Nasdaq Record Evokes Little Celebrating

SAN FRANCISCO -- With those (cool) cats in the bond pits away, stocks with valuations most sensitive to interest rates prowled higher, sending the

Nasdaq Composite Index

to a record.

Other major equity proxies ended mixed, evincing the quietude expected on this quasi-holiday session and reflected by paltry trading volumes.

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TSC

Message Boards.

Led by bellwethers such as

MCI WorldCom

(WCOM)

and

Intel

(INTC) - Get Report

, the tech-accompanied Comp rose 29.39, or 1%, to 2915.96, eclipsing its previous high of 2887.06, set

Sept. 10. The

Nasdaq 100

rose 0.9% to a record 2578.88.

Chip and equipment stocks such as

Motorola

(MOT)

and

Novellus Systems

(NVLS)

were bright spots again within technology, helping the

Philadelphia Stock Exchange Semiconductor Index

rise 2.3%.

Analog Devices

(ADI) - Get Report

gained 2.2% ahead of its slated entry into the

S&P 500

after the close of trading today.

Additionally, positive comments on

CNBC

by the CEO of

Hi/fn

(HIFN)

helped that stock recover some of

Friday's losses, closing up 33.7%, alleviating some concern about the group in general.

Internet names, those of the highest valuations of all, were also on the rise:

TheStreet.com Internet Sector Index

rose 12.62, or 1.7%, to 745.41. However the DOT was restrained by

Yahoo!

(YHOO)

, down 5.6%.

Outside the DOT, Internet backbone plays were in favor after

Extreme Networks

(EXTR) - Get Report

forecast its first-quarter earnings will exceed expectations. Extreme gained 7.5%. In sympathy,

Juniper Networks

(JNPR) - Get Report

gained 14.3% while recent IPO

Radware

(RDWR) - Get Report

rose 34.1%.

Conversely, market makers and other names involved in online trading suffered after

Knight/Trimark

(NITE)

warned that its earnings will fall shy of expectations. The stock fell 12.1% amid downgrades by several brokerages.

Among blue-chip averages, the

Dow Jones Industrial Average

slid 1.58, or 0.01%, to 10,648.18 after trading as high as 10,719.10. The S&P 500 dipped 0.81, or 0.1%, to 1335.21.

Cyclical names such as

AlliedSignal

(ALD)

were among the Dow's biggest gainers, while financials restrained the index, led by

J.P. Morgan

(JPM) - Get Report

. The

Morgan Stanley Cyclical Index

rose 0.6% while the

Philadelphia Stock Exchange/KBW Bank Index

slid 1.6%.

Among other groups moving the S&P 500, energy and transportation stocks reversed Friday's action, with the former rising and the latter retreating. The

American Stock Exchange Oil & Gas Index

rose 1.2% while the

American Stock Exchange Airline Index

slid 3%. Elsewhere, the

Philadelphia Stock Exchange Gold & Silver Index

rose 4%.

The

Russell 2000

rose 2.48, or 0.6%, to 430.19 although market internals were less than effusively bullish.

In

New York Stock Exchange

trading 655.9 million shares were exchanged while declining stocks led advancers 1,567 to 1,364. In

Nasdaq Stock Market

action 875.9 million shares traded while gainers led 1,952 to 1,882. New 52-week lows bested new highs 113 to 42 on the Big Board while new highs led 139 to 72 in over-the-counter trading.

Despite the Nasdaq's record-setting session, market players were unimpressed by the action.

"It was quieter than it looked, quieter than 650 million," said Jim Volk, co-director of institutional trading

D.A. Davidson

in Portland, Ore. "It was not that robust. Everybody is still skittish. The bond market was closed but the dollar was weak. People are still worried about interest rates."

In late New York trading, the dollar was quoted at 106.72 yen vs. 107.39 on Friday.

Volk noted market internals were "slightly negative" as was the case on Friday. "I don't think a lot of people were around that had any conviction," he said. "Tomorrow will be much more interesting when the bond market reopens."

