This is from Street.com, has some comment from Bill M.
For private use only.
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Tech-Sparked Rally Sets Records but Leaves Some Worried
By Aaron L. Task
Senior Writer
4/5/99 5:02 PM ET
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.
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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, 699.7 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 978.4 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.
Market data above are preliminary. Updated numbers and Monday's Company Report will follow this story.
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