- The Washington Times - Wednesday, May 31, 2000

NEW YORK Wall Street's traditional summer rally began on cue yesterday, with the Nasdaq Composite Index staging its best day in history as investors returned from the Memorial Day weekend in search of bargains.

Technology and telecommunications shares led the gains as investors sought out stocks that have been battered in the past few weeks. But volume was light, suggesting that investors remain wary.

"Will the rally stick? I wish I could say yes, but with this surprisingly low volume, I'm not sure it will be extended through the rest of the week," said Robert H. Stovall, market analyst at Prudential Securities.

The Nasdaq composite rose 254.37 points, or 7.9 percent, to close at 3,459.48. It was the largest percentage gain ever for the index and the second-largest point gain ever.

The Dow Jones Industrial Average rose 227.89 points to close at 10,527.13.

Broader stock indicators were also higher. The Standard & Poor's 500 rose 44.43 to 1,422.45.

"Investors are in a buying mood," said Alan Skrainka, chief market strategist at Edward Jones of St. Louis. "At the close of trading last week, the Nasdaq was 37 percent off its record high, and many investors believe that there are bargains to be found."

The telecommunications sector received a lift from the news that France Telecom is buying Britain's Orange from Vodafone AirTouch PLC for about $37.6 billion in cash and stock.

France Telecom rose $8.56 to $139.56 and Vodafone AirTouch shares rose $4.44 to $46.44 on the New York Stock Exchange.

Shares of high-tech industry leaders also rose. Sun Microsystems gained $6.75 to $80 and Cisco Systems gained $4.94 to $59.88.

Intel rose $8.19 to $125.75 after Lehman Brothers analyst Dan Niles, who recently joined the firm from BancBoston Robertson Stephens, began coverage with a "buy" rating and called Intel one of his favorite stocks.

Intel's gains, with those by several other semiconductor stocks, helped the Philadelphia Stock Exchange's Semiconductor Index to its biggest gain in more than a month.

Many high-profile technology stocks have been under pressure in recent weeks as investors have wondered whether future earnings will justify their relatively high share prices. Most analysts expect rising interest rates to take a toll eventually on corporate earnings as it becomes more expensive to borrow money to finance growth.

Technology companies could be hurt if their old-economy clients curb spending on technology while they weather rising interest rates.

Sara Lee edged up 31 cents to $18.88 after the company announced plans to tighten its focus by selling all or part of several businesses, including Coach leather goods and Champion athletic wear.

The market's rally surprised analysts, because it came on the heels of an economic report that suggested six rate increases by the Federal Reserve in the past year have not sapped consumer sentiment.

On a weaker day, the robust report could have prompted a sell-off. But yesterday, eager investors were choosing to gloss over the consumer-confidence report and look ahead to a pair of reports due out later this week.

Tomorrow, the National Association of Purchasing Management will issue a report on activity in the industrial economy during May. And on Friday, the Labor Department will issue its May employment report.

Advancing issues outnumbered decliners by a better than 2-to-1 margin on the New York Stock Exchange and on the Nasdaq.

NYSE composite volume totaled 1.01 billion shares, compared with 867.32 million in the previous session.

The Russell 2000 index of smaller companies rose 19.33 to 476.70.

Overseas, Japan's Nikkei stock average slipped 0.1 percent. Telecommunications stocks boosted European indexes: Germany's DAX index gained 1.5 percent, Britain's FT-SE 100 gained 2.3 percent, and France's CAC-40 rose 1.9 percent.

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