Not Buying It

Not surprisingly, last week's advance by major stock proxies and today's new record for the Nasdaq has not changed the minds of those who've been warning of impending problems.

"The market is in rally phase within a long-term correction," said Gail Dudack, equity market strategist at

Warburg Dillon Read

. "In my view, the market is still not even close to fair value by traditional standards."

The strategist, who has long urged investors to use caution, noted the valuation model used by

Federal Reserve

Chairman

Alan Greenspan

shows the market 35% overvalued. Furthermore, the Fed chief's model expects 12-month forward earnings growth of 22%, which she thinks is "too optimistic."

Dudack foresees the Dow and S&P 500 falling "at least" 10% from current levels, completing a 20% decline "peak to trough."

Her recommendation for investors remains that they retain heavy amounts of cash and focus on "defensive industries" such as telecom services, energy, electric utilities and basic materials. Dudack declined to name specific stocks.

As for her long-held belief that the stock market is in a "bubble," Dudack said it is "difficult" to predict when such a environment ends, but noted "signs of instability" at present. These include "out of control" trade deficits; rising debt-to-capital ratios; rising interest rates; and "when the stock market stops going up."

"I've been saying this for a long time

but you have to be careful when stocks are very highly valued," she said. "You can be in a bubble, you can play it and make a lot of money. But know the warning signs."

Among other indices, the

Dow Jones Transportation Average

fell 55.69, or 1.8%, to 3026.02; the

Dow Jones Utility Average

slid 3.95, or 1.3%, to 295.72; and the

American Stock Exchange Composite Index

climbed 8.53, or 1.1%, to 790.02.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

gained 52.58 to 7116.04 and the

Mexican Stock Exchange IPC Index

mounted 44.22 to 5327.18.

Friday's Company Report

By Tara Murphy
Staff Reporter

(

Earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified. New highs and lows on a closing basis unless otherwise specified.

)

Vantive

(VNTV)

jumped 3, or 33.5%, to 11 15/16 after

PeopleSoft

(PSFT)

, which slid 7/8, or 5%, to 16 3/8, announced plans to buy the unprofitable software maker for $433 million in stock. Vantive warned investors that it expects to post a third-quarter loss of 16 cents to 18 cents a share, greatly missing the eight-analyst break-even estimate.

Separately, PeopleSoft said it expects to report third-quarter results between break-even and a 2-cent profit, in the range of the 21-analyst estimate of a 1-cent profit.

Mergers, acquisitions and joint ventures

Ask Jeeves

(ASKJ)

, a provider of natural-language question answering services on the Web, soared 17 3/8, or 34.3%, to 68 5/16 after it said

Microsoft

(MSFT) - Get Report

will expand its use of Ask Jeeves' "Corporate Question Answering Service" on Microsoft's personal online support site. Shares of Microsoft skidded 9/16 to 94 5/16.

TSC

reported on the

deal in a story this morning.

Cisco

(CSCO) - Get Report

climbed 11/16 to 72 7/16 after it said it plans to make more than 20 acquisitions, spending up to $10 billion in cash and stock. President John Chambers said the company would buy various businesses in Europe, dealing with data, voice and video integration and software applications.

Deutsche Telekom

(DT) - Get Report

declined 11/16 to 44 7/8 after its CEO told

Focus

, a German magazine, that Deutsche Telekom is pondering selling its 25% stake in

Global One

to

France Telecom

(FTE)

, according to a

Reuters

report. Shares of France Telecom slipped 2 1/4 to 92 1/4.

Separately, German newspaper

Welt am Sonntag

said Deutsche Telekom is in talks with

SBC Communications

(SBC)

. However, the article didn't state whether the talks were regarding an alliance or a merger,

Reuters

reported. Shares of SBC Communications added 9/16 to 52 9/16.

Entergy

(ETR) - Get Report

stumbled 5/8 to 27 15/16 after it said it has forged a $1.9 billion agreement to purchase 28 power generating turbines from

General Electric's

(GE) - Get Report

Power Systems

unit through 2004. GE shares fell 1 5/8 to 123 1/8.

