I. Market News: More Blue Chip Celebrating
II. Heroes: Woolworth, Circle K, Tseng Labs, Bstn Tech, Richey Elec.
III. Goats: Mat. Scs., Fr. Quest, Ceridian, Int. Health, Rochester Med.
IV. Investment News: Big-Number-a-Phobia
V. Calendar: Friday's Economic Events

MARKET CLOSE

DJIA: 4969.36, up 46.61 (RECORD)
S&P 500: 597.34, up 3.38 (RECORD)
NASDAQ: 1044.48, up 2.63

MARKET NEWS

The Blue Chip DJIA tacked on another major gain today, piling record high on top of record high. Today's near 50-point advance easily pulls the index within one percent of the Dow 5000 milestone.

No real progress seems to have been made in the Washington silliness. Yet the bond market continues to advance on hopes of another interest rate cut in light of more and more data suggesting that the economy is slowing in the fourth quarter. And blue chips went along for the ride. Technology stocks repeated yesterday's lackluster performance, with Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MSFT)") else Response.Write("(NASDAQ:MSFT)") end if %> heavy weighting dragging the index down after Goldman, Sachs made negative comments about Microsoft's Internet positioning.

HEROES

Woolworth <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:Z)") else Response.Write("(NYSE:Z)") end if %>, profiled in our Investing News a few weeks ago, rallied $1 3/8 to $15 3/4 today after its peer in the discount industry, KMart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:KM)") else Response.Write("(NYSE:KM)") end if %> posted rather ugly earnings. These events may not be connected, but it is always interesting to note the divergence between these two issues. Woolworth pared its dividend, kept its growth operations and is on track to a turnaround. KMart kept its dividend, sold its growth properties and is falling to 15-year lows. Although KMart may be reaching the point where it represents some value, it is important to note that it is the hubris of management and not the weakness in the retail environment that put it where it is today.

"Something strange is afoot at the Circle K," Keanu Reaves opined a few years back. It was certainly true today, when Circle K <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CRK)") else Response.Write("(NYSE:CRK)") end if %> rose $2 to $23 1/4 on an analyst upgrade to "strong buy" from "outperform." Morgan Stanley analyst Debra Levin cited strong sales trends, partially from the addition of gas pumps at most Circle K locations. Circle K's ambitious expansion plan is also highly rated by Levin. Rebuffed earlier this year in a takeover attempt by National Convenience Stores <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NCS)") else Response.Write("(NYSE:NCS)") end if %>, which was later bought out by a gasoline company, Circle K has started moving up again, much to the delight of its shareholders.

Although the series of articles, "A Fool At Comdex," has been focusing on Iomega goings-on in Vegas, it was Tseng Labs <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:TSNG)") else Response.Write("(NASDAQ:TSNG)") end if %> that stole the show today. Tseng Labs, rising $1 7/8 to $10 3/8, unveiled its ET6000 graphics and video processor and was awarded the "Best of Comdex/Fall '95" and "Best Multimedia Hardware" trophies for its troubles. The ET6000 is a 128-bit graphics accelerator, video image processor and 24-bit DAC all rolled into one, and it provides one-gigabyte-per-second bandwidth on top of it all. Tseng expects to sell the first of these chips in the first quarter of 1996. (The "A Fool At Comdex" articles are accessible from the Foolish main screen).

Bargain-shopping investors hopped on to shares of Boston Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BSTN)") else Response.Write("(NASDAQ:BSTN)") end if %> today, pushing the price up $1 7/16 to $12 1/2. Cooler heads seem to have prevailed after the shock of its massive earnings disappointment wore off. Apparently the company explanations in the conference call yesterday soothed shaken investors. Boston Technology is actively buying back shares per an announcement last quarter and remains optimistic about its future despite this most recent quarterly setback, the result of Bell Atlantic getting cold feet on some orders.

Richey Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:RCHY)") else Response.Write("(NASDAQ:RCHY)") end if %> rose $1 5/16 to $10 1/8 today after the company announced it would acquire privately held Deanco Inc. for $30 million in cash plus the assumption of $24 million in debt. Deanco is a California-based electronic components distributor that is currently held by the eponymous Electrical Distribution Acquisition Company. Deanco had $77 million in revenues in the first nine months of this year and will effectively double Richey, which had $83.7 million in revenues over the same period.

GOATS

Dillon Read initiated an assault on shares of Material Sciences <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MSC)") else Response.Write("(NYSE:MSC)") end if %> today, pushing the price down $2 5/8 to $13 as analyst Diane Graboski lowered her rating to "neutral." Material Science announced yesterday that earnings for the current fiscal year would fall below last year's levels. The company has failed to demonstrate sustainable growth in Graboski's eyes and needs to overcome its cyclicality to appreciate further.

