Tech-Sparked Rally Sets Records but Leaves Some Worried

The Dow, the S&P, the Nasdaq and the DOT all posted all-time highs, but stretched valuations and weak internals are raising doubts.
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There's something about Mondays. For the second consecutive one, stocks stormed out of the weekend in impressive fashion, sending major market gauges to record highs.

Unlike

last Monday, when energy names set the pace, technology stocks led today's stampede. The

Nasdaq Composite Index

climbed 66.69, or 2.7%, to 2560.06, notching its first record-setting close since hitting 2510.09

Feb. 1.

Technology's bellwethers rose in near unanimity, lifting the

Nasdaq 100

3.4%, the

Philadelphia Stock Exchange Semiconductor Index

4.3% and the

Morgan Stanley High-Tech 35

higher by 5%.

Internet favorites, led by

Yahoo!

(YHOO)

, which gained 21.9%, also rocketed ahead.

TheStreet.com Internet Sector

index gained 25.69, or 3.9%, to an all-time high of 683.12 while

TheStreet.com E-Commerce Index

climbed 7.11, or 6.1%, to a record 123.23.

The

Dow Jones Industrial Average

rose as high as 10,023.15 before closing up 174.82, or 1.8%, at 10,007.33, eclipsing its previous best of 10,006.78 set a week ago.

Fittingly, tech components

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HWP)

were among the Dow's best performers, joined by

American Express

(AXP) - Get Report

and

Chevron

(CHV)

.

The

S&P 500

gained 27.40, or 2.1%, to a record 1321.12, besting its previous high of 1316.55 set

March 18 .

The

Russell 2000

remains well short of its all-time high but surpassed the psychologically important (?) 400 barrier, up 3.55, or 0.9%, to 402.29.

The extent of the rally was best reflected in the new-high list, which was littered with finely pedigreed names.

In

New York Stock Exchange

trading,

America Online

(AOL)

,

General Electric

(GE) - Get Report

,

Texas Instruments

(TXN) - Get Report

,

Sprint

(FON)

, and

American International Group

(AIG) - Get Report

each set new 52-week highs (just to name a few).

In over-the-counter activity,

Sun Microsystems

(SUNW) - Get Report

,

Microsoft

(MSFT) - Get Report

,

broadcast.com

(BCST)

, and

EchoStar Communications

(DISH) - Get Report

each raced to all-time highs.

Online brokers stood out, soaring in reaction to a favorable report by

Credit Suisse First Boston

.

Ameritrade

(AMTD) - Get Report

rose 46.5%,

E*Trade

(EGRP)

gained 19.1%, and

Charles Schwab

(SCH)

jumped 9.7%; each established a new high.

Donaldson Lufkin & Jenrette

(DLJ)

also established a new best, rising 6.1%. The

American Stock Exchange Broker/Dealer Index

gained 5.4%.

However, market internals did not reflect the euphoria.

"I think if there's a fly in the ointment, it's the volume," said Jim Herrick, managing director of trading at

Robert W. Baird

in Milwaukee. "The breadth was another negative. But you look at the tech and Internet names there was some good volume, that obviously fueled the rally. Short-covering also contributed."

In NYSE trading, 701.2 million shares were exchanged -- fewer than in

Thursday's preholiday session -- while gainers led losers 1,689 to 1,302. In

Nasdaq Stock Market

activity 983.2 million shares were exchanged while declining issues led 2,163 to 1,909. Moreover, new 52-week lows bested new highs 81 to 66 on the Big Board and by 178 to 123 in over-the-counter trading.

"You would like to have confirmation on the volume side, but overall we closed above 10,000, the S&P and Nasdaq are at a record, so it was a good day," Herrick said. "I think the nonfarm payrolls being lighter than expected means any hint the

Fed

might

tighten is put to rest, so you can justify valuations based on earnings that will be forthcoming. That's the bottom line."

Pundits Alternately Impressed and Aghast

The bond market was quiet today -- the price of the 30-year Treasury rose 4/32 to 95 3/32, its yield dipping to 5.59% -- but equity investors pounced on the benign employment data, which sent bond yields tumbling

Friday while stock markets were shuttered in observance of Good Friday.

Another factor in the market's upturn was a bullish report by Bruce Steinberg, chief economist at

Merrill Lynch

.