Global Crossing

(GBLX)

tumbled 1 7/16 to 35 1/16 after it confirmed it's buying

Racal Electronics'

Racal Telecom

for roughly $1.65 billion. The news was reported in today's

Wall Street Journal

and

Financial Times

. Racal shares at 14 7/8.

National-Oilwell

(NOI)

, which popped 5/8, or 5%, to 13 1/8, and Norwegian oil service company

Hitec ASA

announced early Monday a definitive merger agreement valued around $125 million. Each Hitec share will be exchanged for 0.21259 of a National-Oilwell share plus 50 cents. Hitec, which supplies automation and remote control technologies for offshore oil and gas drilling and production, expects to sell its non-drilling related business to a new holding company effective with the acquisition.

National-Oilwell's offer, expected to be approved by the Hitec board, represents a 25% premium based on the last 20 trading days, the companies said. National-Oilwell was up 3/16 to 12 11/16.

Nokia

(NOK) - Get Report

climbed 3/16 to 99 5/16 after it said it will begin cooperation with

IBM

(IBM) - Get Report

, which advanced 7/8 to 114 3/8, in promoting and building mobile Net solutions.

Unisys

(UIS) - Get Report

stumbled 13/16 to 42 7/8 after it announced a multimillion-dollar agreement with

Dow Jones

(DJ)

, publisher of the

Journal

, as part of a redesign initiative for the editorial and pagination processes. Shares of Dow Jones mounted 2 1/2 to 59 amid a generally strong newspaper sector.

XL Capital

(XL)

slid 15/16 to 48 after it said it upped its bid for

Capital Re

(KRE) - Get Report

to $13 per shares from its previous offer of $12.50 a share. XL said that it has extended a merger agreement with Capital Re, which includes paying a $25 million termination fee to

Ace

(ACL)

, severing Ace and Capital Re's existing merger pact. In addition, XL said it would supply Capital Re with $50 million in stand-by capital if they forge a deal to merge. Shares of Capital Re fell 1/8 to 12 7/8.

Warnaco Group

(WAC)

hopped 1 11/16, or 9.6%, to 19 1/8 after it said it has offered to buy

Authentic Fitness

(ASM) - Get Report

for $20.50 a share in cash, a 16.7% premium over Authentic Fitness' closing price Friday. Shares of Authentic Fitness jumped 2 1/4, or 12.8%, to 19 13/16.

Earnings/revenue reports and previews

Abbott Laboratories climbed 5/8 to 41 7/16 after it posted third-quarter earnings of 38 cents a share, in line with the 15-analyst estimate.

Big Flower

(BGF)

was up 15/16 despite warning investors that it expects third-quarter earnings will be 5% to 10% below the year-ago 57 cents a share, greatly missing the five-analyst estimate of 69 cents a share. In addition, the company said that it has adjusted its recapitalization plan, which entails merging Big Flower into a private investment firm. According to the new plan's terms, Big Flower's merger into

BFH Merger Corp.

includes a all-cash payment of $31.50 for each publicly held common share of Big Flower, while maintaining the merger's estimated value of $1.9 billion. Originally, BFH agreed to pay $30 cash and .21 share of payment-in-kind preferred stock for each Big Flower share. Big Flower said the preferred stock equaled $5.25 per Big Flower share.

CK Witco

(CNW)

plummeted 4 11/16, or 32.3%, to 9 13/16 after it warned investors that it expects to post third-quarter earnings of 16 cents to 18 cents a share and fourth-quarter earnings of 6 cents to 8 cents, greatly missing the four-analyst estimate of 28 cents for the third quarter and the three-analyst estimate of 18 cents a share for the fourth quarter. The company cited softness in its newly merged units for the weak results.

Datastream Systems

(DSTM)

fell 3 7/8, or 30.3%, to 8 15/16 after it said it sees third-quarter earnings of between a 1-cent profit, or a 1-cent loss, well below the four-analyst estimate of 16 cents a share.

