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Fri, Jun 16, 2000
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One to Tango: Nasdaq Dances Solo Into Record Territory
By Aaron L. Task

Like rock 'n' roll, you can't stop the Nasdaq Composite Index (can't stop, you can't stop it). But the tech-laden index again lacked a dance partner; while it drove further into record territory today, blue-chip proxies faded modestly.

Major Indices
-0.5% 10,905.79 -5.1%
S&P; 500
-0.01% 1424.21 -3.1%
+1.8% 4320.85 +5.1%
Russell 2000
+1.3% 532.39 +5.4%
TSC Internet
-0.3% 1137.19 -0.9
TSC New Tech 30
-0.3% 640.24 +3.6%
30-Year Treasury
97 5/32 6.338%

With the wild gyrations evident late last week having subsided but the quarterly refunding looming ahead, the long end of the bond market stumbled, taking interest rate sensitive stocks and the Dow Jones Industrial Average along for the ride.

The price of the 30-year Treasury bond fell 31/32 to 97 5/32, its yield rising to 6.34%.

In response (partially), the Dow fell 58.01, or 0.5%, to 10,905.79 after spending the entire session below break-even and trading as low as 10,846.22.

Weakness in rate-sensitive components such as General Electric, down 3.8%, exerted the greatest negative influence on the blue-chip proxy.

Undaunted by rising bond yields or the Dow's decline (as if either has had much influence), the Comp rose 76.71, or 1.8%, to an all-time best of 4320.85, building on its record-setting close of Friday.

Among traditional tech bellwethers, the index got its biggest lift from MCI WorldCom, which rose 8.1% after Salomon Smith Barney "aggressively" reiterated its buy recommendation.

Oracle and Cisco each rose more than 3%, helping the Nasdaq 100 gain 1.5%.

Semiconductor and equipment makers were a standout within technology today after the Semiconductor Industry Association reported global sales rose 19% in 1999. Applied Materials, Atmel and Micron were strong throughout while Intel awakened late in the day, helping the Philadelphia Stock Exchange Semiconductor Index rise 3.9%.

But the Comp's latest record was not symptomatic of a breakaway session for tech stocks, as Internet and even momentum favorites struggled.

TheStreet.com Internet Sector index fell 3.07, or 0.3%, to 1137.19 while TheStreet.com New Tech 30 slid 1.89, or 0.3%, to 640.24. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at http://www.thestreet.com/newtech/.

The New Tech 30 was restrained by Akamai, which fell 3.9% after announcing plans to acquire InterVu, which gained 7%.

Mergers were definitely a highlight of the session, as this day lived up to the "Merger Monday" moniker the financial media is so enamored of.

The biggest, of course, featured Pfizer, which rose 2.6% after finalizing -- on friendly terms -- its once-hostile bid for Warner-Lambert, which rose 2.7%. American Home Products , which walked away from Warner Lambert with "breakup" fees of over $1.8 billion, rose 5.5%. Still, the American Stock Exchange Pharmaceutical Index rose just 0.5% as investors continued to prefer less staid names in the industry. The Amex Biotech Index soared 7.2%.

Without a big lift from drugmakers and with retailers and financials weak, the S&P; 500 fell 0.16 to 1424.21. The small-cap Russell 2000 rose 6.87, or 1.3%, to 532.39.

"This just continues to be the same theme as last week - tech leads and the rest of the market isn't just lagging, it's going down," surmised Jon Olesky, head of block trading at Morgan Stanley Dean Witter. "People are concentrating their bets in a very narrow pattern. That got rolling big last week and kept going today. People get on a story, and they're ramping it."

One of the big ramping tech stories today was Hewlett-Packard, which soared 8.8%. The company announced a series of marketing and technology partnerships with a variety of companies today and CEO Carly Fiorina apparently made some bullish comments today at a meeting with investors. Still, most traders were perplexed at the extent of H-P's move.

In New York Stock Exchange trading, 917.7 million shares were exchanged while declining stocks led advancers 1,776 to 1,228. In Nasdaq Stock Market action 1.607 billion shares traded while gainers led 2,345 to 1,852. New 52-week lows bested new highs 140 to 79 on the Big Board while new highs led 318 to 58 in over-the-counter trading.

Start Making Sense

Although the market's most recent round of bifurcated action has some perplexed, Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, said it is logical.

"The market is extremely rational," he said. "Interest rates are affecting most valuations. We're seeing companies going down to 13, 14 times earnings -- they're there for a reason. The market is saying, 'We're going to ignore these companies because they don't represent growth.'"

A variety of sectors fall into this "ignored" category, including retailers, financials and transports, Hyman said, questioning the mindset that the Russell 2000's recent gains represent a "broadening" of interest. "It's broadened only in tech and biotech," he said.

Hyman believes the Federal Reserve will "take some time off" after raising interest rates in March and thus sees opportunity in financials, particularly regional banks and S&Ls.; But tech remains by far his favorite sector. "There's little money to be made outside of tech."

However, rationality is getting "a little stretched" when a company such as EMC, up 4.6% today, can be considered "a good value" because it's "only" trading at 70 times earnings when its peers are trading at 100 times, he said.

Still, "I accept the market and think investors accept it," the strategist said. "There's a fundamental change in how people define value at this point."

Among other indices, the Dow Jones Transportation Average fell 36.75, or 1.4%, to 2572.21; the Dow Jones Utility Average slid 2.39, or 0.8%, to 306.91; and the American Stock Exchange Composite Index rose 1.11, or 0.1%, to 884.08.

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