 and

TheStreet.com Internet Sector

index rose 21.26, or 3.8%, to 580.64. The "Why'd he call me shorty? Because you're small, small, s-m-all"

Russell 2000

gained 5.76, or 1.3%, to 438.68.

Still, the Dow industrials fell 269.54 or 2.5% for the week; the S&P 500 slid 28.51, or 2.1%; the Nasdaq Comp shed 50.73 or 2%; the Russell 2000 dipped 10.44, or 2.3%; and TheStreet.com Internet index lost 42.74, or 6.9%.

In

New York Stock Exchange

trading, 657.8 million shares were traded -- the lowest level since Feb. 16 -- while advancers led declining stocks 1,944 to 980. In

Nasdaq Stock Market

activity, 685.1 million shares were exchanged -- the lightest day since Dec. 24 -- while gainers led 2,327 to 1,536. New 52-week highs led new lows 25 to 20 in Big Board activity and by 59 to 37 in over-the-counter trading.

Acknowleging the expected slowdown, market players said the upturn was predicated on the bond market's solid pre-holiday-shortened session.

"Everything pretty much shut down after 11" a.m. EDT, said one New York-based trader, who requested anonymity. "Everything is interest-rate-sensitive. The key thing is the bonds caught some support. If they tanked today we would have had some trouble."

The price of the 30-year Treasury bond rose 6/32 to 91 25/32, its yield dipping to 5.84%. (For more on the fixed-income market, see today's late

Bond Focus.)

A benign

Chicago Purchasing Managers Index

for April "gave the bond market its steadiness," the trader said, noting bonds did close off intraday highs. "People flattened out positions going into next week. We've got a bunch of stuff -- construction spending,

NAPM

and consumer spending. Why take the risk?"

However, yesterday's rumors about a preemptive tightening by the

Federal Reserve

was unfounded and probably emerged from "somebody with a big short position" in bonds, he said. The Fed has "a bias toward raising rates, but I don't think the market warrants them raising rates. The market has backed up by itself. Why do they need to raise rates?"

Moreover, the trader remains impressed at equities' ability to largely withstand the recent unrest in bonds.

"The market is bulletproof. There's still value out there," he said. "Maybe money is flushing from one industry to another but there's still a lot on the sidelines. I don't see the market backing up more than 500 to 1000 points. Big deal. Things trade where they trade for a reason the majority of the time."

The upturn encompassed most major industry groups, with paper companies and gold mining stocks the notable exceptions. Among gainers, growth stocks outpaced value as expressed by the

S&P Barra Growth Index

, up 1.9% vs. the

S&P Barra Value Index

, higher by 1.3%.

Within the growth sector, drug makers and tech stocks -- particularly Net names -- were the standouts.

Among druggies,

Johnson & Johnson

(JNJ) - Get Report

was among the Dow's biggest positive influences, while

Pfizer

(PFE) - Get Report

and

Bristol-Myers Squibb

(BMY) - Get Report

helped give the S&P a boost. The

American Stock Exchange Pharmaceutical Index

climbed 2.9%.

Microsoft

(MSFT) - Get Report

and

Oracle

(ORCL) - Get Report

were the best performers among traditional tech bellwethers, sending the

Nasdaq 100

up 2%. With a $600 million investment, Mister Softee also helped

Nextel

(NXTL)

climb 6.5%.

Among Net bellwethers,

Yahoo!

(YHOO)

was the best performer while new and infantile Net names enjoyed big gains.

AudioCodes

(AUDC:Nasdaq) climbed 22% on its first day of trading and

StarMedia

(STRM) - Get Report

jumped 29.5% on its third. Additionally,

Silknet Software.com

(SILK) - Get Report

soared 42.3% on 3.1 million shares, its highest volume since coming public May 5.

Financials also gave blue-chip averages a boost.

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were among the Dow's best; the

Philadelphia Stock Exchange/KBW Bank Index

rose 2.4% while the

American Stock Exchange Broker/Dealer Index

climbed 2%.

On the downside,

International Paper

(IP) - Get Report

was the biggest drag on the Dow while the

Philadelphia Stock Exchange Forest & Paper Products Index

shed 1.6%. Elsewhere, the

Philadelphia Stock Exchange Gold & Silver Index

lost 1.3%.

Newport News

(NNS)

was among notable individual losers, falling 16% on reports the

Navy

opposes the company's planned merger with

Litton Industries

(LIT) - Get Report

. Litton, however, climbed 3.9%.

Among other indices, the

Dow Jones Transportation Average

rose 36.93, or 1.1%, to 3415.70; the

Dow Jones Utility Average

rose 3.42, or 1.1%, to 329.20; and the

American Stock Exchange Composite Index

added 4.35, or 0.6%, to 778.74.

