And ah one, and ah two, and ah one, two, three:

"Oh yes, we have no inflation, we have no inflation, today."

The market's bold ascent

yesterday was validated this morning as the February

employment report was better-than-feared on the inflation-implications front.

Nonfarm payrolls rose by 275,000 for the month, exceeding the 245,000 consensus forecast but below traders' worst expectations. Moreover, January's payroll gain was revised down to 217,000 from 245,000. The unemployment rate, expected to stay flat, ticked up to 4.4% from the 29-year low of 4.3%. Perhaps most importantly, average hourly earnings rose by just 0.1%, the smallest increase since February 1996.

In reaction, the price of the 30-year Treasury bond skyrocketed; lately the benchmark was up 1 15/32 to 95 1/32, its yield falling to 5.60%. (For more on the fixed-income market, see today's early

Bond Focus.)

Not surprisingly, market proxies raced higher in the wake of the news. Given the amazing speed with which the market can go from oversold to overbought, it's unclear whether gains can be sustained or extended this afternoon (such a bold statement!). For now, however, market players are feeling groovy and the most public face of equities is threatening to set a record.

The

Dow Jones Industrial Average

lately was up 206 to 9674, having traded as high as 9689.62 this morning. The index has traded above its

Jan. 8 all-time closing high of 9643.22 and intraday high of 9647.96 for much of the session.

Dow gainers feature

IBM

(IBM) - Get Report

,

General Motors

(GM) - Get Report

and

American Express

(AXP) - Get Report

, as well as "deep" cyclicals such as

Union Carbide

(UK)

.

A record for the Dow is not as important as "how the market behaves," said Greg Nie, chief technical analyst at

Everen Securities

in Chicago. "A new closing high for the Dow is an added plus, but it's not going to be accompanied by the other averages, or doesn't appear so at the moment. As we go through the day, there's still a question of how" the market acts.

Nie observed some buy programs at the opening gave a boost to both market breadth and volume. How those internals finish is most key to the sustainability of the advance, he said, espousing "2-to-1 or even 3-to-1

advancers to decliners and 900 million shares or more on the Big Board as the kind of momentum, the kind of action that's convincing."

'Some people are still doubting this move, which says to me this market is going a lot higher,' said George K. Baum's Brian Belski. 'This is the first time in a while that stocks and bonds are hitting on all cylinders together. In the latest leg of the bull market, that's when we've seen some of the most significant moves.'

In

New York Stock Exchange

trading, advancers were recently leading declining stocks 1,971 to 845 on 480 million shares. In

Nasdaq Stock Market

activity, winners were leading 2,031 to 1,454 on 413 million shares. (An 84-minute outage for Nasdaq's

SelectNet

and

SOES

trading systems depressed the exchange's volume.)

"Early on it looks like there's some serious firepower out there," Nie added. "Continuing that through the rest of the day would be quite helpful. Then follow-through is mandatory next week."

The Dow could hit 10,500 in the near term, Nie said, "based on a long history of major moves able to get 18% or more above the 200-day moving average," which is 8813. "But I'm more interested in how, and have been for a while," he said. "Show me the momentum. If the momentum is not there, then skepticism returns."

Having traded as high as 1273.59, the

S&P 500

lately was up 22 to 1269 and in striking range of its

Jan. 29 closing best of 1279.64. The

Russell 2000

was up 3 to 397.

The

Nasdaq Composite Index

was up 38 to 2331, having traded as high as 2339.21. Following its recent 10% correction, the index remains well below its record high of 2510.20, reached

Feb. 1.

News that

Intel

(INTC) - Get Report

will acquire

Level One Communications

(LEVL) - Get Report

for $2.2 billion in stock culminates a week of buyouts, offers and partnerships in the tech sector. The developments have rekindled interest in the recently flagging group. Intel was up 1.8% while Level One was soaring a whopping 68.4%.