"We are becoming more optimistic about earnings outlook as negatives associated with global crisis recede," he wrote in a research report published today. "We now expect S&P 500 operating

earnings per share to rise 8.5% to $48 in 1999 and to $51 in 2000. Prior estimates were $47 and $50, for 1999 and 2000, respectively. These new estimates are above consensus."

Similarly, the economist lifted gross domestic product forecasts to a rise of 3.5% in 1999 and 3% in 2000, versus previous predictions of 3% and 2.6%, respectively.

Steinberg has spearheaded the "growth recession" mantra at Merrill. Thus, his positivism was greeted with cheers (plus a few "about time" comments). Steinberg did not return calls seeking comment.

Still, other doubters remain fervently so.

"It's just a mania. All the classic signs are there," said Bill Meehan, chief market analyst at

Cantor Fitzgerald

. "Most of these stocks that are booming here -- of a lot of them -- there's no market maker. It's just a lot of individuals flipping shares. I'm watching the Nasdaq tape and there are no real companies trading."

Demonstrating more open-mindedness than some investors doubtless give him credit for, Meehan said the performance of AOL -- which rose 11.2% and continues to confound other prognosticators -- is understandable.

"At least that's the one with a business plan that has earnings at the end of it," he said. "Even at the beginning of Internet mania I put that aside from other stocks that don't seem to have a realistic way to justify market caps. A lot of portfolio managers use that as their 'safe' way to get exposure to the Internet and it's just exploded from there."

As for what will spark the broader downturn he sees as inevitable, the strategist conceded "that's the $64,000 question. There's a lot of things out there that could trigger it. The situation in Kosovo is being given short shrift

because it seems to me the only logical conclusion other than pulling out altogether is ground troops, which I don't think would be met terribly well."

Also, some emerging markets and Japan are starting to recover which could foster some "capital shift" out of the U.S., Meehan noted. Finally, "if I were a foreign investor, I would be a little concerned about the trade deficit, even if valuations were reasonable," he said.

Among other indices, the

Dow Jones Transportation Average

rose 44.24, or 1.3%, to 3353.40; the

Dow Jones Utility Average

gained 2.22, or 0.8%, to 297.23; and the

American Stock Exchange Composite Index

climbed 9.94, or 1.4%, to 721.24.

Elsewhere in North American equities, the

Toronto Stock Exchange 300

jumped 114.89, or 1.7%, or 6739.70 and the

Mexican Stock Exchange IPC Index

soared 171.59, or 3.5%, to 5101.94.

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 note above, online brokerages shot up on word from Credit Suisse First Boston that online trading volume rose 30% to 35% to about 450,000 trades a day during the first quarter. The firm also said E*Trade, which lifted 11 5/8, or 19.1%, to an all-time high of 72 5/8, and Ameritrade, which lifted 29 1/16, or 46.5%, to an all-time high of 91 5/8, might beat earnings targets. Charles Schwab flew 9 1/8, or 9.7%, to an all-time high of 103 3/8;

Siebert Financial

(SIEB) - Get Report

flew 4 13/16, or 20.6%, to 28 1/8; and

National Discount Brokers

(NDB)

flew 4 9/16, or 16.6%, to 32.

Elsewhere in Netland, Yahoo! soared 39 5/16, or 21.9%, to 219 1/8 after reaching a deal by which its content and services will be optimized and delivered to personal digital assistants and Internet appliances through

Online Anywhere's

Author Once, View Anywhere service. Still elsewhere, online bank

Net.B@nk

(NTBK)

jumped 25 1/2, or 33.8%, to an all-time high of 101 11/16 after saying it opened a record 8,000 new accounts during the first quarter.

Amazon.com

(AMZN) - Get Report

surged 15 3/8, or 9%, to 186 1/2 on news it and

Wal-Mart

(WMT) - Get Report

agreed to settle all claims and counter claims related to Amazon.com and

drugstore.com's

hiring practices. In October, Wal-Mart filed suit against Amazon.com, drugstore.com,

Kleiner Perkins Caufield & Byers

and former Wal-Mart executive Richard Dalzell, alleging Kleiner Perkins improperly recruited Wal-Mart employees. Wal-Mart picked up 2 1/8 to 95 3/8.

