Moneyline News Hour

Rumors of Microsoft Settling Antitrust Case Sparks Multi-Market Rally; News Corp.'s Rupert Murdoch Eyes DirecTV

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WILLOW BAY, CNN ANCHOR: Tonight, the Dow makes a triumphant return to 11,000, a big-cap blowout from blue chips old and new.

STUART VARNEY, CNN ANCHOR: Driving Microsoft stock to the moon, hopes that the epic battle between Bill Gates and the government is reaching a climax.

BAY: Rupert Murdoch eying one of GM's prized assets. MONEYLINE has confirmed News Corp. is looking into buying DirecTV.

VARNEY: And our special series on genomics. Cracking the genetic code may lead to profits, but what about ethics?

ANNOUNCER: This is THE MONEYLINE NEWS HOUR. Reporting tonight from New York, Willow Bay and Stuart Varney.

VARNEY: Good evening, everyone. A little more than a week ago, the Dow closed at 9,811, in the depths of a correction.

BAY: Tonight the index is more than 1,300 points higher after another powerful, broad-based rally today. The Dow surged more than 250 points, the winners running the gamut from high-techs to old- school financials.

It vaulted above 11,000 for the first time since early February, to its highest close in two months. And the buying wasn't confined to the select Dow 30. The Nasdaq extended yesterday's strong gains and the S&P shattered its third record in a row.

Greg Clarkin reports.

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GREG CLARKIN, CNN CORRESPONDENT (voice-over): Investors chose news over denials and sent shares of Microsoft soaring, boosting the Dow, Nasdaq and the S&P. Published reports had Microsoft moving closer to settling its antitrust battle with the government. Justice Department officials denied it, but investors believed what they read instead.

Microsoft shares closed up more than 8, at 111 7/8 . The Dow's 2.3 percent gain was also driven by a surge in GE shares, after Lehman Brothers upgraded the stock and set a higher price target. GE shares rose more than 8 as well. Recent underperformers rebounded, helping to propel the Dow: Alcoa, Dupont, International Paper, and J.P. Morgan all moved higher on the day.

The broad rally resulted in another record for the S&P 500, its third straight. But some analyst noted the rally was still technology-driven.

DENNIS MCKECHNIE, PIMCO: It is a broadening out. One important, though, is that tech is now about a third of the S&P 500. In 1992, it was 7 percent -- massive move. And so, when tech moves, it tends to pull the market with it.

CLARKIN: What passes for old technology fueled the Nasdaq's rally. Oracle, Cisco, Sun MicroSystems, all edged forward. While semiconductor and biotech took a breather as investors took profits following a big run-up. But analysts said technology overall should continue to drive the markets, despite the Dow's recent gains.

DODGE DORLAND, LANDOR INVESTMENT MGMT.: If there is a concern in the Dow, in the old-economy type stocks and we see another move or failure to hold -- for example, the Dow the failure to hold the 11,000 level -- then there will be a greater reason for money to flow out of the Dow, old-economy type stocks, and back into technology. And at that point, that's when you're going to see the divergence increase.

(END VIDEOTAPE)

CLARKIN: And while there's optimism of the first quarter earnings announcement, there is always the chance of surprised profit warning. Shares of Compaq fell 8 percent today on speculation its revenue may be less than expected for the quarter. Now the company wouldn't comment, but investors jumped out in a big way. It was the most actively traded stock on the big board -- Willow.

BAY: Greg, so what are expectations on first quarter profits?

CLARKIN: Willow, the traders down here are really looking for a very strong first quarter pretty much across the board. Outside of Proctor & Gamble and Dial a few weeks back, they haven't seen a real high-profile profit warning. That's why Compaq was a little bit troublesome late in the day, to some folks.

But outside of that, they're looking for very strong quarters. The financials doing well already and General Electric it'll top earnings estimates. So a lot of folks here are looking for a very strong earnings season.

BAY: Greg Clarkin at the big board, thank you.

Taking a closer look now at the closing numbers on Wall Street, the Dow today spent just a few minutes in the red before taking off, soaring as much as 270 points, ending the session up 253 at 11,119.

The Nasdaq shot up 111 at its high today, but couldn't sustain that lofty gain. It ended up 75 to 4,940. The S&P 500 today ended well above 1,500 to score its third record close in a row. Advancing issues beat out decliners by nearly two to one on the big board; 107 stocks hit new highs, 40 new lows.

VARNEY: Today's turbo rally on the Dow helps pull the index out of the hole that it sunk into this year. The index is now down about 3 percent in the year 2000, though it's still down 5 percent from its high. Compare that to the Nasdaq, which is once again up more than 20 percent on the year.

Today's Nasdaq rally brings it about 100 points shy of its record.

John Metaxas joins us now from the Nasdaq market site with more on a third straight winning session -- John.

JOHN METAXAS, CNN CORRESPONDENT: Stuart, it was a very strong day for the technology stocks after that Microsoft headline today. The Nasdaq got out of the gate on the upside and never looked back, coming in within 25 points of 5,000 level.

