Nasdaq 5000! Tech Fever Ignites Broad Market Rally

The Nasdaq Composite surged 149.60 points, or 3.1%, to a record high of 5046.86 — its first close above the 5000 level. Today's was the fourth-largest price gain ever, but not even in the top 10 in terms of percentage. The Russell 2000 Index of small-capitalization stocks also hit a record, climbing 11.37 points to 606.05.

Meanwhile, the Dow, which fell 117 points early in the day, leapt 154.20 points, or 1.6%, by the close to end at 10010.73. The broader S&P 500 index jumped 34.99, or 2.6%, to 1401.69.

The Nasdaq Composite, a weighted index of all the stocks on the Nasdaq Stock Market, has more than doubled since Jan. 1, 1999. It hit the 3000 mark on Nov. 3, 1999, and crossed 4000 for the first time less than three months ago, on Dec. 29, 1999.

"The Nasdaq 5000 is smacking people across the face and saying, 'I don't care if the Dow is down. There is money going into stocks and they're real stocks,"' says Ben Marsh, director of equity trading at Adams, Harkness & Hill. "The money will continue to go into these Nasdaq companies. The drop to Dow 10000 will wake up some common person and he'll say, 'Berkshire Hathaway isn't the only way to play. There are other ways to make money right now."'

Tech resumed its place as king on the strength and leadership of its biggest members: Microsoft (MSFT), Dell Computer (DELL), Oracle (ORCL) and Intel (INTC). Surprisingly, the biotechnology group, which has been a leader on the Nasdaq this year, declined today. Cisco Systems (CSCO) hit a record high on rumors that Dow Jones (DJ) would add the networking giant to the stock market bellwether, the Dow Jones Industrial Average, replacing long-time component Procter & Gamble (PG).

The rumor began rumbling on Internet message boards and took on a life of its own. Dow Jones said it refuses to comment on changes to the average, and that information on changes has never been leaked. Dow Jones publishes the Wall Street Journal, and co-owns SmartMoney and SmartMoney.com with Hearst Communications.

Bond were largely unenthusiastic about the Treasury Department's first buyback of government debt since 1930. Prices were flat to mildly higher. The yield on the 30-year Treasury bond, which moves in the opposite direction of price, ended flat at 6.16%, even with Wednesday's close. Ten-year bond yields declined to 6.36% from 6.38% on Wednesday. At 11 a.m. ET, the Treasury paid $1.35 billion for $1 billion in long-term debt, at a weighted average yield of 6.49%. The government ultimately intends to repurchase $30 billion in Treasury bonds as part of its campaign to pay down the national debt.

Oil prices also firmed a bit this morning, after plunging about 8% yesterday, on hopes that the Organization of Petroleum Exporting Countries' members will agree to boost oil production when they meet March 27. Iran and Saudi Arabia signaled such willingness yesterday. The recent rise in oil has been fodder for inflation hawks and kept pressure on the bond market.

Apart from the Nasdaq, the news ticker was dominated by voracious German companies. Deutsche Telekom (DT) has made separate offers for U.S. telecommunications companies Qwest Communications International (Q) and its merger partner U S West (USW) in a deal that could exceed $100 billion, according to the Wall Street Journal. Deutsche Telekom and U S West declined to comment, while Qwest only confirmed that discussions were continuing. Talks are still in preliminary stages and could fall apart at any time, the Journal cautioned. Qwest shares leapt 6.3%; U S West gained 8.8%.

Meanwhile, Deutsche Bank ended speculation by agreeing to buy Dresdner Bank for $29 billion to create the world's biggest bank in terms of assets. While the deal is being termed a merger of equals, Deutsche Bank will control between 60% and 64% of the new bank, which will be called — surprise — Deutsche Bank. The company will be split into two businesses — one for investment banking and funds and one for retail operations. It will close 800 branches and lay-off 16,000 workers in an effort to save costs. Both companies' shares tumbled in Europe.

Back in the States, America Online (AOL) jumped 11.2% on reports it is talking with AT&T (T) about forming a partnership. Bloomberg reported that AOL Chairman Steve Case said discussions are underway.

Credit Suisse First Boston reiterated its Strong Buy rating on AOL after Case spoke at the firm's telecom conference Wednesday. Credit Suisse expressed confidence in AOL's underlying fundamentals, especially its strong subscriber growth, and said the Internet service provider's efforts to develop joint businesses with merger partner Time Warner (TWX) are proceeding rapidly.

Meanwhile, AT&T's stock fell 0.7% on reports that Daniel Hesse, the president of Ma Bell's wireless unit, is resigning to become chief executive of Internet start-up TeraBeam Networks. The move comes just before AT&T is scheduled to spin off its wireless operations in what could be the largest IPO ever. AT&T has named Mohan Gyani, former chief financial officer of AirTouch Communications, to succeed Hesse.

National Semiconductor (NSM) shares fell after resuming trading. The New York Stock Exchange halted trading in the stock earlier today due to a trading imbalance in the wake of the company's positive earnings release. The Santa Clara, Calif., chipmaker reported third-quarter earnings, excluding certain acquisition and restructuring-related costs, of 51 cents a share, compared to a loss of 16 cents a share in the year-ago quarter. This beat First Call/Thomson's consensus estimate by six cents. Adding in excluded items, net income was $1.68 a share. The stock, which hit a 52-week high before trading was halted, ended the day slightly lower.

On the economic front, the Labor Department reported this morning that initial jobless claims for the week ended March 4 rose by 5,000 to 280,000, largely as expected. But the less volatile four-week moving average fell to a 26-year low of 277,250 from 284,000, signaling a very tight labor market. The average has remained below the worrisome 300,00 levels for more than seven months.