In both Big Board and over-the-counter trading, nearly all tech bellwethers were joining IBM and Intel on the upside; the

Nasdaq 100

was lately up 1.6%, the

Morgan Stanley High-Tech 35

was up 2.4% and the

Philadelphia Semiconductor Index

was higher by 4.7%. Only a profit warning from

CompUSA

(CPU)

last night was restraining the enthusiasm.

Internet names were also joining the celebration.

TheStreet.com Internet Sector Index

was up 9 to 532 while

TheStreet.com E-Commerce Index

was higher by 1 to 95.

The E-Commerce Index was

revised after yesterday's close, with

Cyberian Outpost

(COOL)

,

Digital River

(DRIV) - Get Report

and

uBid

(UBID)

replacing

Barnes & Noble

(BKS) - Get Report

,

Hollywood Entertainment

(HLYW)

and

Micro Warehouse

(MWHS)

.

Joy and Pain, Sunshine and Rain

As much as the employment data, rising skepticism is responsible for the upturn, according to Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo.

"Some people are still doubting this move, which says to me this market is going a lot higher," Belski said. "This is the first time in a while that stocks and bonds are hitting on all cylinders together. In the latest leg of the bull market, that's when we've seen some of the most significant moves."

The strategist believes the action today and yesterday is "just the start of an upward move in both markets that proceeds to at least the end of the quarter and probably until tax time."

The Dow has a "real shot" at hitting 10,000 by April 15 and the S&P will likely overtake 1300, he said. But "I think the Nasdaq will lag and have a hard time getting back over 2500. I think leading the way will be the Dow," as it has since Feb. 1 (as

TheStreet.com

noted in a feature

yesterday).

During this morning's euphoria, Belski observed the Nasdaq is trailing a bit and some high-profile tech names are "fading a little." For example,

Compaq

(CPQ)

lately was up 15/16 to 34 1/4 but off its earlier high of 34 9/16.

"With this type of move in the broader market and considering the beating it's taken, you would expect Compaq to bounce

more," Belski said. "This speaks well to what's going on in terms of mega-cap technology. You've seen a rotation out of those types of names and into blue-chips --

such as financials, consumer cyclicals and some oil stocks -- which continue to reign supreme."

Friday's Midday Movers

By Heather Moore
Staff Reporter

As noted above, Level One Communications was flying up 18 1/2, or 68.4%, to 45 5/8 after Intel agreed to acquire the company for $2.2 billion in stock last night. Intel was up 2 1/16 to 115 7/16.

TheStreet.com

looked at the deal in a

piece last night.

In other news:

AEP Industries

(AEPI)

was up 1 3/4, or 9.2%, to 20 13/16 after announcing it's getting out of the oriented polypropylene business. The company expects to incur a $27 million loss as a result. AEP will sell selected assets associated with the business to

Applied Extrusion Technologies

(AETC)

, lately up 1/32 to 6 3/4, for $13 million.

Century Communications

(CTYA)

was up 2 15/16, or 8.4%, to 38 1/16 after

Adelphia Communications

(ADLAC)

agreed to buy the company for $5.2 billion, including $1.6 billion in debt. Adelphia was down 3 3/4, or 6.6%, to 52 15/16. The deal -- which will make Adelphia the fifth-largest cable TV system operator in the country -- calls for Century's Class A stockholders to receive $9.16 a share in cash and 0.61 of a Adelphia Class A common share for every Century Class A share. Century's Class B stockholders will receive $11.81 in cash and 0.64 of a Adelphia Class A share for every Century Class B share.

Harvey Entertainment

(HRVY)

was up 1 13/16, or 35.4%, to 7 after last night saying its founder and former chairman and chief executive, Jeffrey A. Montgomery, made an offer to acquire the company. Under the proposed agreement, shareholders would receive three-year senior secured notes and five-year common-share purchase warrants of Montgomery's

Harvey Acquisition

in exchange for their shares.