Of course, Microsoft's was the engine that powered the rally today. And you know, before we ever heard of genomic stocks or business-to-business or fiber optics, these were the companies that made people money. And it was that kind of old-style rally today.

Microsoft up substantially. Cisco Systems up 5 5/8 today. For a very brief period, Cisco surpassed Microsoft in market capitalization. Intel was down, but Intel had their rally yesterday ahead of the rest of the market. This is near a 52-week high right here.

But the biotechs had a very bad day today. Amgen was downgraded by Merrill Lynch. Merrill Lynch downgrading them based on valuation, also saying that there is substantial litigation risk in this stock.

But that doesn't mean you couldn't make money in some of the special situations within biotech. Here's just one story Immune Response Corporation gaining 42 percent. And that stock was upgraded by a brokerage firm. The company says recent clinical data suggests one of its therapies may induce immunity to the HIV virus.

So overall, it was a good session on the Nasdaq, but the market breadth did not really match what was going on in the Nasdaq Index itself. Advancers just ahead of decliners by a very narrow margin, suggesting that perhaps the rest of the market not yet ready to follow what the Nasdaq big caps did today.

I'm John Metaxas, reporting live from the Nasdaq market site.

VARNEY: Well, joining the winners circle today: General motors and its Hughes Electronics unit. MONEYLINE has confirmed that Rupert Murdoch and News Corp. have been actively looking for a way to snap up the crowned jewel of Hughes, that is the satellite operator DirecTV.

GM soared 5 1/4 points. The tracking stock for Hughes rocketed nearly 11 1/2, and that stock hit a 52-week high. News Corp. was down 1 3/4. The question now, not whether Murdoch wants to buy Hughes, but whether he can.

Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): Rupert Murdoch Satellite TV Network covers much of the globe, but it does not cover the richest consumer market and Murdoch's home, the United States. MONEYLINE has confirmed Murdoch's News Corp. is considering ways it could buy DirecTV, now part of the General Motors' Hughes Electronic unit.

With eight million subscribers, DirecTV is the largest satellite TV service in the U.S. News Corp. would not comment on its possible interest in DirecTV and said it had not talked to General Motors. General Motors had no comment. But if this deal is to be done, it must go through Detroit, because Hughes is a GM tracking stock and not a stand-alone company.

TOM BURNETT, MERGER INSIGHT: It's very complicated because it gives GM, essentially, a 100 percent veto over any transaction. Just going out and buying shares of GMH won't cut it because the economic ownership is controlled by GM.

VILES: Murdoch's preference for satellites is no secret. His Star TV covers Asia, B Sky B covers Europe and Sky Latin America makes News Corp. the satellite leader there.

MARC GROSSMAN, VICE PRESIDENT, J.P. MORGAN: And then in the U.S., News Corp. has a huge, gaping hole. And the purchase of Direct TV, if they could pull something off like this, would give them the most complete satellite assets for delivering satellite TV to the end user. You know, more complete assets -- set of assets than any other plan on the market.

VILES: Hughes could be the missing link but it would not be cheap. The stock has rallied 160 percent in the past year, including a strong rally Thursday on reports of Murdoch's interest, and now carries a market value of roughly $63 billion dollars.

(END VIDEOTAPE)

VILES: And analysts believe that a deal of that size might just be too big for News Corp. alone. Now one obvious partner in the bid could be John Malone's Liberty Media, which already owns 8 percent of News Corp. and a very small stake in Hughes. Liberty tonight had no comment -- Willow, Stuart.

VARNEY: Do analysts at this point think that a deal by Murdoch for DirecTV is at all likely?

VILES: Not likely at this point, very intriguing, very interesting, but not likely.

VARNEY: Not likely is the word of the day.

Peter Viles, thanks.

BAY: Up next, a nail-biting day for Lucent.

VARNEY: Yes, we'll look at how the stock held by more Americans than any other was held hostage today by a mysterious -- or two-way mysterious hoax.

BAY: And an online brokerage hostage to a different problem: too much traffic, overload at American Express.

VARNEY: And next, we're going to talk with strategist John Manley on the Dow's dazzling day. Stay with us for that, please.

(COMMERCIAL BREAK)

BAY: Lucent swung within a $6 trading range today, after a damaging press release was later revealed to be a hoax. The fake news release was posted on a Yahoo! message board, fueling rumors that were already circulating on Wall Street that Lucent would miss earnings estimates. Lucent quickly denied the speculation and the stock turned around. It ended the day up more than two.

VARNEY: All right, checking some of tonight's MONEYLINE "Movers": Gilead Sciences jumped more than 5 1/2, Lehman Brothers started the biotech company with a buy rating. And it also set a $98 price target and said it's currently trading at a discount to its peers.

KLA-Tencor, up more than three, CS First Boston said it will be the first major chip equipment firm to report quarterly results next month. It expects KLA to report an upside surprise, which could set a positive tone for the industry.

Breezecom, up nearly 20 on its market debut. The Israel-based firm makes wireless access products.

And then there's Compuware, down three. DLJ downgraded the software maker to a market perform. It expects the company's stock to hit $30 in the next year, down from a previous forecast of $40.