For the week, the Dow transports dropped 135.56, or 3.8%; the Dow utilities gained 4.05, or 1.2%; and the Amex Composite shed 16.63, or 2.1%.

For the (not so) merry month of May, the Dow industrials lost 229.30, or 2.1%; the S&P 500 shed 27.40, or 2.1%; the Nasdaq Comp fell 72.52, or 2.9%; the Russell 2000 added 2.11, or 0.5%; the DOT dumped 75.62, or 11.5%; the Dow transports tumbled 231.59, or 6.3%; the Dow utilities added 17.65, or 5.7%; and the Amex Comp rose 1.77, or 0.2%.

Elsewhere in North American equities today, the

Toronto Stock Exchange 300

rose 74.90, or 1.1%, to 6802.70 and the

Mexican Stock Exchange IPC Index

fell 75.28, or 1.4%, to 5423.57. For the week, the TSE 300 fell 163.27, or 2.3% and the IPC slid 215.93, or 3.8%. For the month, the TSE surrendered 212, or 3%, and the IPC gained 9.12, or 0.2%.

'Did We Say We Weren't Buying SkyTel? Our Mistake'

After the close,

MCI WorldCom

(WCOM)

announced plans to acquire paging company

SkyTel Communications

(SKYT)

in a $1.3 billion stock deal. Not so surprising, given the extant rumors about a possible link-up between the two Jackson, Miss., telecom players.

But pretty darn surprising given what happened Tuesday, when the Web site

Company Sleuth

reported that MCI WorldCom had registered the Internet domain name "skytelworldcom.com" May 22. Seemed like rather compelling evidence of a pending tie-up, but MCI WorldCom said the registration was "not an indication of any official company intention" and was done by an employee acting on his own initiative.

Given the way things turned out, there are a few possible scenarios here:

MCI WorldCom was telling the truth, but after seeing the way "skytelworldcom.com" looked, it decided to do a couple of days of due diligence and buy SkyTel.

The employee acting on his own initiative was MCI WorldCom Chairman Bernie Ebbers.

MCI WorldCom was ... let's say, shading the truth.

We'll let you know which of those turns out to be the right answer. As for the stocks, MCI WorldCom today closed up 1 3/8 at 86 3/8 but reportedly dipped 1 1/8 to 85 1/4 in after-hours trading on the news. SkyTel rose up 1 to 20 5/16 in the regular session before being halted upon the announcement of the deal. Trading was resumed around 5:20 p.m. EDT although -- as of this writing -- no first sale had been reported in what must be a very quiet after-hours session. Calls to

Instinet

went unanswered.

--

John J. Edwards III

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.

)

General Motors

(GM) - Get Report

spun off its remaining 80.1% stake in

Delphi Automotive Systems

(DPH)

today. GM added 1/2 to 69, off an earlier high of 72 3/16; Delphi lost 7/8 to 19 5/8.

Newport News Shipbuilding tanked 5 1/4, or 16%, to 27 1/2 after

The New York Times

reported the

Defense Department

is recommending against Litton Industries' planned takeover of the company. Litton tacked on 2 7/16 to 65 3/16. The newspaper said the government is rejecting the unfriendly takeover on the grounds it would cause too much concentration in the military shipbuilding business.

Mergers, acquisitions and joint ventures

Everen Capital

(EVR) - Get Report

flew 5 1/16, or 20.9%, to 29 5/16 after last night

First Union

(FTU)

amended their previously announced merger. First Union said it would issue a number of its shares at $31 each in exchange for each share of Everen. In March, First Union said it would give 0.56 of a share for each Everen share. The merger price remains $1.1 billion. First Union added 9/16 to 46 3/16.

Nextel Communications climbed 2 1/4, or 6.5%, to 36 7/8 after saying it received a previously announced $600 million investment from Microsoft. Nextel said Microsoft received about 16.67 million shares of its stock at the agreed price of $36 a share. Microsoft, which picked up 2 3/8 to 80 11/16, now has a 4.25% stake in Nextel on a fully diluted basis.

Norway's

Saga Petroleum

(SPM)

expanded 1 1/4, or 9.3%, to 14 3/4 after

Elf Aquitaine

(ELF) - Get Report

of France made a bid for the company. Elf Aquitaine closed flat at 71.

Earnings/revenue reports and previews

Align-Rite

(MASK)

closed flat at 12 7/8 after reporting fourth-quarter earnings of 19 cents a share, 1 cent above the five-analyst view but below the year-ago 34 cents.

