Small-Caps Soar While Big-Caps Slip

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Market players today echoed the words of an old

Steve Martin

routine: Let's get small.

The small-cap

Russell 2000

was today's standout index, rising 2.22 to 444.06 as smaller issues continued their rebound from deep depths. The Russell has risen in seven of the last eight sessions and sits just below its Nov. 5 close of 444.76. That's well off the Oct. 13 high of 465.21, but the measure is enjoying one of its strongest uptrends since the late-October mini-crash.

Small-caps are coming back, but the Russell 2000
is still short of its historic high

Other indices declined, but not very sharply. The broad

S&P 500

fared worst, sliding 3.36 to 1003.54 in a retreat from record levels. The tech-sparked

Nasdaq Composite Index

poked over the 1700 mark intraday but ended down 3.54 at 1676.90 as bellwethers

Microsoft

(MSFT) - Get Report

,

Intel

(INTC) - Get Report

,

Cisco

(CSCO) - Get Report

and

Dell

(DELL) - Get Report

all fell out of positive territory. The

Dow Jones Industrial Average

edged down 12.45 to 8117.25.

Still, market internals told the small-cap focus story. While the indices most swayed by big-cap movements declined, equity breadth remained positive all day on the major exchanges.

New York Stock Exchange

advancers topped decliners by 1,627 to 1,224 on 704 million shares. New NYSE highs soundly beat new lows, by 221 to 15. On the Nasdaq, 2,272 advancers outpaced 1,987 decliners on 875.7 million shares. New Nasdaq highs led new lows by 190 to 46.

Hugh Johnson, chief investment officer at

First Albany

, said the recent strength in small-caps and in the overall market shows that investors are starting to put the Asian economic crisis behind them. "I think what the market did for the fourth quarter was discount the Asia-induced soft landing that we're about to see unfold before our very eyes," he said. "It might not seem so soft at times, particularly to CEOs of Asia-exposed U.S. multinationals. But what seems to be in the cards is, we'll have a recovery from the Asia-induced soft landing beginning at the earliest in the third quarter of 1998, most likely in early 1999.

"The last two weeks, three of the top four groups have been basic materials, industrials and technology," Johnson went on. "When you see those companies at the top of the list, investors are becoming much more comfortable that the economy is recovering and the earnings are going to be there. What's worrisome is that the markets are signaling that we may have a wrestling match with inflation in late 1998 or early 1999."

Despite any worries, Johnson said he's having a grand time taking advantage of the bounce-back both here and in Asia. "I jumped on board a week or two ago, and it's been a really pleasant ride," he said. "I bought some Korean development bonds, and they're up 6 points. It takes me years to get that kind of return in the bond market." He added that he has bought some Korean stocks as well, but he cautioned that such investments remain pretty risky.

Tracy Herrick, market strategist at

Jefferies

, sees one particular risk looming in the spring mists. "The money's here, there's a sense of confidence, and then comes the unexpected," he said. "The unexpected is the yuan devaluation."

Herrick said he expects the Chinese to devalue their currency at some point later this year "to protect their markets and their trade surplus," both of which are challenged by the sharp decline in other Asian currencies. Such a move by China could trigger a fresh round of competitive devaluations and start the Asian crisis all over again, he said.

But for the next couple of months, Herrick said, a couple of factors will send the Dow streaking toward 8500: "First, there is absolutely no likelihood of a rise in interest rates in the eyes of investors, and second, the $100 billion that is being poured into Asia can only help U.S. markets. That combination is a powerful stimulus, and I don't see anything that will slow the market for the next two months because of it."

The bond market today came under heavy pressure from nervousness over

reports that Whitewater prosecutor

Kenneth Starr

has offered full immunity to former White House intern

Monica Lewinsky

. The benchmark 30-year Treasury bond dropped 28/32 to 102 25/32 in price, the yield rising to 5.93%.

Thursday's market action

(earnings estimates from

First Call

; new highs and lows on a closing basis unless otherwise specified):

Netscape

(NSCP)

jumped 2 11/16, or 14%, to 21 15/16 on reports that the Internet software giant is seeking a buyer.

Sun Microsystems

(SUNW) - Get Report

, the main focus of the speculation, rose 7/8 to 49 7/8. Also discussed as possible buyers for all or part of Netscape were

America Online

(AOL)

, down 2 3/4 to 98,

Oracle

(ORCL) - Get Report

, down 1/2 to 23 7/8, and

IBM

(IBM) - Get Report

, up 1 1/4 to 99 9/16.

TheStreet.com

looked at Netscape options activity in today's

Options Buzz, and Editor-in-Chief Dave Kansas offered a dispatch from Netscape's hometown in his

Editor's Letter.

Pharmacopeia

(PCOP)

powered up 5 5/8, or 34.4%, to 22 1/8 on the news late

yesterday that it plans to acquire

Molecular Simulations

for 7 million Pharmacopeia shares.

Harbinger

(HRBC)

exploded up 7 1/2, or 30.3%, after late

yesterday reporting better-than-expected fourth-quarter earnings.

