FINANCIAL MARKETS : Cable and Entertainment Issues Lead Stock Advance

Market Overview

Media, cable TV and telecommunications stocks soared Wednesday as investors responded to the surprise announcement that phone giant Bell Atlantic Corp. will acquire cable TV king Tele-Communications Inc.

The broad market also closed mostly higher, with smaller stocks again at record highs. The Nasdaq market set a volume record.

* Interest rates were little changed ahead of today’s September wholesale inflation report. Gold prices eased a bit after rising sharply Tuesday.

Stocks

The mega-deal between Bell Atlantic and TCI sparked another feeding frenzy in virtually all stocks linked to the emerging world of interactive TV.

Though many of the stocks have already been bid up sharply in recent months, buyers viewed the Bell Atlantic/TCI deal as a powerful indication that more alliances and outright takeovers in the media and telecom fields are likely.

“What you’re seeing is the euphoria of the takeover game again,” said Alice Sadlo, analyst at brokerage McDonald & Co.

With the attention on media and telecom issues, most blue-chips got scant attention Wednesday. But the Dow industrials still gained 10.06 points to 3,603.19, thanks to a big jump in Disney shares.

The Nasdaq market of mostly smaller stocks continued to lead Wall Street higher. The composite index jumped 6.51 points to a record 778.97, helped by sharp gains in many smaller telecom and technology shares.

Nasdaq trading volume also set a record for the year, as 415.36 million shares changed hands, far exceeding the prior high of 343.2 million set May 20. Volume was bolstered by the action in TCI, which saw 19 million shares change hands.

Analysts said the takeover craze in media and telecom was providing a strong base of support for the market, in the same way that the takeovers of many brand-name consumer products stocks supported the bull market of the late 1980s.

Among the market highlights:

* TCI shares, which shot up 3 to 31 3/8 and traded as high as 32 1/8, pulled other cable TV stocks up dramatically, on the expectation that most of them have now become takeover candidates.

On the American Stock Exchange, Cablevision Systems leaped 9 1/4 to 63 5/8 and Falcon Cable rose 1 to 13 3/4. On Nasdaq, Comcast A surged 6 3/8 to 39 5/8 and Jones Intercable A soared 2 1/4 to 18 3/4.

* Bell Atlantic stock responded to the deal with a huge jump, adding 5 7/8 to 65 7/8, an all-time high. But its gain in acquiring TCI was viewed as a lost opportunity to other Baby Bell stocks, all of which fell. Among them, Nynex slid 1 to 43, Southwestern Bell lost 1 to 40 and Pacific Telesis eased 3/8 to 53 1/4.

* Viacom, whose bid for Paramount Communications launched this mega-merger trend last month, saw its Class A shares rocket 5 5/8 to 62 1/4 as investors reassessed the value of its cable franchises.

But Paramount, already trading well above the value of Viacom’s bid because of a much higher unsolicited bid from QVC Network, inched up just 5/8 to 77 3/8. QVC’s shares added 2 1/2 to 57 1/2.

* Outside of Paramount, anything related to Hollywood was in hot demand, as investors viewed the marriage between TCI and Bell Atlantic as an event likely to accelerate the development of interactive TV--and thus another boon for software providers.

Disney soared 4 3/4 to 44 1/2, Time Warner gained 1 7/8 to 44 7/8, Gaylord Entertainment surged 1 3/8 to 27 1/8, Turner Broadcasting A added 1 1/2 to 27 1/2 and New Line Cinema rose 1 1/8 to 23.

Also, CBS jumped 8 3/4 to 285 1/8 after reporting strong quarterly earnings.

* Telecom and cable TV equipment suppliers also rallied. General Instrument jumped 2 3/4 to 58 7/8, Scientific Atlanta leaped 1 1/4 to 37 3/4, Tellabs added 2 to 75 1/4 and 3DO rocketed 3 1/2 to 45 1/2.

* Away from the media/telecom group, technology issues were mixed. Semiconductor stocks weakened after the industry’s trade group reported that September orders slipped from August. Texas Instruments dropped 4 1/4 at 62 1/4, Intel eased 1 1/2 to 63 1/2 and Cypress Semiconductor dropped 1 to 13.

* In a surprise on such a media-dominated day, Philip Morris was the most active issue on the NYSE, soaring 2 3/4 to 51 1/2. Brokerage Sanford Bernstein upgraded the stock to “buy,” citing expectations for a resumption of earnings growth. Bernstein expects Philip Morris to shift away from discounting cigarettes--a strategy to gain market share--and instead focus on improving earnings.

* Finally, in a case of mistaken identity, NYSE-listed Transcontinental Realty Investors briefly surged as high as 17 7/8 from Tuesday’s close of 15 1/2 when some traders erroneously confused the stock with Tele-Communications Inc. The ticker symbol for Transcontinental is TCI, Tele-Communications’ acronym.

After realizing their mistake, traders quickly bailed out, leaving Transcontinental to close at 15 1/4.

Overseas, hot markets continued to cool. London’s FTSE-100 index lost 13.8 points to 3,080.9, and Frankfurt’s DAX index inched up just 2.90 points to 2,001.51.

In Tokyo, the Nikkei average closed down 98.91 points at 20,038.40.

But in Mexico City, the Bolsa index rallied strongly, rising 38.42 points to 1,944.04, just below its all-time high of 1,949.51. Traders cited Mexican media reports that the North American Free Trade Agreement will go to Congress for a vote Nov. 17.

Credit

Interest rates closed mostly unchanged, awaiting today’s wholesale inflation report for September.

The key 30-year Treasury bond yield eased to 5.91% from 5.92% on Tuesday.

Traders shrugged off congressional testimony by Federal Reserve Board Chairman Alan Greenspan. He strongly rejected suggestions that the nation’s central bank should be more politically accountable, but made no comments to suggest any change in the Fed’s monetary policy.

The bond market also largely brushed off an auto industry report showing that cars sold at a higher than expected annual rate of 6.8 million units over the last 30 days. Often, signs of faster economic growth put upward pressure on interest rates.

But the report did add to speculation that the government report on September retail sales, also due out today, will exceed growth expectations. Forecasts call for a 0.3% increase.

Other Markets

Gold gave back a small portion of Tuesday’s run-up, awaiting today’s inflation report.

Gold futures for current delivery closed at $366.20 an ounce on New York’s Comex, down $1.60, after surging $7.60 on Tuesday.

Near-term silver futures closed at $4.41 an ounce, off 0.8 cent.

Elsewhere, light, sweet crude oil for November slipped 7 cents to $18.64 a barrel.

In currency trading, the dollar firmed against European currencies, but eased slightly against the Japanese yen.

The dollar closed at 1.602 German marks in New York, up from 1.594 on Tuesday. It also closed at 105.94 yen, down from 105.99.

Market Roundup, D10