Publish date:

Ravenous Return to Tech Continues While NYSE Volume Fades

Investors who underweighted technology are overweighting it in a hurry, but cyclicals restrained the Dow.

Same as it ever was -- only better. Similar to the way they stood

midday, stocks ended with blue-chips wary as bonds retreated but tech stocks undaunted. Despite decent point moves for major averages, however, the action was sparse as a lack of corporate news failed to extricate traders from the pre-

FOMC

limbo that's likely to persist for the next week.

The price of the 30-year Treasury bond fell 19/32 to 89 13/32, its yield rising to 6.02%. However, fixed-income participants reacted more to supply issues than concern about economic growth or multiple

Fed

tightenings, traders said. Thus, growth-stock investors were able to brush aside bonds and continue their aggressive display of buying. Moreover, cyclicals, which usually benefit from forces that spook bonds, were among the session's biggest laggards, oil stocks most notably.

Strong throughout, the

Nasdaq Composite Index

rose 66.84, or 2.6%, to 2630.28 -- just 0.8% short of its April 26 all-time high, 2652.10.

TheStreet.com Internet Sector

index gained 30.04, or 5.3%, to 594.38.

In the absence of hardcore news, traditional tech bellwethers rose in an advance partially attributed to some (self-serving) comments from

Dell

(DELL) - Get Dell Technologies Inc Class C Report

Chairman

Michael Dell

in

Barron's

. The PC "is going to be at the core of the computing world for years to come," Dell told the weekly.

Dell rose 6% while PC titans

Intel

(INTC) - Get Intel Corporation (INTC) Report

and

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

gained more than 3% each, as did

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

, which set a 52-week high ahead of a 2-for-1 split. The

Nasdaq 100

rose 2.9%.

In

New York Stock Exchange

trading,

IBM

(IBM) - Get International Business Machines (IBM) Report

,

Hewlett-Packard

(HWP)

,

Motorola

(MOT)

and

Micron Technology

(MU) - Get Micron Technology, Inc. (MU) Report

were all solid gainers. The

Morgan Stanley High-Tech 35

rose 2.7% while the

Philadelphia Stock Exchange Semiconductor Index

added 4.4% to an all-time high of 477.05.

Among Net leaders,

Yahoo!

(YHOO)

gained 10.1%, partially on speculation it may be added to the

S&P 500

, and

Lycos

(LCOS)

jumped 10% on word it will be featured on a new version of IBM's Lotus Notes.

Thanks mainly to techs, the S&P 500 closed up 6.16, or 0.5%, to 1349.00 vs. a midday low of 1337.68. The

Russell 2000

rose 4.39, or 1%, to 449.44.

Conversely, the

Dow Jones Industrial Average

fell 39.58, or 0.4%, to 10,815.98 after trading as high as 10,880.25 and then falling as low as 10,755.83.

The Dow was undone by weakness in

Alcoa

(AA) - Get Alcoa Corp. Report

and

General Electric

(GE) - Get General Electric Company (GE) Report

, as well as oil giants

Chevron

(CHV)

and

Exxon

(XON) - Get Intrexon Corporation Report

. As crude futures slid 32 cents to $17.67 a barrel, the

American Stock Exchange Oil & Gas Index

fell 2.1% and the

Philadelphia Stock Exchange Oil Service Index

lost 4.8%.

"Nasdaq had a great day, transports were up big

but there was very light trading volume," said Anthony Conroy, head of stock trading at

Bankers Trust

. "I think we're stuck in a trading range until we get pretty clear-cut view -- not on a 25-basis-point cut -- but what

the Fed plans for the future."

Like many, Conroy thinks a 25-basis-point tightening, should it emerge, is a "positive because it means the economy is strong enough to raise rates but not so strong they'll raise 50." Ironically, no move next week would be most disturbing because it would engender worries about an economic slowdown, he said.

In NYSE trading, 682 million shares were traded while advancers edged declining stocks 1,585 to 1,398. In

Nasdaq Stock Market

activity, 907.7 million shares were exchanged while gainers led 2,170 to 1,750. New 52-week highs bested new lows 110 to 63 in Big Board action and by 124 to 39 in over-the-counter trading.

Kicking Fallen Tech Bears

The recent advance by tech leaders has tech bulls feeling pleased, and somewhat vindicated.

"Everybody has been so concerned about big-cap tech

being overvalued," said Erik Gustafson, portfolio manager at

Stein Roe & Farnham

. "Everyone was moving into cyclicals because the Fed was going to raise rates and compress multiples. There's been some sellers over the course of the last couple of months: They're wrong. Big-cap tech is the best place to be because they're going to have earnings going forward. We know business is outstanding at Cisco and

Tellabs

(TLAB)

and

EMC

(EMC)

."

Gustafson, who manages the $829 million

(SRFSX)

Stein Roe Growth Stock fund (among others), said there was nothing fundamental behind today's spurt, merely the continuation of recent momentum and capitulation by naysayers.