BAY: An unsolicited takeover bid tops tonight's other headliners.

Bausch & Lomb offered to buy Wesley Jessen Vision Care for $600 million and said it will make a tender offer to shareholders if the contact lens maker refused to negotiate. Wesley Jessen agreed to buy Ocular Services on Monday and said it continues to believe in the merits of that deal, but will respond to Bausch & Lomb's offer in an appropriate time frame. Shares of Bausch & Lomb fell 3/4, Wesley Jessen jumped more than 8 1/2, while Ocular Sciences fell one.

Chase Manhattan confirms its in talks with UK investment banking firm Robert Fleming Holdings. Such a combination would give Chase a bigger piece of the European and Asian M&A market. Chase Manhattan jumped $6.50 today.

VARNEY: With today's rally, the Dow is now up a stunning 13 percent in slightly more than one week. Obvious question: Can the blue chips keep up that kind of pace?

Let's ask John Manley. He's the stock strategist at Salomon Smith Barney. John, welcome back.

JOHN MANLEY, SALOMON SMITH BARNEY: Good evening.

VARNEY: For months, there's been a flow of cash towards Nasdaq stocks. Now, has that cash changed direction? Is it flowing back to the blue chips so they can have a meaningful, longer-term rally?

MANLEY: I think so. I mean, you have to realize what happened while that was going on. You know, as of a week and a half ago the average stock in the S&P was 35 percent off its high. That's almost as bad as it was after the cash in '87. And there's some real companies still out there. Add that to long term rates, 10 year rates, I'll call them the treasury going down, that's a very powerful sign for the next six to 12 months for a lot of stocks.

VARNEY: For across-the-board stocks not just the big names on the Dow and the blue chips.

MANLEY; I think so. I think it's across the board. I think it goes beyond technology, although it doesn't exclude technology. Technology is not so much on old economy, new economy, oh, that was there. Technology was a great place to hide while the Fed was clearly in an aggressive tightening mode or a semi-aggressive tightening mode. Big liquid, high quality, good earnings revisions, exactly what you want to have when the Fed's being tough. It's going to be tough for the Fed to be as tough in the next six to nine months.

VARNEY: You're not talking about any kind of correction? You're not talking about plateauing off on the outside, no? We're off to the races still. It's up up, is it?

MANLEY: I can never call it on daily bases. You of all people should know that. But I think on balance, the factors are pretty good. You know, what do we have at the beginning of a bull market. We generally have stocks that are down, rates that have gone up and then are coming down. Gee, that sounds like today doesn't it? sounds like a week or so ago. I hate to say it's all over right now after a week and a half. Thirty-five percent off its high. You know, in '87, in November of '87, I guess it was 37 or 38 percent for an average. That's a pretty big hit.

VARNEY: You got it. Earnings coming up soon. It's the earning season. Tech stocks, will they perform earnings-wise?

MANLEY: I think they will. There is no sign that has slowed down. You know, one of the thing that's kept tech going for so long, it's not valuation, it's the fact the surprise has still been very positive. In the last year, tech and com have had upside revisions of something like, two to one. In the last two or three months, it's been more like three to one. That sounds pretty good for me coming into the quarter.

VARNEY: No serious dark clouds out there? MANLEY: There's always problems. I mean the fact I'm feeling better these days is probably a good sign -- a bad sign for those who look at it that way. But I think you have to watch out for signs of inflation, but they're not there. You have to watch for signs the Fed's becoming difficult. You have to watch for signs of earnings. A million things could go wrong but I don't see why they're going to happen right with rates coming down and so many stocks have already gone down.

VARNEY: Quick comment on this: General motors valued at $55 billion dollars. It's -- 60 percent of Hughes is valued at $40 billion. It's got $13 billion in cash, that makes $53 billion. That means the market values it's car operation at virtually, zero, $2 million tops. Comment?

MANLEY: Well, I think that's what happened.

VARNEY: Crazy?

MANLEY: No, it is crazy. I think that represents some of the values in some of these quote, unquote "cyclical stocks," which have a old economy, new economy; old stocks, new stocks. A lot of stocks migrate, a lot of companies migrate. They get into business and then they get too cheep. When it gets too far spread, these things snap because people are out to make money any way they can. And if can LBO (ph) or buy out a company that seems to offer very good value on that, or any other analysis, they'll do it.

VARNEY: It's going to happen. John Manley, thanks very much for joining us.

MANLEY: Thank you.

BAY: Coming up, customers flock to a free offering.

VARNEY: But American Express finds that too much of a good thing can cause a logistical nightmare. Trouble for AMEX online. That's next.

(COMMERCIAL BREAK)

VARNEY: As you might imagine, several stocks hit 52-week highs today and they include: Best Buy, Citigroup, Disney, Guess? and Legg Mason.

A word today that Disney is taking its concerns about the impact of a rival merger to Capitol Hill. The company today confirmed that it's lobbying Congress to make sure that Disney's programming will be not shut out of America Online after it merges with Time Warner, which is the parent of this network. Disney says it is not opposed to the deal, but is merely seeking open access. Disney stock was up more than a dollar. Time Warner edged lower, as did AOL.