Fastenal

(FAST) - Get Report

cratered 5 9/16, or 11.7%, to 42 after it reported third-quarter earnings of 45 cents a share, a penny shy of the six-analyst estimate of 46 cents a share, but up from a year-ago 37 cents.

Gannett

(GCI) - Get Report

advanced 11/16 to 72 11/16 after reporting third-quarter earnings of 74 cents a share, beating both the 13-analyst estimate of 71 cents and the year-ago 62 cents a share.

Knight/Trimark

(NITE)

sank 11/16 to 72 11/16 after it warned that it sees third-quarter earnings of 17 cents to 19 cents a share, citing slower trading. The 10-analyst estimate currently calls for earnings of 30 cents a share.

Merrill Lynch

cut the stock's rating to near-term neutral from accumulate, lowered its fiscal 1999 estimate to $1.20 a share from $1.50 and cut its 2000 view to $1.40 from $1.80.

TSC's

James Cramer

had his

say on the preannouncement this morning.

New Era of Networks

(NEON) - Get Report

popped 5, or 22.6%, to 27 1/2 after it said it see third-quarter revenue to be about $30 million to $32 million, a record for quarterly earnings. The company said it expects to report a net loss, about in line with estimates. The 10-analyst estimate calls for a loss of 18 cents a share in the third quarter.

Northrop Grumman

(NOC) - Get Report

mounted 1 to 62 5/16 after it said it is comfortable with the nine-analyst fiscal 1999 estimate of $6.59 a share.

Private Business

(PBIZ)

slipped 1 7/16, or 19.8%, to 3 1/2 after it said it expected third-quarter and annual earnings to fall below analyst estimates. The company said it sees third-quarter earnings of 4 cents or 5 cents a share, and fourth-quarter EPS of 4 cents to 6 cents. The two-analyst estimates call for 7 cents and 11 cents, respectively.

Offerings and stock actions

Morgan Stanley Dean Witter

said it expects to price a 3.75 million-share IPO for

Women.com Networks

at the low end of its revised $8 to $10 a share range. The offering, which is expected to make its debut this week, was initially set for late August and was expected to price in the range of $10 to $12 per share.

Analyst actions

Chevron

(CHV)

mounted 1 1/2 to 86 7/8 after Morgan Stanley upgraded the shares to outperform from neutral.

CompX

(CIX) - Get Report

was unchanged at 18 7/8 after

Banc of America Securities

upped its rating on the shares to buy from market performer.

Cypress Semiconductor

(CY) - Get Report

bounced 1 11/16, or 7%, to 25 5/8 after Merrill Lynch rolled out coverage with an intermediate-term accumulate and long-term buy ratings.

Lehman Brothers

upgraded its investment opinion to outperform from neutral and raised its 2000 and 2001 earnings estimates for offshore drillers

Ensco

(ESV)

, which hopped 2 3/8, or 14%, to 19 1/8;

Global Marine

(GLM)

, which bounced 2 1/16, or 14%, to 16 7/16;

Noble Drilling

(NE) - Get Report

, which climbed 2 5/8, or 13.5%, to 21 15/16; and

Rowan

(RDC)

, which added 1 3/4, or 11.9%, to 16 7/8.

Lehman raised its 2000 estimate for Ensco to a profit of 15 cents a share from a loss of 10 cents and its 2001 estimate to an 85-cent profit from 55 cents. Global Marine's 2000 estimate was increased to 45 cents from 30 cents, and its 2001 estimate to 90 cents from 75 cents. Noble Drilling's 2000 estimate was raised to 85 cents from 75 cents, and its 2001 estimate to $1.20 from $1.10. Rowan's 2000 estimate was raised to a 20-cent profit from a projected loss of 10 cents, and its 2001 estimate was upped to 90 cents from 60 cents. All four stocks were up in early trading.

Galileo

(GLC)

slipped 15/16 to 28 3/16 after Morgan Stanley lowered its opinion on the shares to neutral from strong buy.