Computer Associates

(CA) - Get Report

jumped 3 5/16, or 7.5%, to 47 5/16 after last night recording fourth-quarter earnings of 83 cents a share, a penny above the 24-analyst estimate and above the year-ago 75 cents. Today,

Prudential Securities

upped its price target for the stock to 50 from 45 a share.

CIBC World Markets

lifted the stock to strong buy from hold.

Medtronic

(MDT) - Get Report

vaulted 7, or 10.9%, to 71 after last night reporting fourth-quarter earnings of 41 cents a share, matching the 39-analyst estimate and moving ahead of the year-ago 38 cents. Today, Prudential lifted the stock to strong buy from hold and lifted its price target to 80 from 68. CIBC World Markets pushed up the stock to buy from hold.

Starbucks

(SBUX) - Get Report

perked up 1 1/4 to 36 7/8 after last night saying its same-store sales for May rose 6%.

Offerings and stock actions

AudioCodes swelled 3 1/16, or 21.9%, to 17 1/16 after its 3.5 million-share IPO priced at $14 a share. The company is an Israel-based provider of Internet protocol and voice-over packet technologies

Meanwhile StarMedia grew 13 3/8, or 29.5%, to 58 7/8 and

DLJdirect

(DIR)

grew 5, or 13.2%, to 43 in their respective third days of trading.

Analyst actions

American Xtal

(AXTI) - Get Report

sliced off 3, or 12.6%, to 20 15/16 after

SG Cowen

lowered it to buy from strong buy. Late yesterday, the company agreed to buy privately held

Lyte Optronics

and said it would take a $2.8 million charge in the second-quarter.

Bank of America

(BAC) - Get Report

rose 2 3/16 to 64 11/16 after

Morgan Stanley Dean Witter

upgraded it to outperform from neutral.

Eidos

(EIDSY)

flourished 3 1/2, or 11.9%, to 33 1/16 after

Goldman Sachs

raised its price target for the British computer games company to 28 pounds.

Extreme Networks

(EXTR) - Get Report

expanded 4, or 10.4%, to 42 5/8 after Morgan Stanley Dean Witter increased it to outperform from neutral.

Goldman Sachs

(GS) - Get Report

tacked on 3/16 to 67 15/16 after

Merrill Lynch

initiated coverage with a near-term neutral and a long-term buy.

Tropical Sportswear

(TSIC)

surged 2 1/2, or 10.1%, to 27 1/2 after Prudential lifted it to strong buy from accumulate and upped its price target to 40 from 30 a share.

TRW

(TRW)

hopped up 2 7/16, or 5.1%, to 50 1/16 after

BT Alex. Brown

upgraded it to buy from market perform and raised its 12-month price target for the stock by 7 to 63 a share.

Valero Energy

(VLO) - Get Report

declined 7/16 to 20 1/16 after Goldman Sachs downgraded it to market perform from outperform.

Miscellany

Cell Therapeutics

(CTIC) - Get Report

tumbled 2 3/8, or 48.7%, to 2 9/16 after saying it stopped Phase II/III trials of lisofylline after an independent safety panel recommended the trials be halted. Lisofylline is used to treat acute lung injury and acute respiratory distress syndrome.

Eastman Kodak

(EK)

fell 1 3/16 to 67 5/8 after

The Wall Street Journal

said retail surveys show the company is losing U.S. market share to rival

Fuji Photo Film

(FUJIY)

. Fuji clicked up 7/8 to 36. Kodak said the surveys focused on the short-term and were based on "a partial view of the market."

Immunex

(IMNX)

gave up 1 7/16 to 130 1/8 while

American Home Products

(AHP)

picked up 1/8 to 57 5/8 after the

Food and Drug Administration

approved

Enbrel

for the treatment of moderately to severely-active polyarticular-course juvenile rheumatoid arthritis. Immunex and AHP's

Wyeth-Ayerst Pharmaceuticals

market Enbrel in North America.

Specialty software company

Lightbridge

(LTBG)

rallied 5/8, or 6.6%, to 10 1/8 after a bullish mention in

Business Week's

Inside Wall Street column, penned this week by Gary Weiss. Pat Farley, who follows software companies at

Kopp Investment Advisors

, told the magazine he believes the company is ripe for acquisition.

PaineWebber

(PWJ)

advanced 2 9/16, or 5.8%, to 47 on last night's news it will replace

Bankers Trust

(BT)

in the S&P 500 after the closing bell June 4.

Deutsche Bank

is acquiring Bankers Trust.

Sylvan Learning Systems

(SLVN)

rose 1 5/8, or 6.3%, to 27 1/4 on news it will take PaineWebber's place in the

S&P MidCap 400

.