BAY: Old-economy companies continue to jump on the B-2-B bandwagon. Today, three major deals were announced, including one that involves some of the nation's biggest home builders. Companies like Centex and Kaufman and Broad, plan to create an e- Commerce portal that will list new homes available throughout the country.

International paper, Georgia-Pacific, and Weyerhaeuser plan to create a business-to-business Web market for paper and forest products.

And finally, Pet Assure wants to create an electronic marketplace for the veterinary industry. So it's hooked up with Cornerstone Internet Solutions to create VETGalaxy.com. Checking investor reaction: Centex up more than one, Kaufman and Broad gained 1/2, International Paper and Weyerhauser both rose on their alliance. Cornerstone Internet Solutions also up fractionally.

VARNEY: In tonight's "Tech Watch," a traffic jam in cyberspace for American Express' brokerage unit. Its free stock trading service became so popular that the company can not service, or couldn't service, all of its customers.

Fred Katayama has the story.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, AD)

UNIDENTIFIED ANNOUNCER: The American Express card -- don't leave home without it.

(END VIDEO CLIP)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): American Express symbolizes service and trust. Lose a travelers' cheque, and it's replaced in 24 hours. Its online brokerage unit boasts its service is "exceptional." Some say it's anything but.

In Web tracker Gomez.com's spring survey of consumer confidence, AmEx ranked 53rd out of 56 online brokers, falling 23 notches from the previous quarter. The reason, according to complaints posting on the Gomez Web site, customers seeking help on how the navigate the AmEx brokerage Web site, for example, can wait as long as half an hour before someone answers.

ALEXANDER STEIN, GOMEZ ADVISERS: Our data found that we could not get through to customer service, on telephone or e-mail, period. We tried a battery of tests, and in this past quarter, all its tests unresponsive.

KATAYAMA: And often e-mails don't get answered right away. When they are, some are canned responses, referring them back to the 1-800 line.

To be fair, Gomez says service at many online brokerages has slipped because of the recent record trading volumes.

But in American Express' case, there's a bigger factor. Its pioneering free stock trading program has proved too popular, signing up in one week the number of customers it thought it would get in one month, but the company lacked the staff to handle the load.

FRANCOIS ODOUARD, V.P., AMERICAN EXPRESS BROKERAGE: Given the fact that the volumes that we have been experiences are actually a lot higher than what he had planned, we did have -- it does a little bit more time to answer the phone than we would like.

KATAYAMA: Similar to what America Online encountered in 1996 when it offered unlimited service at a flat rate; both lacked the infrastructure to meet the spike in demand.

(END VIDEOTAPE)

KATAYAMA: American Express says it's adding staff and beefing up technology. But it did not offer any deadlines for improving service -- Stuart and Willow.

VARNEY: Well, that's customer service. What about the performance of the Web site itself?

KATAYAMA: That, too, was slower than that of the competition, but not so much as to derail the process of an order.

VARNEY: And it's free.

Fred Katayama, thanks very much.

BAY: Coming up, President Clinton takes time out from the delicate dance of diplomacy. That is in our news digest.

VARNEY: And we'll tell you about the new partnership that let's you surf while you slim.

We'll be back.

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VARNEY: Time now for the MONEYLINE "News Digest." And with that, here is Jim Moret -- Jim.

JIM MORET, CNN ANCHOR: Thank you, Stuart.

CNN has learned the Justice Department is conducting a criminal investigation into White House computer breakdowns which blacked out subpoenaed e-mails. Contractors from Northrop Grumman today told a house hearing that White House employees warned them to keep the problem quiet, threatening two of them with jail. The administration employees deny that charge. The glitch blocked delivery of hundreds of White House messages subpoenaed by Congress, the independent counsel and the Justice Department.

Amid protests in Miami today, Attorney General Janet Reno restated her belief that Elian Gonzalez should be reunited with his father in Cuba. But Reno declined to discuss the behind-the-scenes negotiations to send the boy home. (BEGIN VIDEO CLIP)

JANET RENO, U.S. ATTORNEY GENERAL: His family is very we'll intentioned. They care a great deal. Elian's father cares a very great deal. This is a wonderful boy, from all that I have heard, and it is just important that everybody work it out the right way.

(END VIDEO CLIP)

MORET: President Clinton was showered with flowers as he toured rural India today. The president mixed sightseeing with cross- cultural exchange, discussing the role of women in Indian society with villagers.

And in Israel, the pope expressed grief and sorrow during an emotional visit to a hilltop memorial for victims of the Holocaust. But he stopped short of an apology for the Catholic Church's silence during the Nazi era.

I'll have more on those stories on the "WORLD TODAY," 8:00 p.m. Eastern, 5:00 Pacific.

Stuart, Willow, back to you.

BAY: Thanks, Jim.