Magainin Pharmaceuticals'

(MAGN)

was falling 2 7/32, or 58.2%, to 1 5/8 after last night an advisory panel to the

Food and Drug Administration

rejected its

Locilex

, a topical treatment for infected foot ulcers. Today,

Hambrecht & Quist

cut the stock to hold from buy.

7thStreet.com

(SEVL)

-- no relation to this publication or its parent company -- was jumping 2 1/16, or 75.9%, to 4 25/32 after the

oft-wrong Inside Wall Street column in

Business Week

said the tiny Internet content provider is preparing to announce a pact with

America Online

(AOL)

. The company's Tutorials.com is expected to become an "anchor tenant" in AOL's Computing and Workplace Channels, according to the column. AOL was up 9/16 to 86 13/16.

Wal-Mart was up 2 1/2 to 91 15/16 after last night setting a 2-for-1 stock split, increasing its buyback program by $1.2 billion to $2 billion and boosting its annual dividend to 40 cents a share.

Yahoo!

(YHOO)

was up 7 1/16 to 158 11/16 after H&Q upgraded it to buy from hold.

Earnings/revenue movers

IDX Systems

(IDXC)

was tumbling 11 1/16, or 42.6%, to 15 after warning it expects to post a first-quarter loss of 22 cents to 28 cents a share because of an unexpected deferral of purchasing decisions by its customers. The 22-analyst consensus called for earnings of 35 cents vs. the year-ago profit of 28 cents.

Credit Suisse First Boston

dropped the stock to hold from buy, and

Merrill Lynch

lowered it to near-term neutral from accumulate while keeping it at long-term buy. Other health-care information stocks were feeling IDX's pain:

Quadramed

(QMDC)

was down 3 1/8, or 19.9%, to 12 5/8;

Cerner

(CERN) - Get Report

was down 7/8, or 5.6%, to 14 11/16; and

Shared Medical Systems

(SMS)

was down 3 1/4, or 6.1%, to 50.

McKesson HBOC

(MCK) - Get Report

was down 5 1/2, or 8.4%, to 60 3/8 after

Morgan Stanley Dean Witter

separately downgraded it to outperform from strong buy.

Allied Waste

(AW)

was down 2, or 10%, to 18 despite posting fourth-quarter earnings of a quarter a share, in line with the nine-analyst estimate and up from the year-ago 12 cents.

Anchor Gaming

(SLOT)

was down 4 5/16, or 10.7%, to 36 1/4 after last night saying it sees third-quarter earnings coming in at $1.10 to $1.20 a share due to a reduction in the number of income-generating gaming machines placed by its stand-alone propriety games operations. The six-analyst view called for a repeat of the year-ago $1.33. Today,

Prudential Securities

lowered the stock to hold from accumulate.

CompUSA was down 2 1/16, or 25.4%, to 6 1/16 after last night warning it sees a break-even third quarter and a fourth-quarter loss because of lower-than-expected sales. Today,

Salomon Smith Barney

downgraded the stock to neutral from outperform,

Goldman Sachs

lowered it to market performer from outperformer, and both Credit Suisse First Boston and

NationsBanc Montgomery Securities

slashed it to hold from buy.

Information Advantage

(IACO)

was down 2, or 16.3%, to 10 3/8 after last night reporting fourth-quarter earnings of 7 cents a share, in line with the nine-analyst view and up from the year-ago 2 cents. The company also announced it adopted a shareholder rights plan but not in response to any known takeover threat.

Rawlings Sporting Goods

(RAWL)

was down 2 1/8, or 17.5%, to 10 after last night saying it expects to post second-quarter earnings of 38 cents to 43 cents a share because of delayed orders that may be placed closer to baseball season, financial problems at several retailers and competitive pressure. The two-analyst estimate called for 66 cents vs. the year-ago 61 cents.

WinStar Communications

(WCII)

was up 2 3/16, or 6.8%, to 34 3/4 after last night posting a fourth-quarter loss of $3.80 a share, 6 cents narrower than the 14-analyst expectation but wider than the year-ago loss of $2.18.