Stocks End High; Investors Nervous About Testimony

Stocks ended at new highs Monday on more upbeat earnings from technology companies, but the market was nervous ahead of testimony by Federal Reserve Board Chairman Alan Greenspan on the economy.

The Dow Jones industrial average rose 10.77 points to 6,843.87 for its third straight record close and ninth in 11 sessions.

Broader measures also meandered to new highs after some early weakness.

The technology-laced Nasdaq composite index rose 15.24 points to 1,364.28, a new high. It produced the day’s biggest gains amid enthusiasm about late Friday’s earnings report from Microsoft, the latest in a series of better-than-expected results from technology bellwethers such as Intel and Sun Microsystems. Microsoft’s shares surged 3 5/8 to 90 3/4.

“Earnings are clearly coming in better than expected, but there’s an underlying nervousness, a belief that we’ve moved very far very fast,” said Hugh Johnson, chief investment officer at First Albany Corp.

“The same things helping the market over the last two weeks were certainly at work today: the heavy flow of money into mutual funds [from year-end retirement plan contributions] and the willingness of money managers to put it to work because earnings are so good,” said Johnson.

Elsewhere, the session was a fairly cautious affair, in part because the bond market was closed for the Martin Luther King Jr. holiday.

Advancing issues barely outnumbered decliners on the New York Stock Exchange in light trading.

Padding Friday’s record highs were the Standard & Poor’s 500 list, up 0.53 points to 776.70, and the Russell 2000 list of smaller companies, up 1.47 to 369.35. The NYSE’s composite index was unchanged at Friday’s record of 409.31,

Looming today is Greenspan’s testimony before the Senate.

Wall Street always scrutinizes Greenspan’s comments for any clues about Fed monetary policy, a persistent source of tension for markets. With the outcome of the Fed’s next policy meeting in early February still a matter of debate, what Greenspan says about the economy and the stock market’s surge is drawing even sharper attention.

“If he’s really planning a tightening, I think there will be a hint to the Senate [today],” said Edgar Peters, chief investment strategist at PanAgora Asset Management Inc.

Most economists expect no change in interest rates at the meeting on Feb. 4 and 5 of the Federal Open Market Committee. But some see sufficient cause in recent employment and other data for the central bank to issue a preemptive strike against incipient inflation.

Absent a signal on the interest rate front, corporate earnings will likely continue to dominate investor attention.

Among Monday’s highlights:

* Stock of financial service companies soared amid speculation that industry consolidation would continue after Banc One’s announcement that it’s acquiring First USA for $6.65 billion in stock. First USA soared 8 7/8 to 45 5/8 on the news, while Banc One slipped 3 1/2 to 41 5/8.

The New York Stock Exchange financials index rose 2.25 points to 367.26, as Citicorp jumped 1 3/8 to 109 1/4, Chase Manhattan rose 7/8 to 92 7/8 and Dean Witter Discover rose 1 to 36 1/2.

Among credit card issuers, Advanta gained 5 9/16 to 48 11/16; Capital One Financial rose 4 7/8 to 38 3/8, a new high; MBNA rose 2 3/8 to 33 1/2, also a new high; Green Tree Financial rose 2 1/8 to 39; and Household International gained 2 3/4 to 94 3/8.

* Target Therapeutics surged 10 1/4 to 57 on speculation that the company would be acquired by Boston Scientific. A deal was confirmed after the close of trading. Boston Scientific, which will pay 1.07 shares for each Target share, fell 4 5/8 to 66 7/8 ahead of the announcement.

* Nasdaq’s record close was powered in part by Cisco Systems, which rose 2 1/8 to 74 3/4, Sun Microsystems, which climbed 1 3/16 to 32 3/8, and Atmel, which jumped 2 5/8 to 43 7/8.

Among software shares that gained, Oracle climbed 1 1/8 to 42 5/8, Novell climbed 13/16 to 10 1/2, BMC Software rose 1 3/4 to 49 3/8 and Peoplesoft gained 1/4 to 53 3/4.

Meanwhile, Web browser company Yahoo rose 2 7/8 to 29 1/2 because of optimism about Internet advertising growth.

* Dow Jones slid 4 1/8 to 26 3/4 after reporting flat fourth-quarter earnings and announcing plans to spend up to $650 million to revitalize and expand its Dow Jones Telerate financial information services unit.

Overseas, Japanese stocks took another steep tumble as the government failed to offer new economic initiatives in a closely watched policy speech and reaffirmed its resolve to raise taxes.

The key Nikkei stock index in Tokyo closed down 609.70 points, or 3.37%, at 17,480.34. It had briefly plunged to 17,237.27--a drop of around 850 points--ahead of a speech by Prime Minister Ryutaro Hashimoto, who vowed to press ahead with tax increases and repeated pledges of broad reforms.