"You could see it starting to build last week," he said. "

Wednesday you saw massive amounts of capital flow to classic tech stocks. Seeing it continue tells you some people were underweight these groups

and obviously some people were short and they had to cover. Those underweight continue to try to scramble to get merchandise in -- I love when that happens. All those yo-yos that jumped out two months ago are coming back strong."

Gustafson's strategy is to invest in "franchise tech companies" with "powerful and dominant market positions." Stein Roe Growth maintains core long positions in Cisco, Tellabs, EMC,

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

,

America Online

(AOL)

,

Lucent

(LU)

, Microsoft,

Motorola

(MOT)

and

MCI WorldCom

(WCOM)

.

Owing to the "wonderful tone" of recent company conference calls and presentations, the fund manager remains quite enamored with the group. "This whole notion of a Y2K nuclear-winter spending shutoff has not materialized," he said. "The tone of business is outstanding, and they are all poised to meet and exceed expectations. Telco/tech is the place to be."

Judging by the past few trading days, it's hard to argue with that assessment.

Among other indices, the

Dow Jones Transportation Average

rose 31.88, or 0.9%, to 3428.22; the

Dow Jones Utility Average

slid 3.33, or 1%, to 327.77; and the

American Stock Exchange Composite Index

dipped 2.82, or 0.4%, to 765.75.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

dipped 9.98, or 0.1%, to 6995.08 and the

Mexican Stock Exchange IPC Index

jumped 107.06, or 1.9%, to 5823.71.

Monday'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.

)

As noted above, Lycos popped up 8 13/16, or 10%, to 96 5/8 after agreeing to provide its

Lycos Network

Internet tools and content to IBM's

Lotus Development

TheStreet Recommends

unit. IBM picked up 4 to an all-time high of 124 3/4.

Elsewhere among small deals (in Monday merger terms) between big companies,

E*Trade

(EGRP)

jumped 5 11/16, or 16.3%, to 40 11/16 after striking a marketing arrangement with

AT&T

(T) - Get AT&T Inc. Report

to provide new investors with six months of free Internet access through a Yahoo!-branded version of Telephone's WorldNet online service. AT&T added 7/8 to 56 1/2; Yahoo! swelled 14 9/16, or 10.1%, to 158 7/8.

Still elsewhere, America Online rose 3 3/8 to 115 3/8 after saying it will invest $1.5 billion in

Hughes Electronics

(GMH)

, which owns DirecTV, to form an alliance to offer high-speed Internet service via satellite. Hughes, a unit of

General Motors

(GM) - Get General Motors Company (GM) Report

, grew 3 3/16, or 6%, to 56 5/8.

Separately, Hughes Network Systems, a subsidiary of Hughes Electronics, said it will use Intel's microprocessors in a new generation of TV-set-top receivers. Intel tacked on 1 13/16 to 56 13/16.

Mergers, acquisitions and joint ventures

ADC Telecommunications

(ADCT) - Get ADC Therapeutics SA Report

slashed 2 15/16, or 5.9%, to 47 1/8 after announcing plans to buy

Saville Systems

(SAVLY)

, an Irish software company, in a stock deal valued at $700 million. Saville lowered 9/16 to 15 1/8.

Britain's

BOC Group

(BOX) - Get Box, Inc. Class A Report

closed unchanged at 40 after rejecting a joint takeover proposal from

Air Products & Chemicals

(APD) - Get Air Products and Chemicals, Inc. Report

and France's

L'Air Liquide

(AIQUY:OTC BB ADR). Air Products & Chemicals gained 13/16 to 46 5/16.

Delta Air Lines

(DAL) - Get Delta Air Lines, Inc. Report

rose 2 13/16, or 5%, to 58 3/4, on expectations it will announce an international alliance with

Air France

(of France).

KN Energy

(KNE)

tumbled 5 1/8, or 28.3%, to an annual low of 13 after announcing it jointly agreed with

Sempra Energy

(SRE) - Get Sempra Energy Report

to terminate their plans for a nearly $2 billion merger, which was announced Feb. 22. Sempra gave up 1 1/8 to 22 13/16. KN Energy also confessed it will lose 20 cents to 25 cents a share in the second quarter and that it will likely break even or post earnings of 10 cents a share for the full-year. A four-analyst estimate called for earnings of 16 cents in the second quarter and a nine-analyst estimate called for $1.07 for the year.

Reuters

(RTRSY)

climbed 4 7/16, or 5.4%, to 87 7/8 after

The Sunday Times

of London reported the company is in talks with Yahoo! about a linkup that would give retail investors access to Reuters'

Instinet

trading system.

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

tacked on 3 3/4 to an all-time high of 136 1/2 after confirming plans to acquire Israel's

Libit Signal Processing

for $365 million in cash. (

TheStreet.com's

Adam Lashinsky reported on the possible combination earlier

today .)

UST

(USTB) - Get VictoryShares USAA Core Short-Term Bond ETF Report

shot up 6, or 24.7%, to an all-time high of 30 1/4 after

Royal Bank of Scotland's

subsidiary,

Citizens Financial

, agreed to buy the Boston company for about $1.4 billion. Citizens Financial said it will cut 800 positions due to the acquisition.