Well, here's a story that combines two obsessions of our time: the Internet and our waistlines. Today, Bally Total Fitness is hooking up with Netpulse Communications to bring broadband Internet access to its North American fitness centers. Bally's plans to install Netpulse Internet appliances on everything from steppers to exercise bikes. Now when customers work out, they can surf the Web for e-commerce, e-mail, music and TV. For Netpulse, it could mean an additional 125 million visits a year to its network.

VARNEY: That's a great idea, isn't it?

Ahead on the next half-hour, Microsoft helps kick Wall Street into high gear. We'll have details on that for you.

BAY: Plus turmoil in the bond pits.

Stay with us.

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VARNEY: In tonight's headlines: call it the Microsoft rally. The stock lights up the Dow, the Nasdaq and the S&P.

Question: Does Rupert Murdoch want DirecTV? MONEYLINE has confirmed News Corp. would like to buy it. But would General Motors let it go?

And our series on genomics continues, as companies race to discover the mysteries of the human gene. We ask the question: who owns life? BAY: First more on our top story: the stock market fired up by a big-cap comeback. Investors today clamored for shares of the most important names in corporate America, igniting a broad-based rally. With enormous help from General Electric and Microsoft, the Dow industrials reached their best level in two months, cracking 11,000. The Dow rocketed 253 points or 2 percent, closing at 11,119. That puts Wall Street's best known index just 5 percent below its all-time high.

The Nasdaq also felt the might of Microsoft. The index climbed 75 points, or about 1.5 percent, to close at 4,940. It is now up 330 points in three days. And it was record number three for S&P, which rallied 26 points.

Susan Lisovicz has more on the big day for big names.

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SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): It was Microsoft's day in the stock market. Investors flocked to the stock on sketchy published reports suggesting that the world's biggest software company might soon settle its case with the Justice Department.

Microsoft's surge helped drive the Dow over the 11,000 mark for the first time since early February, and it helped propel the Nasdaq to its third consecutive rally. General Electric, the oldest company in the Dow industrials, did its share of heavy lifting, too, after positive analyst comments on its improved earnings outlook. The broad rally united old and new-economy stocks, pushing the AMEX and S&P 500 to new highs.

BERNADETTE MURPHY, KIMELMAN & BAIRD: It's very exciting for investors. It's important that we have a broadening in the market. We were becoming too narrowly focused, and that seems to be taking place. That sets a strong foundation for the long-term outlook for the stock market, and I think it is an important positive for investors.

LISOVICZ: Microsoft and GE led the buying bonanza, but financial blue chips American Express and J.P. Morgan, and networking giant Cisco Systems also added solid gains. Analysts say that falling bond yields are another fact behind the newfound affection for non-tech stocks as investors search for better returns and value.

MICHAEL CARTY, NEW MILLENNIUM ADVISERS: I have been in the new- economy stocks for a while, but I have been dipping into the old- economy stocks because they seem to represent fair value, they seem to be grossly undervalued.

LISOVICZ: Especially with expectations of strong earnings from the quarter ending next week. FedEx jumped more than $2 after reporting profits that beat Wall Street's consensus by a nickel.

(on camera): Some analysts say they were encouraged by the fact that the Dow industrials made it back to 11,000 and remained there. They say that could indicate staying power for a very neglected area of the market.

Susan Lisovicz, CNN Financial News, New York.

(END VIDEOTAPE)

VARNEY: The government's antitrust lawsuit has hung like a cloud over Microsoft shares. In fact, even with today's huge run-up, the stock is still down slightly on the year. That could may be finally lifting amid word that the two sides may be close to a settlement.

Here's Steve Young.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): With the Microsoft antitrust trial now in the end game, the stock rallied on reports the government might agree to remedies less harsh than breaking up the company. Judge Thomas Penfield Jackson called the parties to his chambers Tuesday to report on the progress of their federally mediated settlement talks. Message: it has been a month since he last heard oral arguments and if they don't settle soon within a couple of weeks, he'll issue his conclusions of law, slamming the door on anymore settlement talks.

Antitrust specialists say litigants don't usually get serious about mediation until the water rises to their eyeballs.

KEVIN ARQUIT, CLIFFORD CHANCE ROGERS & WELL: And the time for the tough talk and the posturing is rapidly winding down. That's easy to do when you're still a ways away from accountability. That's no longer the case, and given the risks for both sides, one has to assume they're both serious about settlement.

YOUNG: The last time they were in open court, the judge left the impression he might not side with a key government claim that Microsoft abused its monopoly power and illegally tied its Web browser to Windows. But Microsoft has to worry about more than 100 private consumer suits filed in 28 states.

ELEANOR FOX, NYU LAW SCHOOL: Microsoft, you know, has an interest in settling before any judgment, because once there's a judgment, the private parties will use the judgment and rely on the judgment for what the judgment says, so a judgment against Microsoft is a big deal against Microsoft.

YOUNG: Microsoft has already been tied up in legal red tape for half a decade.

(END VIDEOTAPE)

YOUNG: And with 300 million Windows PCs in the world, if the company had to pay back consumers even $10 or $20 each for overcharging, that would add up to serious money and there would be attorney's fees and treble damages piled on top -- Stuart.

VARNEY: All right, Steve Young reporting a big story. Thanks, Steve.