And AOL climbed 16 15/16, or 11.3%, to an all-time high of 166 15/16 on market chatter of a linkup with

CBS

(CBS) - Get Report

. The

San Jose Mercury News

reported that the two companies have been holding talks over the past year. CBS scored 1 3/4 to an all-time high of 41 7/8. Meanwhile, AOL said it bought

When.com

, a provider of free Internet calendaring and event services, for an undisclosed amount of AOL stock.

Mergers, acquisitions and joint ventures

Ameritech

(AIT) - Get Report

tacked on 2 3/8 to 62 5/8 on news it will sell 20 Midwestern cellular properties for $3.7 billion in cash to a venture of

GTE

(GTE) - Get Report

and

Georgetown Partners

. Ameritech said the move meets

Justice Department

conditions for approval of its merger with

SBC Communications

(SBC)

, which added 1 1/16 to 50 13/16. GTE slipped 9/16 to 60 3/16. On Thursday,

Federal Communications Commission

Chairman

William Kennard

said he has "serious concerns" about whether the planned $61 billion merger of SBC and Ameritech is in the public interest.

Hanger Orthopedic Group

(HGR)

swelled 1 7/8, or 14.4%, to 14 7/8 after agreeing to buy the orthotics and prosthetics division of

NovaCare

(NOV) - Get Report

in a deal valued at $455 million. NovaCare expanded 7/16, or 36.8%, to 1 5/8.

Mosaix

(MOSX)

advanced 2 5/8, or 32.3%, to 10 3/4 after

Lucent Technologies

(LU)

agreed to acquire the company in a stock swap valued at about $145 million, or $10.77 a share. Lucent grew 3 1/16, or 5.5%, to 58 15/16.

Rental Service

(RSV)

vaulted 5, or 29%, to 22 1/4 after

United Rentals

(URI) - Get Report

launched an unsolicited $22.75-a-share cash tender offer for all the company's outstanding shares. United Rentals shed 15/16 to 27 13/16.

SkyTel Communications

(SKYT)

rocketed 3 15/16, or 26.1%, to 19 1/32 after

Business Week

reported that MCI WorldCom is considering taking over the wireless messaging company.

MCI WorldCom

(WCOM)

surged 3 3/16 to 92 1/2.

Telewest

(TWSTY)

flourished 3 3/8, or 7.3%, to an all-time high of 50 1/4 after

The Wall Street Journal

said Britain's

Cable & Wireless

(CWP)

is mulling over a proposal to merge the residential assets of its cable TV division with the company. Cable & Wireless pulled in 1 to 37 3/4.

Tyco

(TYC)

rose 2 to 73 7/8 after completing its acquisition of

AMP

and naming Juergen Gromer president.

Earnings/revenue reports and previews

Aspect Development

(ASDV)

tanked 14 13/32, or 64.6%, to an all-time low of 7 15/16 after warning first-quarter earnings will miss estimates due to large contract delays. The 13-analyst forecast called for earnings of 12 cents a share vs. the year-ago 7 cents.

BT Alex. Brown

lowered the stock to market perform from buy, and Credit Suisse First Boston cut it to hold from strong buy.

Aspen Technologies

(AZPN) - Get Report

tumbled 3 1/8, or 23.8%, to 9 15/16 after saying it expects to post a "significant" operating loss in the third quarter. The five-analyst estimate called for earnings of 18 cents a share.

Axent Technologies

(AXNT)

halved, falling 11 7/8 to an all-time low of 8 1/16, after saying it expects to post a first-quarter loss of 5 cents to 10 cents a share before nonrecurring charges associated with the acquisitions of

Internet Tools

and

PassGo

. The 14-analyst consensus called for earnings of 18 cents vs. the year-ago 12 cents.

Centennial Healthcare

(CTEN)

skidded 4 1/16, or 48.5%, to an all-time low of 4 5/16 after reporting fourth-quarter earnings of 24 cents a share, a nickel below the three-analyst estimate and behind the year-ago 32 cents. Also, privately held

Welsh Carson Anderson & Stowe

canceled its proposed $300 million acquisition of Centennial, citing a federal investigation into the company.

Eagle USA Airfreight

(EUSA) - Get Report

shot up 2 11/16, or 8.4%, to 34 13/16 after saying it expects to post earnings of 27 cents to 29 cents a share in the second quarter, which would be above the current eight-analyst view of 24 cents.

First Union Real Estate

(FUR)

closed flat at 4 after reporting fourth-quarter earnings of 18 cents a share, a penny shy of the three-analyst outlook and below the year-ago 21 cents.

