Nasdaq Romps to Fresh Record While NYSE Volume Sets Record

Volatile triple-witching trading knocked the Dow out of record territory, but there was no stopping the Comp.
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SAN FRANCISCO -- In what's become an almost

Kafka

-esque occurrence, the

Nasdaq Composite Index

scored yet another record today. Adding to the surreal nature of trading, the Comp fell from its session highs while

Dow Jones Industrial Average

closed well off potential record-setting levels following a pronounced slide in the final hour of trading.

Still, major averages mostly closed higher amid startlingly heavy trading volume; the Big Board experienced its highest volume ever plus a fourth-consecutive session of more than a billion shares traded for the first time.

Although many traders were swamped amid the avalanche of volume -- and thus unable to comment at length -- everybody's favorite

Allen Iverson (a.k.a. "The Answer") to the "why stocks faded" question was the expiration of index futures and options and stock options.

Many arbitragers "bought cash and sold combos" during the day, said Monte Hord, vice president of program trading at

Cantor Fitzgerald

, referring to synthetic futures in the

S&P 100 Index

. When the combos "rolled off" at the close, the arbs had to sell the cash to maintain they're hedged position, thus putting "downward pressure" on the market.

In addition, "a lot of the shorts were already rolled into next month" and thus weren't there to take the other side of the arbs' trades, Hord said.

According to two market makers in options, heavy buying into the futures market late on Friday forced investors to redeem some of their stock holdings and raise cash for their purchases. "That's what made the Dow jack around towards the end of the day," said one

American Stock Exchange

-based options trader.

Meanwhile, Bob Basel, director of listed trading at

Salomon Smith Barney

said the late-day slide "had more to do with the rebalancing" of the

S&P 500

and

Nasdaq 100

after the close than with triple-witching.

For professionals, the action at the close overshadowed the final prices for major averages.

Still, the Nasdaq Comp rose 38.00, or 1%, to 3753.06 after trading as high as 3796.80, setting its 54th record of the year and 25th in the past 35 trading days (a 71.4% rate).

Gains by bellwethers such as

MCI WorldCom

(WCOM)

,

Oracle

(ORCL) - Get Report

and

Cisco

(CSCO) - Get Report

fueled the Comp; the Nasdaq 100 rose 0.8% to an all-time closing high of 3360.08 vs. its session best of 3434.22.

Adobe Systems

(ADBE) - Get Report

rose 5.8% after posting better-than-expected earnings

last night .

Also, chip and chip-equipment makers, such as

Intel

(INTC) - Get Report

and

KLA-Tencor

(KLAC) - Get Report

, continued to recover from their recent mini-slump. The

Philadelphia Stock Exchange Semiconductor Index

rose 1.4%.

The Dow, meanwhile, closed up 12.54, or 0.1% to 11,257.43, leaving it well shy of its intraday high of 11,383.74 and its

Aug. 25 record close of 11,326.04.

General Electric

(GE) - Get Report

was the Dow's biggest positive, rising 3% after

announcing a 3-for-1 stock split, a 17% increase to its quarterly dividend, and an increase to its existing stock buyback program.

The Dow was restrained by weakness in consumer-focused components such as

Procter & Gamble

(PG) - Get Report

,

Wal-Mart

(WMT) - Get Report

and

Merck

(MRK) - Get Report

. The

Morgan Stanley Consumer Index

fell 1%.

The S&P 500 rose 2.27, or 0.2%, to 1421.05 after trading as high as 1431.77 while the

Russell 2000

gained 0.96, or 0.2%, to 466.22 vs. its session best of 469.21.

TheStreet.com Internet Sector

index fell 10.54, or 0.9%, to 1113.09 after trading as high as 1163.77. Additionally,

TheStreet.com

Red Hots index rose 5.97, or 1.7%, to 359.22. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money. (You can check quotes on the Red Hots index and its component stocks at

http://www.thestreet.com/redhots.)

Play the Game

The "dramatic" increase in volume and moves such as

Microsoft's

(MSFT) - Get Report

26.5% rise thus far in December suggest many market players have the mindset that "we need to pad performance" and "everyone knows the market is going up at the end of the year," said Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo. "That's the game we're playing."

The strategist called the market "goofy" in a research report today but acknowledged in a phone interview that "the opportunity cost of missing these

tech stocks is high and remains high." Tech stocks are "going to continue to go" higher but "other groups and sectors" are beginning to generate interest, he said. "That's encouraging."

