Stocks Feel the January Effect, Rallying Behind Good Old Tech

More records for the Nasdaq Comp and the S&P.
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January, chow-ch, chow, chow, chow. For those who love, love the calendar's portents, it looks like 1999 is going to be another up year dominated by technology stocks.

Following today's gains, the

Nasdaq Composite Index

is up 14.3% for the month and in record territory; the

S&P 500

is higher by 4.1% and at an all-time high; and the lumbering

Dow Jones Industrial Average

is up 1.9%. Whether the pattern holds remains to be seen (of course), but the "January barometer" has forecast the broader market's fate with near 90% accuracy since 1950, according to

The Stock Picker's Almanac

.

The overriding positivism was evinced in the success of three IPOs today,

Tut Systems

(TUTS)

, up 218%,

Smith Gardner

(SGAI)

, which rose 33%, and

Entercom Communications

(ETM) - Get Report

, higher by 36.7%.

With PC and related companies at the vanguard, the Nasdaq Comp climbed 28.55, or 1.2%, to 2505.89, notching its third record high of the week and its 11th in 1999.

The

Philadelphia Stock Exchange Semiconductor Index

jumped 3.7% after

BancBoston Robertson Stephens

upped five chip-equipment makers, including

Novellus Systems

(NVLS)

, which gained 7.9%, and

Lam Research

(LRCX) - Get Report

, up 18.4%.

Still, the

Nasdaq 100

rose just 0.9%, saddled by a 12.7% decline in

PeopleSoft

(PSFT)

, which posted disappointing fourth-quarter results

last night.

The Nasdaq Comp was aided by

Amgen

(AMGN) - Get Report

, up 6.9% after posting better-than-expected earnings and setting a stock split, and

Uniphase

(UNPH)

, which rose 13% on word of its

merger with Canada's

JDS Fitel

.

Among traditional Nasdaq bellwethers,

Dell

(DELL) - Get Report

was the best performer, up 6.2% to an all-time high of 100 after research firm

International Data

reported PC sales expanded 15% in the fourth quarter and 12% in 1998. In

New York Stock Exchange

trading,

Gateway

(GTW)

gained 9.2% to an all-time high of 77 1/4 on the news. Meanwhile,

Hewlett-Packard

(HWP)

rose 6.1% after receiving an upgrade from

Goldman Sachs

and

IBM

(IBM) - Get Report

rose 2.6%.

The two tech giants were among the leading influences on the Dow Jones Industrial Average, which closed up 77.50, or 0.8%, to 9358.83 after hitting 9383.29 intraday. Other Dow gainers included

Merck

(MRK) - Get Report

.

The S&P 500 added 14.27, or 1.1%, to end at 1279.64, eclipsing its previous best of 1275.09, set

Jan. 8. In addition to the aforementioned, financials such as

Chase Manhattan

(CMB)

, consumer giants such as

Gillette

(G) - Get Report

and airlines such as

Delta Air Lines

(DAL) - Get Report

supported the index.

Airlines were inspired by better-than-expected earnings from

Alaksa Air Group

(ALK) - Get Report

, which rose 10.4%, and word

Northwest Airlines

(NWAC)

will match fare increases of its rivals. The

American Stock Exchange Airline Index

surged 8.5%, helping the

Dow Jones Transportation Average

gain 123.39, or 4%, to 3202.50.

"It's back to the old game with the

long bond yield at 5% that stocks are a better play. It does look like it's going to 10,000," said the head listed trader at one Wall Street firm, who requested anonymity. "The good earnings are getting a lot better reaction then the negatives. A company like

Hershey Foods

(HSY) - Get Report

disappoints and they crush it. But others are inline or even a penny light and the stocks rally."

The trader isn't overly concerned about the market's narrowness, noting that "tech continues strong, financials act well, even some of the dull stocks like publishing are starting to lift a little. Food stocks and cable and wireless are all acting good. I am starting to see signs of the rally starting to broaden out, at least in the listed world. But most of the strength is in the over-the-counter market."

Still, the bulk of buying was concentrated in a select few, mainly big-cap tech. Internet stocks were largely absent from the tech advance as volatility in the sector continues to simmer down.