The title of "world's most valuable company" was up for grabs today if only briefly. Cisco won those bragging rights a short time when its market value edged ahead of Microsoft's by a mere $600 million. But by the close, Microsoft was back on top, worth 7 -- I'm sorry -- $579 billion, about $11 billion richer than Cisco.

BAY: Helping to power the Dow surge: General Motors. The stock ran up on reports which MONEYLINE has confirmed that News Corp. has been interested in buying DirecTV, part of GM Hughes Electronics business. GM jumped 5 1/4. Hughes Electronics, which trades as GM class H shares, soared nearly 11 1/2 to a new high. And News Corp.. slipped 1 3/4.

The question is: How can News Corp. get control of America's number-one TV satellite operator?

Peter Viles has been following this developing story for us -- Peter.

VILES: Willow, in short, it won't be easy. Rupert Murdoch does have his eye on DirecTV, the satellite television unit that is part of General Motors' Hughes division. A source familiar with News Corp.'s internal deliberations tells MONEYLINE that executives have been looking for a way to buy DirecTV for quite some time. The problem is, DirecTV is not a stand-alone company. It's part of GM's tracking stock, Hughes Electronics, and for that reason, all talks would have to go through Detroit.

(BEGIN VIDEO CLIP)

BURNETT: It's very complicated, but it gives GM essentially a 100 percent veto over any transaction. Just going out and buying shares of GMH won't cut it, because the economic ownership is controlled by GM.

(END VIDEO CLIP)

VILES: News Corp.. would not comment on whether it has -- is considering such a deal. It did say it has not talked to GM. GM would not comment at all. Analysts have their doubts about whether this can happen, because Hughes Electronics is not cheap. Its market value tonight: $63 billion.

If Murdoch went looking for a partner, one possible partner is John Malone's media -- Liberty Media, rather, which owns a 8 percent stake in News Corp.. and a very small stake in Hughes Electronics. No comment tonight from Liberty.

BAY: Quite a story. Peter Viles, thank you.

VARNEY: Yes, it is.

Well, meanwhile, as GM considers it options for DirecTV, another deal could be in the making. "The Financial Times" is reporting that GM is considering making a bid for Land Rover to trump a $3 billion offer from Ford. The paper says GM is attracted to the Land Rover brand. Land Rover is the luxury SUV division of BMW.

Here's what's coming up, bond traders spooked again by the Treasury Department, and they scramble for the safety of government debt.

BAY: We'll hash out the move with the country's biggest bond trader, Pimco's Bill Gross.

(COMMERCIAL BREAK)

VARNEY: A tumultuous day in the bond market, as traders scrambled for Treasury paper, this after chewing over comments from the Treasury Department. Checking prices: the 10-year note gained 7/32; the yield 6.08 percent. The 30-year long bond rose 26 ticks, and that pushed the yield down to 5.9 percent.

Here's more on that from Ceci Rodgers in Chicago.

(BEGIN VIDEOTAPE)

CECI RODGERS, CNN CORRESPONDENT (voice-over): Yet another powerful rally in the bond pits based not on fundamentals, but fear. Investors fled to the safety of U.S. treasuries, and sold securities issued by the giant mortgage lenders Fannie Mae and Freddie Mac. The turmoil followed a Treasury official's testimony that Congress should eliminate long-held lines of credit to the two agencies.

MICHAEL BOSS, IBJ LANSTON FUTURES: You have comments suggesting that the Treasury wants to back off of this implied backing of Fannie and Freddie paper, and it gets investors very, very worried.

RODGERS: Both Fannie Mae and Freddie Mac enjoy triple-A ratings, positioning them to vie with Treasury debt for benchmark status in the bond market. But if the Treasury has its way, that might not happen. A Fannie Mae official called the Treasury official's testimony -- quote -- "irresponsible."

In Washington, Treasury Secretary Lawrence Summers had no comment on the market turmoil. Analysts say Summers' predecessor would have handled things differently.

ANDY LAPERRIERE, ISI GROUP: I think a lot of market watchers and market participants believe that Robert Rubin had a better pulse of the market and that he wouldn't have surprised the market.

RODGERS: Market turmoil is not the only worry. As Treasuries rally, long-term interest rates are falling, providing a stimulus to the economy, just as the Federal Reserve is raising short-term rates to cool things off.

WILLIAM SULLIVAN, MORGAN STANLEY DEAN WITTER: This will just encourage the Fed to continue to lift the funds target. And in many respects, we don't have a lid on where the funds rate could be going this year.

RODGERS (on camera): The minutes of the Fed's February meeting, released today, suggest that may be the case. Economists say odds are now greater that the Fed could raise interest rates by 1/2 percentage point at its next meeting in May.

Ceci Rodgers, CNN Financial News, Chicago.

(END VIDEOTAPE)

BAY: Joining us now, the man who trades more bonds than anyone else, Pimco's Bill Gross.

Bill, welcome back.

BILL GROSS, MANAGING DIRECTOR, PIMCO: Thank you, Willow.