Indeed, the Dow also got a boost from cyclicals such as

Alcoa

(AA) - Get Report

and

DuPont

(DD) - Get Report

as well as

American Express

(AXP) - Get Report

, as most financials overcame early weakness.

Most notably,

J.P. Morgan

(JPM) - Get Report

down as low as 122 1/4 amid rumors of a profit shortfall, rebounded to close off fractionally at 128 1/8.

In

New York Stock Exchange

trading, 1.35 billion shares were exchanged -- the busiest NYSE session in history -- while advancers led declining stocks 1,674 to 1,409. In

Nasdaq Stock Market

action 1.573 billion shares traded while losers led 2,149 to 2,000. New 52-week lows swamped new highs 289 to 66 on the Big Board while new highs led 195 to 118 in over-the-counter trading.

The advance was not all-encompassing, however. Drugmakers continued to face selling despite reports of merger talks between

Monsanto

(MTC) - Get Report

, which rose 3.4%, and

Pharmacia & Upjohn

(PNU)

, which lost 5.6%. The

American Stock Exchange Pharmaceutical Index

lost 1.4%.

Also, electronics retailers suffered after

Tandy

(TAN) - Get Report

, down 19.7%,

reported disappointing same-store sales for the first half of December. In sympathy,

Best Buy

(BBY) - Get Report

slid 6.8% while

Circuit City Stores

(CC) - Get Report

shed 2.2%. The

S&P Retail Index

fell 2.1%.

"We're see an exaggeration of a pounding of the negative and an advancing of the positives," said Jack Ablin, managing director at

Colonial Asset Management

in Jacksonville, Fla. who attributed the trend largely to tax considerations. "If I'm a taxable investor, I'd rather sell my losers before year-end and hold my gains until after."

The price of the 30-year Treasury bond rose 4/32 to 96 19/32, its yield dipping to 6.38%.

Among other indices,

Dow Jones Transportation Average

slid 3.09 to 2918.42; the

Dow Jones Utility Average

added 3.75, or 1.4%, to 274.27; and the

American Stock Exchange Composite Index

lost 4.06, or 0.5%, to 829.80.

For the week, the Dow rose 0.3%, the S&P gained 0.3%, the Nasdaq rose 3.7%, the Russell dipped 0.1%, the DOT gained 1.5%, the Red Hots soared 12.1%, the Dow transports rose 1.5%, the Dow utilities added 0.4% and the Amex Composite rose 0.2%.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

gained 51.03, or 0.6%, to a record 8098.20 and the

Mexican Stock Exchange IPC Index

gained 100.32, or 1.5%, to 6959.35. For the week, the TSE was up 1.8%, while the IPC gained 2.6%.

Friday's Company Report

By Eileen Kinsella
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.

)

Ariba

(ARBA)

was having a party after

Deutsche Banc Alex. Brown

upped its rating to strong buy from buy. The stock popped 18 5/8, or 7.9%, to 156 1/8.

Mergers, acquisitions and joint ventures

Abbott Laboratories

(ABT) - Get Report

lost 2 3/16, or 5.5%, to 37 5/16 and

Alza

(AZA)

fell 1 1/16 to 32 7/16 after the companies said they called off their $7.3 billion merger because they were unable to resolve

Federal Trade Commission

concerns. Alza said it will take a fourth-quarter cancellation charge between $10 million and $15 million and now expects to report earnings in the range of 26 cents to 29 cents a share, well below the current seven-analyst estimate of 45 cents.

Gruntal

upped its rating on Alza to a long-term outperform from a market perform.

TheStreet.com/NYTimes.com

joint newsroom covered the pre-wedding divorce in a

story yesterday.

Daleen Technologies

(DALN)

gained 3 3/8, or 12.4%, to 30 9/16 after saying it agreed to buy

Inlogic Software

in a stock deal valued at $64.8 million.

Duke Energy

(DUK) - Get Report

rose 1 3/4 to 49 3/4, while

Phillips Petroleum

(P)

slipped 3/4 to 47 1/8 after the companies said they formed a gas-gathering, marketing venture. Duke said the new company would offer about 20% of its stock in an IPO in the first half of 2000.

Headhunter

(HHNT)

climbed 3/4, or 5.7%, to 14 1/4 after saying it entered a distribution pact with

NBC Internet

(NBCI)

Shares of NBCI rose 1/2 to 70 7/8..

NatWest

(NW)

fell 1 1/2 to 126 1/2 after it voiced concerns over the Royal Bank of Scotland's takeover bid, saying it contains "seeds of substantial value destruction."

