Time to Talk 10,000: Merger Buzz Spurs Big Rally

The Dow's not alone in surging, as the BP Amoco-Arco talks and other stories send stocks broadly higher.
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Like

MC Hammer

, the rally this morning looks too legit to quit as the advance is underpinned by some constructive news.

Then again, the bond market is down sharply, developments in Kosovo remain a concern and the

Federal Open Market Committee

meets tomorrow. So there are no guarantees the advance won't peter out or (at a minimum) fail to secure

Dow

10,000. Moreover, who knows where MC Hammer is these days? And, frankly, who cares?

But for now, the tide is high and major market proxies are rolling on. The

Dow Jones Industrial Average

lately was up 152, or 1.6%, to 9975, having peaked at 9989.57, while the

S&P 500

was higher by 21, or 1.6%, to 1304.

First and foremost on the good-news docket are reports of merger talks between

BP Amoco

(BP) - Get Report

and

Atlantic Richfield

(ARC) - Get Report

. With "major" oil producers looking more and more like colonels, the BP Amoco-Arco development has inspired considerable "who's next?" discussion, bolstering other producers such as Dow member

Chevron

(CHV)

and

Texaco

(TX) - Get Report

. The

American Stock Exchange Oil & Gas Index

was up 4.1%.

Oil service stocks were also on the rise after

Morgan Stanley Dean Witter

upped recommendations on

Baker Hughes

(BHI)

and

Halliburton

(HAL) - Get Report

; the

Philadelphia Stock Exchange Oil Service Index

was up 4.8%.

In addition to energy, the Dow and S&P were aided by drug makers, up after some struggles last week and reports

Bristol-Myers Squibb

(BMY) - Get Report

and

Glaxo-Wellcome

(GLX)

have engaged in preliminary merger talks. Also, the

Food and Drug Administration

ruled

Warner-Lambert

(WLA)

can still market Rezulin. The

American Stock Exchange Pharmaceutical Index

was up 2.4%.

Technology is also playing its part in the morning's upturn, partially on news that

Computer Associates

(CA) - Get Report

will acquire

Platinum Technology International

(PLAT) - Get Report

in a stock swap valued at more than $3.5 billion.

Compaq's

(CPQ)

lack of glaringly negative comments during a meeting with analysts this morning is also helping the sector.

The

Nasdaq Composite Index

was up 49, or 2%, to 2468, with traditional stalwarts such as

Sun Microsystems

(SUNW) - Get Report

,

Cisco

(CSCO) - Get Report

and

Dell

(DELL) - Get Report

leading the charge.

Internet favorites were also higher.

TheStreet.com Internet Sector

index was up 22, or 3.5%, to 651, but

TheStreet.com E-Commerce Index

had gained less than 1, or 0.7%, to 112.

Among Net plays, E-Commerce Index components

eBay

(EBAY) - Get Report

and

Onsale

(ONSL)

were lower in the wake of news that

Amazon.com

(AMZN) - Get Report

will open its own online auction site. But Amazon.com was up 7.5% and other Net bellwethers, such as

America Online

(AOL)

, were solidly higher.

Small-caps were also participating, reflecting solidly positive breadth indicators; the

Russell 2000

was up 5, or 1.2%, to 399.

"The market opened up very well from the get-go and has completely ignored what's going on overseas" in Kosovo, said Ken Ducey, director of trading at

BT Brokerage

. "Merger mania is adding fuel into the marketplace. As long as you see this, there's going to be a lot of interest to the upside. It looks like it's going to approach 10,000 later this week." If not today.

Ducey observed that "each time

the Dow has approached 10,000 we have some seen some resistance and this time is not any different. But we've got a short workweek and people know to get anything done they've got to do it early in the week."

The stock market is closed Friday in observance of Good Friday.

In

New York Stock Exchange

trading, advancers were leading declining stocks 1,777 to 1,037 on 398 million shares. In

Nasdaq Stock Market

activity, gainers were leading 2,057 to 1,534 on 462 million shares.

Surprised but Still Cautious

"This morning is a little surprising to me in that the broad market is stronger," said Bruce Bittles, market strategist at

J.C. Bradford

in Nashville, Tenn. "My guess is we've got a lot of end-of-the-quarter business on the long side of the market, plus the Arco deal. Outside of that, my guess is we'll turn around for a while."

Bittles is not bearish but believes the fact the advance/decline line made a new low last week is a telling sign. "I don't see how that can be considered particularly bullish," he said. "We're not looking for a downturn of significance, but we think 10,000 is going to be resistance."

That seemed to be the case this morning, as the Dow stalled less than 11 points from the milestone. Bittles foresees the venerable index trading between 9200 and 9900 for the time being, noting mutual-fund inflows have been "inconsistent" this year compared with 1995 to 1998. Back then, he said, "they just put money into funds. What it might mean is the public is finally becoming fully invested in terms of mutual funds."

