Wall Street Debates Whether Jobs News Will Send Mega-Caps Back into Orbit

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The moderate-but-robust economy has finally provided the news that's going to light a fire under big-cap stocks and send them stratospheric -- maybe.

Even with the September jobs report coming out surprisingly weak and sending the 30-year Treasury yield to its lowest levels since early 1996, there's some doubt on Wall Street whether this heralds the long-awaited breakout or a shift in the trading range for the biggest of big stocks. The tech-spangled

Nasdaq Composite Index

and the broad

S&P 500

are charging into record ground with 1.2% gains, with the S&P poised to make a new closing high for the first time since Aug. 6's 960.32. The small-cap

Russell 2000

also is continuing its record-setting ways, up 0.9%. But the

Dow Jones Industrial Average

, having shot up nearly 117 points by 9:45 a.m. EDT, by noon was up a mere 59, or 0.7%, to 8087.

"I'm kind of confused," said Edward Collins, head of trading at

Daiwa Securities

. "Maybe we'll continue to climb the wall of worry and test the old highs. That's what it looks like right now."

Collins noted that today's rally is remarkably broad-based, with

New York Stock Exchange

advancers crushing decliners by a 21-to-6 margin and new highs over new lows by 533 to 3. But he said it remains unclear whether this is more than just a one-day pop.

Thomas McManus, market strategist at

NatWest Securities

, thinks this move will have some staying power. And he thinks the small-cap-led market is about to change horses.

" I think the leadership is going to swing back to the super large-cap, multinational Nifty 50 that was leading the market for a couple of years," McManus said. "Watching the small-caps underperform for three years,

investors see them outperform for two months and they think it's the next big bull move in small-caps."

Depending on small- and mid-cap companies to consistently lead the market higher ignores some basic economic realities, McManus said. Competitive pressures will make it difficult for any but extraordinary companies to outperform, he said -- and the most extraordinary companies are the biggest ones.

"I can't believe how many people saw a currency crisis in Southeast Asia and decided they needed to sell

Coca-Cola

(KO) - Get Report

or

Gillette

(G) - Get Report

or

Procter & Gamble

(PG) - Get Report

on that basis," McManus said. "I don't know enough about those companies out there, but I know that

Johnson & Johnson

(JNJ) - Get Report

and Coke and

Colgate

(CL) - Get Report

have significant growth opportunities in those areas. If there's going to be a significant decline in income, that's going to cause a decline in cellular handset sales, but my sense is that this does not necessarily keep them from buying a Coke when they're walking down some dusty road."

But Michael Metz, chief investment strategist at

Oppenheimer

, believes the international situation is going to hurt stocks of all sizes more than many market mavens think. "I think we're going to see a reacceleration of the economy over the rest of this year and into 1998," he said. "We're on the verge of a worldwide synchronized expansion that's going to cause commodity inflation. I don't think it's up-and-away from here."