Park National

(PRK) - Get Report

fell 3 3/8 to 111 1/2 after it agreed to buy

SNB

(SNB)

. SNB was unchanged at 5 7/16. Park National said it would issue 835,000 shares for the purchase.

Pharmacia & Upjohn dropped 3, or 5.6%, to 50 1/4 after

The Wall Street Journal

reported it is in merger talks with

Monsanto

(MTC) - Get Report

. Pharmacia and Monsanto, which rose 1 3/8 to 41 3/4, are having serious talks about a merger of equals, the newspaper reported, citing people familiar with the matter. For more on the always-compelling drug wars, take a gander at the

story written by

TheStreet.com/NYTimes.com

joint newsroom.

Telewest Communications

(TWSTY)

lost 1/2 to 52 3/4 after it and

Flextech

said their proposed merger would dilute earnings in the first two years. Charles Burdick, who would serve as the finance director for the merged group, said during a conference call that EBITDA would be diluted by roughly 12% in the first year before it becomes accretive in the third.

Earnings/revenue reports and previews

Adobe added 3 11/16, or 5.8%, to 67 1/2 after it posted fourth-quarter earnings of 76 cents a share, crushing the 12-analyst estimate by 34 cents. Banc of America Securities upped Adobe's price target to 90. For more on Adobe's earnings,

TheStreet.com/NYTimes.com

joint newsroom has the complete

story .

Circuit City

(CC) - Get Report

lost 15/16 to 41 5/8 after it posted third-quarter earnings of 26 cents a share, in line with the 17-analyst estimate and up from the year-ago 8 cents. Circuit City also said it tapped its president and COO, W. Alan McCollough, as its CEO.

Nike

(NKE) - Get Report

popped 6 3/4, or 14.8%, to 52 7/16 after it posted second-quarter earnings of 38 cents a share, beating the 17-analyst estimate of 34 cents and the year-ago 28 cents, which excludes a restructuring charge. Nike said earnings rose more than 50% and that it achieved quarterly revenue growth for the first time in two years. The company said it saw revenue grow in every region, but that its sales increase was largely fueled by growth outside the U.S.

Merrill Lynch

raised its medium-term rating on Nike to buy from accumulate,

Lehman Brothers

rated the stock buy and set a 12-month price target of 66, and

J.P. Morgan

upped the stock to a buy from long-term buy and set a price target of 60. For more on the sneaker behemoth's earnings, check out

additional coverage from

TheStreet.com/NYTimes.com

joint newsroom.

Potlatch

(PCH) - Get Report

was unchanged at 42 1/2 despite warning it expects fourth-quarter earnings will fall "significantly below" the consensus estimate. The three-analyst estimate calls for the diversified forest-products company to earn 48 cents a share in the fourth quarter and $1.77 in fiscal 1999.

Sinclair Broadcast Group

(SBGI) - Get Report

lost 1 11/16, or 14%, to 10 3/8 after it revised its outlook for the fourth quarter based on reports of its advertising sales for the quarter to date. The company said it expects fourth-quarter cash flow of 91 million, or 38 cents a share.

Tandy shed 13, or 19.7%, to 53 after it said it is comfortable with earnings estimates for the fourth quarter following an earlier announcement that same-store sales are currently 8% to 10% below its goal this month. The company did say that it sees double-digit sales gains for the fourth quarter and the year. The current 17-analyst estimate calls for earnings of 62 cents a share. Brown Brothers Harriman cut its fourth-quarter estimate on Tandy to 60 cents from 63 cents a share, while Merrill Lynch downgraded shares of Tandy to an intermediate-term accumulate from a buy rating.

Offerings and stock actions

AVT

(AVTC)

slipped 15/16 to 39 15/16 after it set a 2-for-1 stock split and said it tapped Richard Laporte as its next CEO.

CMGI

(CMGI)

dropped 9 11/16 to 211 13/16 after it said its CEO is considering the possibility of an IPO for its Atventures, venture arm.

Copart

(CPRT) - Get Report

climbed 3 9/16, or 12.8%, to 31 7/16 after it set a spinoff of its Internet divisions. The company is seeking the

Internal Revenue Service's

approval to distribute the unit's shares as a dividend.

General Electric jumped 4 3/8 to 152 after it set a 3-for-1 stock split, and increased its share buyback program by $5 billion to $22 billion.

Modis Professional Services

(MPS)

slipped 1/8 to 12 15/16 after it said it will split into two publicly traded companies reflecting its two business sectors, information technology and professional business services. The company also said its board authorized it to explore a possible IPO for its e-business unit, which is included in the IT division.