TheStreet.com Internet Sector

index rose more than 38% for the month but gained just 5.12, or 0.9%, to 557.52 Friday. At the extremes of the evenly-weighted index were

Open Market

(OMKT)

, up 15.2%, and

Security Dynamics

(SDTI)

, which fell 16.1% after

Prudential Securities

cut its recommendation to hold from accumulate.

Meanwhile, the

Russell 2000

rose a modest 3.24, or 0.8%, to 427.21, finishing the month up 1.2%.

In NYSE trading, 917.1 million shares traded while gainers led declining stocks 1,681 to 1,330. In

Nasdaq Stock Market

activity, advancers led 2,381 to 1,840 while 1.063 billion shares traded. New 52-week highs led new lows 96 to 84 on the Big Board and by 129 to 44 in over-the-counter trading.

Today's gains notwithstanding, market internals "do concern me," said Rao Chalasani, chief investment strategist at

Everen Securities

in Chicago. "This is not conducive for the stock market to go up and stay up. I would like to see some broadening of the market but as it was broadening we got the Brazilian problems and it has been shattered. As long as it stays narrow, there's a cloud over the market."

Still, Chalasani remains bullish, noting the "beginning of some interest in consumer staples," as well as the "very good" economic news reported today. The

Commerce Department

reported fourth-quarter gross domestic product rose 5.6%, well above the 4.4% expected. The backdrop for the GDP blowout is even more favorable, Chalasani said.

"The employment cost index has been very weak and at the same time you have the GDP deflator lower than in the third quarter," he said. "Without inflation, inventories are being drawn down and the consumer is still spending. The momentum is there and nobody has to be worried because there's no inflation."

Regarding the market's apparent dwindling angst about Brazil, Chalasani said: "I don't know how they can be so unconcerned about the real breaking 2 to the dollar. I can't say it's a positive." The real fell another 7.1% today to a record low 2.10 to the dollar.

However, "it's not a big enough negative to get out" of stocks, the strategist said.

Among other indices, the

Dow Jones Utility Average

fell 0.39, or 0.1%, to 302.80; and the

American Stock Exchange Composite Index

rose 0.93, or 0.1%, to 714.86.

The price of the 30-year Treasury bond rose 4/32 to 102 10/32, its yield falling to 5.09%.

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.

)

As noted above, Tut Systems -- which develops products that enable high-speed data to travel over copper infrastructure -- shot up 39 1/4, or 218%, to 57 1/2 after

Lehman Brothers

priced its 2.5-million-share IPO top-range at $18 a share last night. Earlier this week, the offering's range was upped to $16 to $18 from $14 to $16.

In other offerings, Entercom Communications, a radio broadcaster, soared 8 1/4, or 36.7%, to 30 3/4 after

Credit Suisse First Boston

priced its 13.6 million-share IPO at $22.50 a share last night. The expected price range was raised to $21 to $23 from $18 to $21. Smith Gardner, a marketing firm, lifted 3 15/16, or 32.8%, to 16 after

BT Alex. Brown

priced its 4.4 million-share IPO above range at $12 a share. The offering price range was increased to $10 to $11 from $8 to $10.

American Axle & Manufacturing

(AXL) - Get Report

slipped 7/16 to 16 9/16 after

Merrill Lynch

priced its 7 million-share IPO mid-range at $17 a share last night.

Mergers, acquisitions and joint ventures

Supreme

(SUPI)

took in 1 1/8, or 7.8%, to 16 after agreeing to acquire privately held

Perry Ellis

in a $75 million deal.

Uniphase jumped 10 3/8, or 13%, to an all-time high of 91 1/8 after agreeing

last night to merge with Canada-based JDS FITEL in a deal valued at $6.1 billion.

Earnings/revenue reports and previews

Alaska Air flew 4 3/4, or 10.4%, to 50 3/8 after yesterday reporting fourth-quarter earnings of $1.02 a share, beating expectations for 82 cents.

Alza

(AZA)

picked up 4 7/8, or 10.7%, to 50 9/16 even after last night missing fourth-quarter earnings estimates by a penny a share.