Notwithstanding struggles earlier this year,

Liquidity Trim Tabs

reported fund inflows totaled $3.5 billion for the five trading days ended Thursday. Also, the percentage of money going into equity funds in the past four weeks was over 50% for the first time since July 1998, the report said.

Nonetheless, Bittles recommends a relatively conservative allocation model of 45% stocks, 50% bonds and 5% cash. The "big bond allocation" reflects a belief that deflation remains a greater long-term threat than inflation and that bonds are "a great hedge in case the U.S. stock market gets into trouble," he said.

The bullishness on bonds also incorporates a view that the Fed is on hold for the foreseeable future. Tomorrow's FOMC meeting is a "nonevent," Bittles said. "If they indicate a change of bias, that doesn't mean anything in terms of action later on. The Fed is not going to risk a recession or a U.S. slowdown

because all other areas of the world depend on exports to the U.S. for growth."

Nonetheless, bond traders were hedging positions. The price of the 30-year Treasury bond lately was down 27/32 to 94 5/32, its yield rising to 5.66%. (For more on the fixed-income market, see today's early

Bond Focus.)

TheStreet.com's

readers were perhaps caught a bit off guard by this morning's solid forward progress. Among respondents to

TSC's

Investor Sentiment Poll, only 40% were either very bullish or somewhat bullish while 28% claimed Swiss-like neutrality and 32% were either somewhat bearish or very bearish. The anecdotal poll is conducted each Sunday.

Monday's Midday Movers

By Heather Moore
Staff Reporter

As noted above, Atlantic Richfield was up 6 13/16, or 10.4%, to 72 3/16 after confirming it's in merger talks with BP Amoco. BP Amoco, the third-largest oil company in the world, is expected to buy Arco in a stock deal valued around $25 billion. BP Amoco was up 3 3/8 to 103 13/16.

TheStreet.com

first caught wind of a potential deal

last night.

Elsewhere in oil, Halliburton was up 2 1/4, or 5.9%, to 40 3/8 and Baker Hughes was up 15/16 to 24 3/4 after Morgan Stanley Dean Witter upgraded the stocks to strong buy from outperform.

In other merger news, Platinum Technology was rocketing up 14 15/16, or 152.2%, to 24 13/16 after Computer Associates agreed to buy its rival for $3.5 billion in one of the biggest deals to hit the software industry. Computer Associates was off 1 1/4 to 32 11/16.

In other news:

Amazon.com was up 10 3/8, or 7.5%, to 149 7/16 after announcing plans to launch an online auction service. Rumors that the book and music retailer would enter the auction biz first hit the Street

Friday. Separately, Amazon agreed to buy 50% of closely held

Pets.com

.

Auctioneer eBay was down 5 5/8 to 149 1/8, up from an earlier 146, on the Amazon news despite word it and

Warner Bros. Online

, a unit of

Time Warner

(TWX)

, set a three-year strategic alliance. Time Warner was up 1 5/16 to 70 1/8.

uBid

(UBID)

was down 2 15/16 to 71 1/2, and Onsale was down 1 1/16 to 34 3/16.

Corporate Renaissance Group

(CREN)

was up 1, or 15.7%, to 7 1/2 after saying late Friday it received a proposal from a management-led group to acquire all the company's outstanding shares for $8 a share.

Global Pharmaceutical

(GLPC)

was flying up 1 1/2, or 66.7%, to 3 3/4 after receiving approval from the

Food and Drug Administration

to manufacture and market

Minocycyline HCL

, a generic version of the antibiotic Minocin.

Lucent

(LU)

was up 4 11/16 to 106 3/4 after agreeing to supply $1 billion in equipment and services to former parent

AT&T

(T) - Get Report

under a four-year pact. AT&T was up 3/16 to 82 7/8. Also, Lucent will replace

AMP

(AMP) - Get Report

in the

S&P 100

index,

Standard & Poor's

announced

late Friday.

Among other changes to S&P indices announced last week,

Kansas City Southern

(KSU) - Get Report

, an

S&P MidCap 400

component, was up 2 5/8 to 56 5/16 on news it will replace AMP in the S&P 500 after the closing bell April 1. AMP is being acquired by S&P 500 component

Tyco

(TYC)

.

Still elsewhere,

Mohawk Industries

(MHK) - Get Report

, an

S&P SmallCap 600

component, was up 2 3/16, or 8.4%, to 28 3/16 on news it will replace Kansas City Southern in the midcap index.

Silicon Valley Group

(SVGI)

was up 15/16, or 9%, to 11 3/8 on news it will replace Mohawk Industries in the small-cap index. And

MedImmune

(MEDI)

, a component of the small-cap index, was up 3 1/16, or 5.2%, to 62 3/4 on news it will replace

Varian Associates

(VAR) - Get Report

in the midcap index.