Progress Software

(PRGS) - Get Report

popped 8 9/16, or 18.9%, to 53 7/8 after it set a 2-for-1 stock split. The company posted fourth-quarter earnings of 60 cents a share, beating the three-analyst estimate of 55 cents and the year-ago 43 cents.

R.H. Donnelley

(RHD)

rose 11/16 to 18 11/16 after it said it set a share buyback of up to $25 million.

Analyst actions

J.P. Morgan started coverage of

Agilent

(A) - Get Report

as a buy and set a price target of 60. Agilent lost 1 5/16 to 45 15/16.

Salomon Smith Barney raised its rating on

Broadcom

(BRCM)

and PMC-Sierra

(PMCS)

to buy from outperform. Broadcom's target was upped to 300 from 150, while PMC-Sierra's was upped to 200 from 110. Broadcom bounced up 4 1/16 to 225 5/16 and PMC-Sierra gained 4 1/2 to 121 5/16.

Schroder

said it started coverage of

Cumulus Media

(CMLS) - Get Report

with an outperform rating and a price target of 44. Shares rose 1 5/8 to 38 3/8.

Robertson Stephens

said it upped its price target on

Emmis Communications

(EMMS) - Get Report

to 100 and maintained its buy rating. Emmis jumped 6 3/16, or 6.9%, to 96 3/8.

Credit Suisse First Boston

analyst David Nelson upgraded

General Mills

(GIS) - Get Report

to buy from hold. Shares of General Mills edged up 15/16 to 33 11/16.

First Boston upped its fiscal 2000 estimates on

Jabil Circuit

(JBL) - Get Report

to $1.60 a share from $1.55 a share. Shares of Jabil slipped 2 5/16 to 69 3/16.

After making cautious statements regarding

J.P. Morgan's

(JPM) - Get Report

fourth-quarter earnings outlook, Merrill Lynch banking analyst Judah Kraushaar changed his tune after speaking with the company and raised his fourth-quarter earnings estimate to $1.86 a share from $1.69 and his fiscal 1999 number to $9.60 a share from $9.45.

ING Baring

also raised its fourth-quarter estimate on the stock to $1.90 a share from $1.75. JPM slipped 3/4 to 128 1/8.

Credit Lyonnais

cut its rating on

Marriott International

(MAR) - Get Report

to add from buy and cut its 12-month price target to 37 from 40. Shares of Marriott slid 1 5/8, or 5.1%, to 30.

Banc of America Securities

said it sliced its rating on

Tommy Hilfiger

(TOM)

to a market performer from buy. Shares fell 1 5/16, or 5.1%, to 24 9/16.

Miscellany

America Online

(AOL)

said membership of its AOL service has surpassed 20 million. Shares of AOL dwindled 1 1/8 to 85.

Bell Atlantic's

(BEL)

plan to offer long-distance service in New York state could be awarded

Federal Communications Commission

approval as soon as next week, making it the first Baby Bell to enter the long-distance market, the

Journal

reported. Shares of Bell Atlantic gained 5/8 to 64 15/16.

Gilatech

(GLIA)

said the

Food and Drug Administration

has ended its restrictions on its European-made

Adcon-L

product line. The company said that shipments would begin again in the first quarter of 2000. Gilatech popped 3 13/16, or 24.9%. to 19 3/16.

Modis Professional Services

(MPS)

said its board gave the company the go-ahead to create two publicly traded companies: information technology and professional services. The board also authorized management to continue to look at strategic alternatives, including an IPO, for the company's e-business unit, which is included in the information technology division. Shares of Modis Professional Services retreated 1/8 to 12 15/16.

Raytheon

(RTN.A)

fell 1/4 to 24 11/16 after it said it was awarded a $1.3 billion United Kingdom defense contract for a radar system.

This week's "Inside Wall Street" column in

Business Week

, penned as usual by Gene Marcial, offers up a positive piece on

Silverleaf Resorts

(SRV) - Get Report

. The column cites money manager Geoffrey Nixon of

MCM Associates

, which holds a 6% stake in Silverleaf. Nixon says the stock is worth 27 based on 15 times estimated earnings per share of $1.80 a share in 2000. Shares of Silverleaf Resorts bounced 1/16 to 6 9/16.

The column also offers up positive pieces on

EarthWeb

(EWBX)

and

GlobalNet Financial.com

(GLBN)

. Shares of EarthWeb mounted 4 1/8, or 11.3%, to 41.

Staff reporter

Erin Arvedlund contributed to this story.