Stocks Zipping Higher in Light-Volume Trading

The major indices are finding support as the week ends, but the holiday weekend is dampening activity.
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Drop your socks and grab your stocks. Equities leapt from their (near) deathbed this morning, albeit amid predictably modest trading activity ahead of the holiday weekend.

Continuing a trend evident

yesterday, tech stocks were outperforming their value counterparts, although all major proxies were in solidly positive territory.

The

Nasdaq Composite Index

was up 30, or 1.3%, to 2449 while

TheStreet.com Internet Sector

index was higher by 16, or 2.8%, to 575.

Microsoft

(MSFT) - Get Report

was giving the Comp its biggest lift and inspiring

Nextel

(NXTL)

, up 6.7% after receiving $600 million from the software giant in exchange for 4.25% of its soul -- er, stock. The DOT was encouraged by

Yahoo!

(YHOO)

and smaller Net plays such as

USWeb

(USWB)

.

Among blue-chips, the Dow Jones Industrial Average was up 113, or 1.1%, to 10,580 and the

S&P 500

was higher by 19, or 1.5%, to 1301. Meanwhile, the

Russell 2000

was up 5, or 1.2%, to 438.

Johnson & Johnson

(JNJ) - Get Report

was the Dow's leading influence amid a strong drug sector overall. The

American Stock Exchange Pharmaceutical Index

was up 2.9%.

General Motors

(GM) - Get Report

was among the Dow's best performers, up 3.7% as the auto giant completed its spinoff of

Delphi Automotive

(DPH)

via the distribution of a special dividend.

Financials

American Express

(AXP) - Get Report

and

J.P. Morgan

(JPM) - Get Report

were also giving the Dow a boost while the group's overall performance was aiding the S&P 500. The

Philadelphia Stock Exchange/KBW Bank Index

was up 1.6% while the

American Stock Exchange Broker/Dealer Index

was higher by 1.4% as fear of higher interest rates receded, at least for now.

The price of the 30-year Treasury bond was up 1/32 to 91 20/32, its yield sliding to 5.85%. (For more on the fixed-income market, see today's early

Bond Focus.)

Meanwhile, Louise Yamada, director of technical research at

Salomon Smith Barney

, said recent rate hike fears are unfounded.

"We've been bullish on bonds since 1985, and every time we have a long drop in rates we have some backup. So far, this is nothing more than a normal backup in rates," Yamada said. "Yes interest rates could go to 6.05% in course of this backup, but our long-term work suggests the structural trend is still toward lower rates down the road."

Among "story stocks,"

Newport News

(NNS)

was down 14.1% on news the

Navy

opposes the company's planned merger with

Litton Industries

(LIT) - Get Report

, which was up 4.2%.

In

New York Stock Exchange

trading, advancing stocks were leading decliners 1,816 to 920 on 366 million shares. In

Nasdaq Stock Market

activity, gainers were leading 2,028 to 1,400 on 367 million shares. New 52-week highs were ahead of new lows 13 to 10 on the NYSE and 38 to 31 on the Nasdaq.

"We have a little more to do today than we thought we would, but that won't last," said Jay Meagrow, vice president of trading at

McDonald

in Cleveland. "In the past there've been big swings on days like today, but I don't think you'll see that. I think it's going to dwindle after this lunch hour. I don't believe we'll get 700 million shares on the Big Board."

Meagrow observed the "phenomenal" weather between Chicago and New York will contribute to the expected afternoon exodus among market players.

Yamada Says You Gotta Love Tech

Beyond the "daily noise" of trading, Yamada said, what's been happening of late is the "emergence of a completion of a shift of leadership that started around 1993-1994."

Specifically, the market is moving into a "capital goods cycle" from a consumer goods one that began back in 1981, she said. "Given the fact technology has been the leader for the last five years. it's due for a well deserved rest, especially considering

the group is up 80% since October. Into that resting vacuum is a well-deserved bounce of old tech areas which had been depressed."

Unlike some pundits and players, the technician considers all areas of technology -- including the Internet -- as "new tech" while labels basic materials and heavy industry as "old tech."

New tech will continue to lead but "by the same token, I think there's a technical factor at work that has forced what I call old tech sectors to utility new technology just to survive and hopefully move into the next capital goods cycle," she said.

Tyco

(TYC)

is her favorite pick among so-called diversified industrials, her favorite group within the old tech segment. Among new tech,

IBM

(IBM) - Get Report

is her top choice.