Franklin Quest <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:FNQ)") else Response.Write("(NYSE:FNQ)") end if %>, down $2 1/2 to $20 1/8, reported today that net earnings for its fiscal first quarter would come in at the same level as last year's because of a higher-than-expected gross margin. Earnings growth for the year will only be 13-15% as a result, according to company officials. This disappointment caused MF Templar to sell the shares of Franklin Quest he holds in the Neocontrarian portfolio. The upside seems limited to $25 to $29 given these facts and that tax-loss selling will likely drive the share price down significantly. Check out the Neocontrarian folder over in the Let's Talk Investment Approaches message boards for his highlights from the conference call.

Shares of Ceridian <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CEN)") else Response.Write("(NYSE:CEN)") end if %>, a payroll processing and information services company spun off from Control Data Systems, slipped $4 to $41 1/8 today. The stock succumbed to news that Ceridian will take on a $325 million revolving credit facility to help repay debt at Comdata Holdings Corp., a proposed merger partner. Ceridian will be forced to pay $10 million more than expected to improve Comdata's payroll processing operations. Analyst David M. Togut at First Boston lowered his rating to a "hold" on this news; his analysis suggests that even in the best-case scenario, the operating margin would slip to 10% from 11%. Shares of Comdata Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CMDT)") else Response.Write("(NASDAQ:CMDT)") end if %> lost $2 1/2 to end at $23.

Integrated Health Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IHS)") else Response.Write("(NYSE:IHS)") end if %> slipped $1 1/4 to $21 1/8, still recoiling from Monday's rating cut by an analyst at Ladenburg. In a research note, the analyst cited the downward pressure of Medicaid reform as the principle reason for cutting FY 1995 estimates to $2.21 per share and FY 1996 estimates to $2.21 as well. Apparently, this analyst is betting that Congressional Republicans are going to dismantle Medicare completely as we know it. Tax-loss selling continues to pressure this issue and it now trades below book value. Integrated Health Services provides specialized long-term care to the elderly.

Norton McNaughton <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:NRTY)") else Response.Write("(NASDAQ:NRTY)") end if %> slipped $2 to $14 today after it announced that earnings for its fiscal fourth quarter would be between $0.27 and $0.32 per share versus $0.45 in the year-ago period, and this in spite of a 47% gain in revenues. The company has suffered a decrease in gross margins as a result of the dismal retail environment. Norton, a clothing manufacturer, had been doing fairly well until today's devastating announcement.

Nothing like having a secondary offering below the current price of the common shares to kill a stock. Rochester Medical <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ROCM)") else Response.Write("(NASDAQ:ROCM)") end if %> announced today it was offering 1.5 million shares at $13.50 a share, cutting the stock price $2 5/8 to $14 3/8. Why do companies do this? Many times they choose to offer a beneficial deal to large institutional buyers at the expense of current shareholders.

INVESTING NEWS: Dow 5000? Nah, Maybe 8000!

As the Dow Jones Industrial Average hurtles towards 5000, a Fool's mind wanders back to December of 1993 when the Dow seemed headed like a bullet toward the magic number 4000. Although the Dow broke through that magic 4000 barrier early in January of 1994, it took almost an entire year of poking around to continue decisively over that line.

What is because of some profound fundamental concern? The dividend yield, the price earnings ratio, the amount of the fiscal US government deficit? None of the above. We Fools call it "fear of big numbers."

For some reason, the thousand mark has some magical significance that makes commentators wax poetic and investors contort in apoplexy. Ever since mankind invented the number zero as a place holder, allowing us to count above our ten fingers, multi-zero numbers have held some special significance.

We can already see the slew of articles issuing from the conventional press, talking about the "big run-up" that the market has seen in the past year and about how there is a "correction" brewing. Tax-loss selling, exacerbated by feared changes in the capital gains tax law, will give way to panic one day in the not too distant future as the four on the left of the Dow's odometer clicks to five.

Could we spend 1996 like we spent 1994? Bored to death, watching the most-watched and least useful index ever created bounce back and fourth above and below an invisible dotted line drawn at a number ending in three zeros?

A Fool's jaundiced eye rolls at this prospect. Realizing that with the Dow near 4000 in late 1993, a Dow near 5000 in late 1995 means that the index has added a mere 10% annualized growth in the past two years. In fact, we think it should become law from now on that market mavens who are trying to strike fear into the heart of investors use two- or three-year returns instead of those big scary year-to-date numbers.

Dow 5000? Nah. Dow 8000 by the year 2000. Hit 'em with two sets of big zero numbers. Guaranteed to send them into panic.

CALENDAR: Friday's Economic Events

---October Housing Starts & Building Permits (8:30)
---FOMC Minutes

Byline: Befumo/Sheard (MF Templar/MF DowMan)