British Biotech

(BBIOY)

dived 6 3/4, or 26%, to 19 1/4 after warning that increased spending in some areas may damage its operating margins. The company late

yesterday reported fourth-quarter earnings in line with expectations.

Technical Chemicals & Products

(TCPI)

plunged 2 11/16, or 24.4%, to 8 7/16 after

Deutsche Morgan Grenfell

downgraded it to hold from buy.

Waste Industries

(WWIN)

was trashed 3 3/4, or 19%, to a post-offering low of 16 1/16 after late

yesterday warning of a fourth-quarter shortfall.

Abacus Direct

(ABDR)

surged 5 1/4, or 14.5%, to 41 9/16 after reporting fourth-quarter earnings of 20 cents per share. That beat the four-analyst forecast by 4 cents and beat the year-ago 12 cents.

Hambrecht & Quist

upped 1998 earnings estimates on the stock.

Cerner

(CERN) - Get Report

gave up 3 1/8, or 13.2%, to 20 11/16 despite late

yesterday reporting better-than-expected fourth-quarter earnings.

Lehman Brothers

downgraded the stock to outperform from buy.

Dendrite International

(DRTE)

bounded 2 1/2, or 10.5%, to a 52-week high of 26 1/8 after reporting fourth-quarter earnings of 23 cents per share. That beat the two-analyst expectation by 3 cents and topped the year-ago loss of 29 cents.

A slew of retailers advanced on strong January same-store sales reports. Among the standouts,

Fred's

(FRED)

rose 2 1/2, or 11.9%, to an all-time high of 24;

Pier 1 Imports

(PIR) - Get Report

rose 2 1/16 to an all-time high of 27 15/16;

Dollar General

(DG) - Get Report

rose 2 3/8 to 39 9/16;

Kohl's

(KSS) - Get Report

rose 4 7/8 to an all-time high of 76;

Lowe's

(LOW) - Get Report

rose 2 9/16 to an all-time high of 54 5/16;

Sears

(S) - Get Report

rose 2 1/8 to 50 1/4; and

Dayton Hudson

(DH)

rose 1 to an all-time high of 75.

TheStreet.com

took a close look at the retail sales environment in a

story today.

Mastech

(MAST)

bounced 3 1/2, or 8.7%, to an all-time high of 43 13/16 after late

yesterday reporting strong fourth-quarter earnings.

Golden State Bancorp

(GSB) - Get Report

popped up 2 1/4 to an all-time high of 38 after it agreed to merge with privately held

First Nationwide Holdings

. The combined bank will trade publicly under the Golden State name.

Avon Products

(AVP) - Get Report

lifted 4 1/4 to 65 13/16 after reporting fourth-quarter earnings of $1.01 per share, a penny better than the 11-analyst projection and up from the year-ago 99 cents. The company raised its quarterly dividend to 34 cents per share from 31.5 cents.

Micron Technology

(MU) - Get Report

dropped 3 1/8 to 34 7/8 after

Brown Brothers Harriman

slashed it to short-term avoid from hold.

Seagram

(VO) - Get Report

ascended 1 1/4 to 35 3/4 after selling 15 million shares of

Time Warner

(TWX)

to

Goldman Sachs

at $64.375 each. Seagram still holds 11.8 million Time Warner shares, or about 1.5% of the company. Time Warner shed 1 1/4 to 63 7/8.

Canadian National Railway

(CN) - Get Report

climbed 2 3/8 to 53 7/16 after confirming it is in talks to acquire

Illinois Central Railroad

(IC)

for a price in the high $30s per share. Illinois Central was unchanged at 36 1/2.

Quaker Oats

(OAT)

declined 1 13/16 to 51 15/16 after reporting fourth-quarter earnings of 22 cents per share, a cent below the 10-analyst estimate but up from the year-ago 12 cents.

Quintiles Transnational

(QTRN)

rose 15/16 to 43 after

Interstate/Johnson Lane

started coverage at long-term buy with a 12- to 18-month price target of 51.

Reuters

(RTRS)

dipped 4 1/4 to 73 5/8 after Salomon Smith Barney reduced it to outperform from buy.

Jacor Communications

(JCOR)

ran up 2 3/8 to 54 3/8 after

Merrill Lynch

upgraded it to near-term buy from accumulate, maintaining a long-term buy.

World Color Press

(WRC)

increased 1 5/8 to 29 1/8 after late

yesterday reporting fourth-quarter earnings in line with expectations. The company also named a new CFO.

Zeigler Coal Holding

(ZEI)

added 5/16 to 14 5/16 after reporting fourth-quarter earnings of 47 cents per share, 7 cents better than the two-analyst outlook but down from the year-ago 63 cents.

PacifiCare Health Systems

(PHSYB)

lost 2 1/8 to 58 1/8 on news that CFO Wayne Lowell is retiring. The company reiterated a fourth-quarter forecast of 30 cents per share, short of the 22-analyst view of 33 cents.

Steel Dynamics

(STLD) - Get Report

was burnished 3/16 to 19 7/16 after

Prudential Securities

initiated coverage at buy.

Kensey Nash

(KNSY)

improved 3/8 to 16 3/4 after

Salomon Smith Barney

upgraded it to buy from outperform.