Salomon Smith Barney has not done any underwriting for Tyco in the last three years but has for IBM, a spokeswoman said.

At this point, "we don't have structural evidence of sustainability of outperformance" of basic materials, Yamada continued. "What has happened is you've had a good bounce off an extremely depressed level. That leaves you with a situation where old leadership is correcting so it's going to be hard to sustain the market in a kickback of what's become 12% of the S&P 500."

The technician compared the current environment to a period in 1956-57. Amid the "throes of a structural bull market" that ultimately encompassed 1942 to 1966, the market corrected 19% while transitioning from capital-goods outperformance to consumer-goods dominance, she said.

Unable to determine whether the current shift will engender a correction of a similar magnitude, "we must bear in mind what history tells us," Yamada said. "It could feel bad for people getting margin calls but it could be nothing more than a consolidation of 10% to 20%. It could give us an opportunity to pick up what will continue to be the leadership."

Friday's Midday Movers

By Heather Moore
Staff Reporter

As noted above, General Motors is spinning off the remaining 80.1% of its stake in Delphi Automotive Systems today. Its stock lately was up 2 1/2 to 71. Delphi was down 13/16 to 19 11/16.

Newport News Shipbuilding was down 4 5/8, or 14.1%, to 28 1/8 on word from

The New York Times

that the

Defense Department

is recommending against Litton Industries' planned takeover of the company. Litton was up 2 5/8 to 65 3/8. The newspaper said the government is rejecting the unfriendly takeover on the grounds that it would cause too much concentration in the military shipbuilding business.

In other news:

AudioCodes

(AUDC:Nasdaq) was up 3 1/2, or 25%, to 17 9/16 after its 3.5 million-share IPO priced at $14 a share. The company is an Israel-based provider of Internet protocol and voice-over packet technologies

Bank of America

(BAC) - Get Report

was up 1 11/16 to 64 3/16 after

Morgan Stanley Dean Witter

upgraded it to outperform from neutral.

Eidos

(EIDSY)

was up 3 11/16, or 12.5%, to 33 1/4 after

Goldman Sachs

raised its price target for the British computer games company to 28 pounds.

Specialty software company

Lightbridge

(LTBG)

was up 1 15/16, or 20.5%, to 11 3/8 after a bullish mention in

Business Week's

Inside Wall Street column, penned this week by Gary Weiss. Pat Farley, who follows software companies at

Kopp Investment Advisors

, told the magazine he believes the company is ripe for acquisition.

Nextel Communications was up 2 5/16, or 6.7%, to 36 15/16 after saying it received a previously announced $600 million investment from Microsoft. Nextel said Microsoft received about 16.67 million shares of its stock at the agreed price of $36 a share. Microsoft, which was up 1 9/16 to 79 15/16, now has a 4.25% stake in Nextel on a fully diluted basis.

PaineWebber

(PWJ)

was up 2 3/16 to 46 5/8 on last night's news that it will replace

Bankers Trust

(BT)

in the S&P 500 after the closing bell June 4.

Deutsche Bank

is acquiring Bankers Trust.

Sylvan Learning Systems

(SLVN)

was up 1 5/8, or 6.3%, to 27 5/16 on news it will take PaineWebber's place in the

S&P MidCap 400

.

Norway's

Saga Petroleum

(SPM)

was up 1 3/8, or 10.2%, to 14 7/8 after

Elf Aquitaine

(ELF) - Get Report

of France made a bid for the company. Elf Aquitaine was up 5/8 to 71 5/8.

Earnings/revenue movers

Computer Associates

(CA) - Get Report

was up 3 1/16, or 7%, to 47 1/16 after last night recording fourth-quarter earnings of 83 cents a share, a penny above the 24-analyst estimate and above the year-ago 75 cents. Today,

Prudential Securities

upped its price target for the stock to 50 from 45 a share.

CIBC World Markets

lifted the stock to strong buy from hold.

Medtronic

(MDT) - Get Report

was up 6 1/8, or 9.6%, to 70 1/8 after last night reporting fourth-quarter earnings of 41 cents a share, matching the 39-analyst estimate and moving ahead of the year-ago 38 cents. Today, Prudential lifted the stock to strong buy from hold and lifted its price target to 80 from 68. CIBC World Markets pushed up the stock to buy from hold.

Starbucks

(SBUX) - Get Report

was up 1 1/2 to 37 1/4 after last night saying its same-store sales for May rose 6%.