National Research

(NRCI)

lost 1, or 27.6%, to an all-time low of 2 9/16 after saying it expects delays converting to a automated production system to "significantly" hurt first-quarter revenue. A three-analyst estimate calls for first-quarter earnings of a dime a share, vs. the year-ago 8 cents, and 52 cents for 1999.

Pediatrix Medical Group

(PDX)

fell 9 1/2, or 35.7%, to annual low of 17 1/8 after saying it sees first-quarter earnings of 45 cents to 48 cents a share. The 15-analyst view called for 49 cents vs. the year-ago 39 cents. The company blamed increased accounting and legal expenses. Pediatrix also said government officials in Arizona and Colorado are seeking billing-related documents and information from the company.

Software AG Systems

(AGS) - Get Report

soured 2 3/16, or 29.7%, to an annual low of 5 3/16 after warning of first-quarter earnings of 16 cents to 18 cents a share because of a decline in product license revenue and softness in Y2K remediation work.. The six-analyst outlook called for 21 cents vs. the year-ago 17 cents.

Synopsys

(SNPS) - Get Report

sloughed off 7 1/8, or 13.4%, to 46 despite saying it expects to post second-quarter results in the range of prior expectations. The 16-analyst estimate calls for earnings of 60 cents a share vs. the year-ago 50 cents. But, according to

Reuters

, John Barr of

Needham

told clients the company has missed several major customer orders.

Offerings and stock actions

The Wall Street Journal's

Heard on the Street column said

Gartner Group's

(IT) - Get Report

plan to spin off most of the 47% of Gartner stock owned by

IMS Health

(RX)

has upset some Gartner shareholders. Some non-IMS shareholders argue that the plan benefits only IMS while hurting other investors by costing them their majority vote in electing Gartner's board, the column reported. Gartner lost 1 3/4, or 7.7%, to 21 1/16; IMS Health added 5/8 to 33 1/8.

General Instrument

(GIC)

picked up 1 3/16 to 32 5/8 after saying it will repurchase 5.3 million shares of its stock owned by two partnerships affiliated with

Forstmann Little

for $148.4 million. In a separate transaction,

Liberty Media

(LMGA)

agreed to purchase 10 million General Instrument shares from the Forstmann Little partnerships for $280 million. Also, General Instrument said it expects Forstmann Little to sell additional General Instruments shares in a block transaction that will reduce its ownership interest in the company to about 1%. Liberty Media, a unit of

AT&T

(T) - Get Report

, picked up 1 1/8 to 55 7/8. AT&T gave up 1 1/16 to 77 7/16.

Separately,

News Corp.

(NWS) - Get Report

expanded 3 5/16, or 10.8%, to an all-time high of 33 7/8 after

The Wall Street Journal

reported that Liberty Media plans to eventually take a 7.5% stake the company worth $2.1 billion.

Gillette

(G) - Get Report

slid 1 1/2 to 57 3/4 after

Kohlberg Kravis Roberts

announced plans to sell more than 25 million shares, worth more than $1.5 billion, in halving its profitable investment in the household goods concern.

Analyst actions

CKE Restaurants

(CKR)

shaved off 1 7/8, or 9.5%, to 17 7/8 after

BancBoston Robertson Stephens

lowered it to buy from strong buy.

Jabil Circuit

(JBL) - Get Report

jumped 3 3/4, or 9.2%, to an all-time high of 44 7/16 after

Morgan Stanley Dean Witter

began coverage with an outperform.

QuadraMed

(QMDC)

sank 2 25/32, or 39.7%, to an all-time low of 4 1/4 after

Bear Stearns

lowered the stock to attractive from buy,

Warburg Dillon Read

downgraded it to hold from buy, and

CIBC Oppenheimer

cut it to hold from strong buy.

Qualcomm

(QCOM) - Get Report

rose 11 7/16, or 8.3%, to an all-time high of 148 7/8 after

First Albany

upped it to accumulate from neutral.

Miscellany

Medtronic

(MDT) - Get Report

lowered 2 11/16 to 67 15/16 after warning doctors who have implanted the company's GEM SR single-chamber defibrillator that a specific component may lead to early battery drain.

MMC Networks

(MMCN)

hopped up 3 3/4, or 22.4%, to 21 after naming former

3Com

(COMS)

executive vice president Douglas Spreng as its president.