Amgen grew 8 3/16, or 6.9%, to an all-time high of 127 13/16 after last night recording fourth-quarter earnings of 90 cents a share, 6 cents ahead of the 25-analyst estimate and above the year-ago 67 cents. The company also set a 2-for-1 stock split. Today, BT Alex. Brown raised the stock's price target to 136 from 125 a share.

Aspect Development

(ASDV)

shaved off 1 5/16 to 28 7/8 despite last night beating fourth-quarter earnings estimates by 4 cents a share.

Broadcast.com

dropped 12 1/8, or 6.8%, to 167 after last night reporting a first-quarter loss three cents a share wider than the year-ago loss but 4 cents better than expected.

CEC Entertainment

(CEC)

climbed 5 1/8, or 20.7%, to 29 7/8 after last night forecasting fourth-quarter earnings will outpace year-ago results of 30 cents a share as well as the 10-analyst estimate of 32 cents.

Dialogic

(DLGC)

tanked 3 3/8, or 11.7%, to 25 1/2 even after last night meeting fourth-quarter earnings projections of 43 cents a share.

FDC

(FDC) - Get Report

brought in 2 3/16, or 6.1%, to an annual high of 38 5/16 after last night reporting fourth-quarter earnings of 48 cents a share, in line with expectations.

Deutsche Bank Securities

upped it to buy from hold.

FVC.com

swelled 2 9/16, or 23.4%, to 13 5/8 after last night reporting fourth-quarter earnings of 8 cents a share, double the three-analyst consensus and up from a loss of 3 cents a year ago. The company also said

Lucent

(LU)

has agreed to act as a buyer and reseller of all of FVC.com's voice, video, and data products.

Gencor Industries

(GX)

lost 1 1/16, or 13.8%, to an annual low of 6 5/8 after last night saying it will restate figures for fiscal 1998 due to accounting irregularities and other improprieties at its U.K.-based unit. The company said the accounting irregularities and other improprieties may amount to between $4 million and $6 million.

Lam Research advanced 5 15/16, or 18.4%, to an annual high of 38 3/8 after last night reporting a fourth-quarter loss 30 cents a share narrower than expected. Today,

Morgan Stanley Dean Witter

upgraded it to outperform from neutral and Credit Suisse First Boston upped it to buy from hold. BancBoston Robertson Stephens lifted five semiconductor equipment stocks, including Lam Research to buy from long-term attractive, citing an upward movement in Asian business.

Advanced Energy Industries

(AEIS) - Get Report

rose 3 1/8, or 12%, to 29 1/8 after also being upped to buy from long-term attractive; and

Applied Materials

(AMAT) - Get Report

rose 4 1/8, or 7%, to 63 3/16, Novellus rose 5 5/16, or 7.9%, to 73 1/8, and

Teradyne

(TER) - Get Report

rose 6 1/2, or 11.1%, to an all-time high of 65 after all were upped to strong buy from buy.

LSI Logic

(LSI) - Get Report

jumped 3 3/16, or 12.9%, to 27 15/16 after last night posting break-even fourth-quarter results, above the expected loss of 3 cents a share. Today, Credit Suisse First Boston raised the stock to buy from hold, setting a price target of 35 a share, and BT Alex. Brown pushed it up to strong buy from market performer.

Mercury International

(MERQ)

vaulted 6, or 10.5%, to 63 1/8 after last night posting fourth-quarter earnings of 47 cents a share, up from 28 cents a year ago and ahead of the 10-analyst estimate of 41 cents. The company also announced a 2-for-1 stock split.

Micros Systems

(MCRS)

expanded 2 3/8, or 8.1%, to 32 after last night topping second-quarter earnings by a penny a share.

Herman Miller

(MLHR) - Get Report

skidded 5 5/8, or 22.9%, to 18 15/16 after last night warning it expects third-quarter earnings to fall short of the seven-analyst prediction for 39 cents a share due to weak order entry in December and January. The company earned 36 cents in the year-ago period. Today, Merrill Lynch slashed the stock to near-term neutral from buy.