Glaxo Wellcome

(GLX)

gained 2 3/4 to 59 1/4 after Merrill Lynch upgraded the shares to intermediate-term accumulate from neutral.

i2 Technologies

(ITWO)

leaped 3 1/4, or 6.6%, to 51 15/16 after

Credit Suisse First Boston

upped its fiscal 1999 and 2000 earnings estimates to 32 cents from 28 cents a share and 65 cents from 60 cents a share respectvely.

Luminant

(LUMT)

was unchanged at 34 1/8 after

Deutsche Banc Alex. Brown

initiated coverage with a buy rating.

MGC Communications

(MGCX)

bounced 2 1/4, or 8.95, to 27 1/2 after

Goldman Sachs

started coverage of the stock with a market outperformer rating.

MGM Grand

(MGG)

climbed 3 11/16, or 8%, to 49 1/4 after Credit Suisse First Boston raised its rating to buy from a hold.

Netsilicon

(NSIL)

fell 1 1/16, or 7.9%, to 12 7/16 after

U.S. Bancorp Piper Jaffray

initiated coverage of the stock with a buy rating.

Norfolk Southern

(NSC) - Get Report

declined 5/16 to 22 3/16 after

J.P. Morgan

downgraded the stock to long-term buy from buy.

Quantum-DLT

(DSS) - Get Report

gained 2 1/16, or 17.9%, to 13 9/16 despite Lehman Brothers slicing its fiscal 2000 estimates to $1.36 from $1.53 a share.

Natrol

(NTOL)

jumped 1, or 12.9%, to 8 13/16 after Banc of America Securities upped its rating on the shares to strong buy from buy.

Rexall Sundown

(RXSD)

slid 1/4 to 11 5/16 after Banc of America cut its rating on the stock to buy from strong buy.

Stryker

(SYK) - Get Report

popped 4 15/16, or 9.2%, to 58 7/16 after Deutsche Banc Alex. Brown raised the stock's rating to strong buy from buy.

Telephone & Data Systems

(TDS) - Get Report

leapt 7 1/4, or 7.8%, to 99 3/4 after Deutsche Banc Alex. Brown initiated coverage of the stock with a strong buy rating.

Texaco

(TX) - Get Report

hopped 2 1/8 to 62 15/16 after Morgan Stanley upgraded the shares to outperform from neutral.

Zebra Technologies

(ZBRA) - Get Report

was unchanged at 47 7/8 after

ING Barings

rolled out coverage of the stock with a buy rating and a price target of 60.

Miscellany

Ameritech

(AIT) - Get Report

said Chairman and CEO Richard Notebaert will retire effective Dec. 30. Ameritech's acquisition by SBC Communications was completed Friday.

British Airways

(BAB) - Get Report

fell 1 1/2 to 54 1/4 after it said it would buy 12

Airbus Industrie

A318 planes for $471.4 million, and had options for an additional 12. The deal comes as a blow to

Boeing

(BA) - Get Report

, which had hoped to sell its own 100-seater, the 717. Boeing shares slipped 1/16 to 41 15/16.

Separately, Boeing said it took 10 new orders for business jets, increasing its total orders to 56.

Compaq

(CPQ)

was up 1/8 to 21 7/8 after it said it would slash prices on most of its business desktop computers, in an effort to maintain its lead ahead of

Dell

(DELL) - Get Report

as the world's No. 1 PC maker. The company said it would lower prices on the

Desktop EN

and

EP Series

computers.

DaimlerChrysler

(DCX)

mounted 5/8 to 73 3/4 after it said it will invest $27.5 billion in Germany over the next three years. The money earmarked for Germany is part of a $47.7 billion worldwide investment package announced earlier this year.

Matav-Cable Systems Media

(MATVY)

slid 1/2 to 46 after it said it has tapped Daniel Yaakobi as its president and CEO, effective Nov. 1. Yaakobi is replacing Amit Levin, who will become the company's general manager.

Schering-Plough

(SGP)

added 5/16 to 50 1/8 after it said the

Food and Drug Administration

requested that it not bring on more patients to participate in its gene therapy testing, while it probes the death of a patient in an unrelated trial at the University of Pennsylvania.

Staff reporter

Mavis Scanlon

contributed to this story.