PaineWebber

lowered UST to neutral from buy.

Weyerhaeuser

(WY) - Get Weyerhaeuser Company Report

lost 2 5/8 to 67 1/8 after saying it's acquiring Canada's

MacMillan Bloedel

in a stock swap worth $2.45 billion.

Earnings/revenue reports and previews

Chesapeake

(CSK)

, a specialty packaging and tissue company, blew off 3, or 8.1%, to 34 after late Friday saying it expects second-quarter earnings to come in 10% to 20% below the six-analyst forecast for 51 cents a share. The company, which earned 49 cents in the year-ago period, blamed the expected shortfall on higher costs and a short-term margin squeeze at its North American packaging operations.

Lilly Industries

(LLY) - Get Eli Lilly and Company (LLY) Report

shaved off 1 5/16 to 67 5/8 after reporting second-quarter earnings of 41 cents a share, in line with the three-analyst outlook and above the year-ago 37 cents.

Construction equipment maker

OmniQuip

(OMQP)

soured 3/8 to 8 1/8 after late Friday saying it sees third-quarter earnings coming in around 12 cents to 15 cents a share. The seven-analyst outlook called for 50 cents vs. the year-ago 48 cents. The company said it sees quarter sales rising 15% to 17% above the year-ago sales of $119.7 million, which is below management's previous expectations. OmniQuip plans to take a third-quarter restructuring charge of about $2.2 million, or 9 cents a share. Finally, the company said it will cut about 200 jobs at its

Snorkel

unit.

Offerings and stock actions

Global TeleSystems Group

(GTSG)

picked up 3 9/16 to an all-time high of 91 1/2 after setting a 2-for-1 stock split in the form of a stock dividend.

Analyst actions

AnnTaylor

(ANN)

flourished 2 3/16, or 5.4%, to 42 9/16 after

Merrill Lynch

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

barnesandnoble.com

(BNBN)

expanded 11/16 to 18 11/16 after underwriters of the firm's May IPO initiated coverage of the stock.

Goldman Sachs

started coverage with a market outperform while Merrill Lynch started coverage with a near-term accumulate and long-term buy rating.

Salomon Smith Barney

and

Wit Capital

began coverage with buy ratings. Goldman and Merrill were lead underwriters on the IPO; Salomon Smith Barney and Wit Capital were co-managers.

And

DLJdirect

(DIR)

excelled 2 11/16, or 9.4%, to 31 1/4 after Merrill Lynch began coverage with a near- and long-term accumulate.

Still elsewhere among today's broad Internet strength,

Juno Online

(JWEB)

rocketed 3 1/16, or 27.8%, to 14 1/8 after PaineWebber started coverage with a buy and Salomon Smith Barney started coverage with a buy and a 12-month price target of 20.

Finally,

About.com

(BOUT) - Get Innovator IBD Breakout Opportunities ETF Report

rallied 8 1/4, or 20.9%, to 47 1/2 and

Go2Net

(GNET)

rallied 26 7/8, or 21.5%, to 152 1/8 on no specific news.

Chevron sloughed off 2 1/2 to 90 11/16 and Exxon sloughed off 2 1/8 to 78 1/4 after

ABN AMRO

slashed second-quarter earnings estimates for the companies to 70 cents from 80 cents a share and to 49 cents from 62 cents a share, respectively. The firm cited depressed refining and marketing margins.

Federal-Mogul

(FMO) - Get Fiduciary/Claymore Energy Infrastructure Fund of Benef Interest Report

vaulted 2 13/16, or 5.5%, to 53 13/16 after

Donaldson Lufkin & Jenrette

upped it to top pick from buy.

Open Market

(OMKT)

advanced 1, or 8%, to 13 7/16 after PaineWebber raised it to buy from neutral.

StarMedia

(STRM) - Get Streamline Health Solutions, Inc. Report

swelled 7, or 16.3%, to 50 after

J.P. Morgan

started it with a buy and price target of 66 a share and Goldman initiated coverage with a market outperform.

Miscellany

McKesson HBOC

(MCK) - Get McKesson Corporation (MCK) Report

chopped off 2 3/8, or 6.6%, to 33 11/16 after delaying its annual report filing and firing several executives for their involvement in accounting improprieties that contributed to the delay. The company fired Chairman Charles McCall and some officers from its

Information Technology Business

unit, formerly

HBO & Co.

, and said CEO Mark Pulido and CFO Richard Hawkins resigned. The company named John Hammergren and David Mahoney as co-CEOs and Heidi Yodowitz acting CFO. Alan Seelenfreund was named nonexecutive chairman.

Phoenix Technologies

(PTEC)

, a system software developer, shot up 4 3/8, or 37.6%, to an annual high of 16 1/16 after naming Albert E. Sisto president and CEO. Sisto succeeds Jack Kay, who will remain on the company's board. Phoenix also formed

ebetween

, a new subsidiary in which

Softbank

has signed a letter of intent to acquire a 20% stake. (Softbank is a minority investor in

TheStreet.com Inc.

(TSCM)

, publisher of this Web site.)