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MARKET PREVIEW: To rally, or not to rally?

Investors will continue to debate Monday whether last week's disappointing employment report merits a rally. Lucent Technologies, 3Com and Portal Software should be active, and the Dow is set to open slightly lower.

U.S.

Investors shrugged off a weaker-than-expected April employment report Friday, sending the Dow Jones industrial average up 155 points to 10,951.30. The Nasdaq composite gained 45 points to close at 2,191.58.

Initially, investors had sold shares on the news, but a midday turnaround signaled that investors had decided the report would keep the Federal Reserve cutting interest rates aggressively, sparking a rally.

Expect the battle between interest-rate optimism and economic pessimism to continue Monday, as investors await other clues to the economic puzzle and look ahead to Cisco Systems (Nasdaq: CSCO) earnings, due Tuesday.

Stocks to Watch

  • Lucent (NYSE: LU) shuffled management and named a new CFO Sunday. The telecom equipment maker, which has been looking for a new chief executive since October, replaced Chief Financial Officer Deborah Hopkins with Frank D'Amelio, president of Lucent's switching solutions business. D'Amelio was named CFO after Hopkins resigned.

  • Computer network equipment maker 3Com (Nasdaq: COMS) may also see some attention after The Wall Street Journal reported the company will announce a second round of "substantial" layoffs.

    Citing people familiar with the matter, the paper said the layoffs are expected as early as Monday. The cuts would be a second round, following 1,200 layoffs in February, and are expected to help 3Com meet its goal of reducing annual operating costs by $1 billion. The number of jobs to be eliminated was not known, but 3Com Chief Executive Bruce Claflin said in an e-mail that the cuts would be "substantial,'' the paper said.

  • Portal Software (Nasdaq: PRSF) said revenue and earnings for its first quarter, ended April 30, are now expected to be below the company's prior expectations. Revenue for the first quarter is now expected to be in the range of $42 million to $44 million. Pro forma loss is predicted to be in the range of 19 cents to 21 cents per share; First Call had predicted a profit of a penny a share.

    At the Bell

    The Dow Jones industrial average may open 19 points lower. The Standard & Poor's 500 index for June futures contracts was off 2.2 points to 1271 at 7:15 a.m. EDT in 24-hour electronic trading.

    Reuters contributed to this report.

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