Finland's

Nokia

(NOKA)

slid 9 7/8, or 6.4%, to 144 1/8 after posting fourth-quarter earnings in line with expectations. The company also said its board will propose a 2-for-1 stock split.

PeopleSoft slouched 2 7/8, or 12.7%, to 19 13/16 after last night reporting fourth-quarter earnings of 16 cents a share, a repeat of the year-ago figure and 1 cent below the 25-analyst forecast. The company also said it will cut 430 jobs, or 6% or its workforce, amid competition from

SAP

(SAP) - Get Report

and

Oracle

(ORCL) - Get Report

. Today, Bear Stearns lowered PeopleSoft to neutral from buy.

Reltec

(RLT)

sliced off 7 5/16, or 28.3%, to 18 1/2 after last night missing fourth-quarter earnings estimates by 3 cents a share.

Scientific-Atlanta

(SFA)

added 1 1/8 to 31 1/8 after last night beating second-quarter earnings estimates by 4 cents a share.

Sequent Computer

(SQNT)

tumbled 1 1/8, or 8.3%, to 12 3/8 after last night posting fourth-quarter earnings 1 cent below expectations.

Starbucks

(SBUX) - Get Report

perked up 3 1/16, or 6.3%, to 52 1/16 after last night announcing its same-store sales rose 25% for the four weeks ended Jan. 24.

Wisconsin Energy

(WEC) - Get Report

slipped 2 3/8, or 8.4%, to an annual low of 26 after last night falling short of fourth-quarter earnings estimates by 13 cents a share. Today, Merrill Lynch cut the stock to near-term neutral from accumulate and long-term accumulate from buy.

In other earnings news:

Analyst actions

Collagen Aesthetics

(CGEN) - Get Report

shot up 3, or 30.8%, to 13 after Lehman Brothers initiated coverage with a buy and a 12-month price target of 20 a share.

Cytyc

(CYTC)

gave up 4 1/8, or 17.7%, to 19 1/8 after

NationsBanc Montgomery Securities

lowered it to hold from buy.

Eastman Kodak

(EK)

picked up 1 13/16 to 65 3/8 after Goldman Sachs raised it to buy from market outperform.

Flextronics

(FLEX) - Get Report

excelled 2 7/8, or 7.4%, to 42 3/8 after Morgan Stanley Dean Witter started coverage with an outperform and set a price target of 55 a share.

Hewlett-Packard added 4 1/2, or 6.1%, to 78 3/8 after Goldman Sachs pushed it up to market outperformer from market performer.

Restoration Hardware

(RSTO)

swelled 2 5/16, or 12.7%, to 20 9/16 after NationsBanc Montgomery Securities upgraded it to buy from hold.

Security Dynamics Technologies slipped 4, or 16.1%, to 20 7/8 after

Prudential Securities

slashed it to hold from accumulate.

Silicon Graphics

(SGI)

took in 1 5/8, or 8.6%, to an annual high of 20 9/16 after Merrill Lynch boosted its price target to 23 from 18 a share and increased its 2000 earnings estimate for the company to 80 cents a share from 60 cents after management said revenue should grow by more than 20%.

Tandy

(TAN) - Get Report

brought in 4 7/8, or 9.9%, to 54 after

Dain Rauscher Wessels

upped it to strong buy from buy.

Miscellany

Compaq

(CPQ)

rose 7/16 to 47 5/8, apparently not getting much help from word of its new division focused on selling products over the Internet.

Inktomi

(INKT)

powered up 3 15/16, or 5.8%, to 71 7/8 after the

oft-wrong Inside Wall Street column in

Business Week

said some Wall Streeters are bullish on the stock even after

Microsoft

(MSFT) - Get Report

dumped the search service as the primary platform for Microsoft's Web network. And

Cash Technologies

(CHNG) - Get Report

, a company that makes machines that deal with loose coins, rung up 1, or 9.5%, to an all-time high of 11 3/4 on a positive mention in the column. Casey Stern, an analyst at

Starr Securities

, told the magazine the coming of the euro has produced a big potential market for the company's unusual coin-processing machines.