BAY: Please, help us sort this out. Treasury official makes these comments. How does the market take that comment?

GROSS: Well, the market took it to mean that agency debt in the future may have less creditworthiness than they do now; if the government and the Treasury withdraws their credit lines, and I don't think that's a distinct possibility, but that's the proposal nonetheless, if they withdraw their lines, then agencies, theoretically, have less of a backing than they do know from the U.S. Treasury.

BAY: So, Bill, if you don't think that's a possibility, why do you suspect the official made that proposal?

GROSS: Well, I think the Treasury is concerned about the growing power of Freddie Mac and Fanny Mae. They've been growing very rapidly. They suspect at some point down the road -- and that may be ten or 15 minutes down the road -- that the creditworthiness of those agencies will be less than they are now. Now Moody's came out this afternoon and suggested -- affirmed that the ratings were triple A, and I suggest that that is the proper rating for Freddie Mac and Fanny Mae. But the Treasury is worried 10 or 15 years down the road, and they're trying to nip a movement in the bud, so to speak.

BAY: As we mentioned, investors dumped agency debt. What did you do?

GROSS: Well, we bought some of that agency debt. You know, there comes a point in time where value becomes important as opposed to momentum. Treasuries have had the momentum for the past several weeks, the past several months. It's almost like anyone that had Treasuries won the game. Nowadays, however, with agency debt being spread at a hundred basis points or 1 percent higher than Treasury debt, there comes value into the question. It becomes a value versus a momentum question, much like we have seen the stock market. So we've been buying a little agency debt. I am still under the assumption that Treasuries continue to do well over the next several months.

BAY: One of the issues that we're wrestling with is this notion of a benchmark.

GROSS: Right.

BAY: What in your mind is the benchmark right now, and do you expect that will change?

GROSS: Well, the benchmark right now is now a 10-year treasury. It used to be a 30-year Treasury. It's a 10-year Treasury now, but as the Treasury issues less and less paper, eventually -- and that's probably two or three years down the road -- agency debt will become the benchmark almost by default. Now that's something that the Treasury doesn't want. It means that agency debt basically will gain on benchmark status, and therefore, trade at lower yield levels, increasing that power that I just spoke to, but for the moment, the Treasury 10-year, two or three years down the road, agencies.

BAY: Bill Gross, as always, thank you for joining us.

GROSS: Thank you, Willow.

VARNEY: Here's what's coming up. Federal Express delivers a real surprise to Wall Street.

BAY: The shipping company soars on better-than-expected profits. The details when MONEYLINE returns.

(COMMERCIAL BREAK)

VARNEY: The recent market volatility a big help to the bottom line at Morgan Stanley Dean Witter last quarter. The securities firm said first quarter net income soared 49 percent due to record trading volume. Revenues soared to nearly $7.5 billion, on profits that beat estimates by 28 cents a share. Shares of Morgan Stanley up 4 1/2 today, and they're up nearly 45 percent in just the past month. A quick programming note for you: We'll have more on Morgan Stanley Dean Witter in our "Bottom Line" segment. That's tomorrow night.

BAY: As we reported earlier, strong earnings drove FedEx shares higher. The stock up 2 3/4 after it reported a 45 percent jump in third quarter profits. Despite higher fuel costs, the shipping giant beat estimates by a nickel. Earlier on CNN, its CEO said he hopes lower fuel prices this summer will help offset the recent rise.

(BEGIN VIDEO CLIP)

FRED SMITH, CEO, FEDEX: Year over year comparisons from our fourth quarter, the one we're now in, the March, April and May quarter, will sort of even out as we go into our fiscal year 2001, because the big run-up in fuel prices started this time last year.

(END VIDEO CLIP)

BAY: Despite today's gains, shares of FedEx are still off 36 percent from their 52-week high.

Exodus Communications up more than 1 1/2. Several analysts raised their price target on the Web-hosting firm to up to $234 a share. Deutsche Bank's Alex Brown cited yesterday's investment in Web content delivery firm Mirror Image.

And Blaze Software up 11 3/4 on its market debut. The e-commerce software maker priced at $16 per share.

VARNEY: Legal proceedings kept big-cap biotech stocks from participating in today's market rally. Amgen, one of the biggest losers after Merrill Lynch cuts its rating on the biotech firm. It cited Amgen's current valuation and a patent litigation suit that it's fighting in federal court. Amgen stock down more than 4 points today. Biogen off almost 5 1/2. Prudential cut its price target after it lost an arbitration case against Schering-Plough over royalty payments on a Hepatitis C treatment.

Other biotechs down today include Chiron, Immunex and Genzyme.

BAY: Just ahead on MONEYLINE, the cure for everything from cancer to arthritis could be inside your body.

VARNEY: The human gene, the final frontier of medicine, but who owns it? Our special series continues next, with a look at genomics and the law.

(COMMERCIAL BREAK)

BAY: Turning now to our special series: "The Promise of Genomics, from Code to Cash." For companies in the business of gene mapping, here's the key question: How do you stake a claim on a piece of the human body?

Here's Allan Dodds Frank on this brave new world of science and the law.

(BEGIN VIDEOTAPE)

ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): This week, drosophila. The complete genetic code of the fruit fly is mapped by the genomics company Celera.

Coming soon, the complete genetic code for humans. The government says the first rough draft of the human genome sequence will be laid out this summer. But the revolution in human genetic research, called genomics, also poses complicated and troubling legal and philosophical questions, starting with "Who owns life?"

PROF. GEORGE ANNAS, BOSTON UNIVERSITY: The two biggest issues, it's no surprise to anybody, are patenting and privacy. The question is, who's going to be able to patent what? And the question is, what information about our own genomes we are going to be able to keep private?

FRANK: Already, more than 2,000 patents on various genomes have been issued and 10,000 more are pending, patents aimed at everything from producing more nutritious corn, to curing dread diseases to cloning farm animals.

WILLIAM HASELTINE, HUMAN GENOME SCIENCES: Why is it so important that we protect these genes and these proteins with patents. These genes and these proteins are the drugs themselves. They're what we put into the bottle to treat a patient with.

ROY WHITFIELD, CEO, INCYTE PHARMACEUTICALS: This is the wave of the future for doing pharmacology and toxicology. You're really understanding the mechanism of the drug as opposed to historically lining up 50 rats, if you will, and seeing if 49 of them croak.

FRANK: Companies working on genomics want patents to protect their work in isolating and manipulating genes.

PROF. ARTHUR CAPLAN, UNIVERSITY OF PENNSYLVANIA: There's a sense in which people say what we really have to fear about the genetic revolution is that the ethics can't keep up, that we're going to find ourselves with billionaires making clone babies, and giant conglomerates owning the genome, doling it out for zillions of dollars for the few who can afford it, and that's not the worry I have. The worry I have is the ethics can keep up.

FRANK: The U.S. patent commissioner says the current system of 20-year protection provides incentive for inventions that benefit all.

COMM. TODD DICKINSON, PATENTS AND TRADEMARKS: The question of whether the genomic information is patentable, again, largely rests on the question of utility, and the new use that you found for that isolated gene. We're not talking about that gene as it is in your body and the function it performs in your body; we're talking about taking that gene and creating that use for it, as a diagnostic, or as a therapeutic or as a tool.

FRANK: Indeed, patent protection is so central to the genomics revolution that when President Clinton and British Prime Minister Tony Blair talked about it last week, confusion about their remarks knocked nearly $17 billion of market capitalization off biotechs in one day.

CHUCK LUDLAM, BIOTECHNOLOGY INDUSTRY ORG.: If investors need to look at these companies, they need to look at business models or the brilliance of the company, but patent policy is not going to turn out to be a variable. The government patent policy in this area is very, very clear and very favorable.

FRANK: While patents protect inventors, Congress has yet to provide comprehensive laws governing what happens to genetic information about individuals.

ANNAS: Do you have to share that information with your family members, who also share many of the same genetic characteristics you do, obviously, with your employer, the insurance company, the government, the Army, the FBI? I mean, that's going to be where the real battle is going to be waged.

FRANK: The range of medical developments and genetic experimentation that will spring from the Humane Genome Project will pose great ethical challenges.

ROCHELLE SEIDE, ATTORNEY, BAKER BOTTS: Certainly cloning of people -- you know, the ability exists, and that's where I think the philosophers, and the ethicists, and the theologians are really going to have to step in much more so than the lawyers.

FRANK: Genomics advances will generate profound debates. For instance, if a genomics company develops a blockbuster cure for cancer, will the government want to control pricing to assure its widespread availability, or will it be left to the free market?

Allan Dodds Frank, CNN Financial News, New York.

(END VIDEOTAPE)

BAY: It is so interesting but so complicated with all of these stories yet to unfold -- science, medicine, law -- it really does create somewhat of a mine field for investors, I think.

VARNEY: But I do get the strong impression that it is money that is running this show at this point in time.

BAY: That would be the case.

VARNEY: We'll see where it goes.

BAY: Well, don't miss the final report in our genomics series.

VARNEY: Yes, we're going to look at the biotech booms and busts of the past and what they may tell us about the current biotech craze. That's tomorrow, here on MONEYLINE.

BAY: Up next, "Ahead of the Curve," some of what you need to know tonight before the markets open tomorrow.

VARNEY: I already know it.

Yes, you are watching MONEYLINE.

(COMMERCIAL BREAK)

VARNEY: Checking some of what could move the markets tomorrow: On the economic front: durable goods orders, those figures due out at 8:30 a.m. Eastern. Keep an eye also on the share price of Gillette. After the bell, the consumer products giant said it's going to sell its White Rain hair care brand to Diamond Products. Also watch Johnson & Johnson. After the bell, it said it's going to stop marketing its heartburn drug, Propolsid, after reports of serious cardiovascular side-effects. The drug will still be available to some patients on a limited access basis.

BAY: That is MONEYLINE for this Thursday. I'm Willow Bay.

VARNEY: And I'm Stuart Varney.

Thanks for joining us. Good night from New York.

"CROSSFIRE" is next.

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