RALLY MAY BE FLEETING; MANY WALL STREET OBSERVERS PREDICT MARKET DECLINE DESPITE RECENT RECORD GAINS.

Byline: Nick Olivari Bloomberg News

The rally in oil stocks which helped send both the Dow Jones Industrial Average and Standard & Poor's 500 Index to records this week is unlikely to last, money managers say.

That could make it that much more difficult for the Dow average to top 10,000, after coming within 42 points of the mark Friday.

The Standard & Poor's Corp. index of international oil stocks rose 7.8 percent on Wednesday and Thursday, its biggest two-day advance this decade, on expectations that producers would cut output enough to boost prices.

Exxon Corp., a member of the Dow average, rose 15 percent since March 2, while Texaco Inc. jumped 24 percent and Mobil Corp. added 17 percent. Still, money managers weren't optimistic that the stocks would be able to hold the gains.

``It's a short-term event,'' said Robert Froehlich, chief investment officer at Scudder Kemper Investments Inc., which manages $350 billion. ``The fundamental price of oil is driven more by demand than supply, and we have an overabundance of oil.''

Crude topped $15 a barrel Friday for the first time in five months as oil producers from Saudi Arabia, Algeria, Iran, Mexico and Venezuela agreed to idle almost 3 percent of the world's output in an effort to end a world glut. The price retreated to $14.58 amid concern that supplies are too high to justify such a big gain.

``We have been down this road before, and I am not convinced oil stocks have more room to rise,'' said Bryan Piskorowski, a market analyst with Prudential Securities Inc.

The Paris-based International Energy Agency estimates the industrialized nations have 83 days' supply of crude and petroleum products on hand. That's little changed from the 82 days at the end of 1997, even after OPEC pledged last June to cut 2.6 million barrels a day from world markets. OPEC next will meet on March 23.

For the week, the Dow industrials gained 1.4 percent, the S&P 500 added 1.3 percent, and the Nasdaq Composite Index gained 1.6 percent.

Both the Dow industrials and the S&P 500 climbed to records. The Dow average rose to an intraday record of 9,958.77 Friday, just 42 points away from the 10,000 mark, after closing at a record 9,897.44 on Thursday. The S&P 500 climbed Thursday to an all-time high of 1,306.41, closing at a record 1,297.68.

Investors were more excited by the S&P 500's gains than the Dow's, with many forecasting the Dow will slip in coming days.

``Our models suggest if we go through 10,000, it could be a long wait for 11,000 - or we may drift down,'' said Douglas Cliggott, a strategist with J.P. Morgan & Co.

Cliggott was maintaining his year-end target of 9,300 for the Dow.

``For those of us who work in the markets, it's just another day,'' said John Bartlett, senior portfolio manager for Commerce Funds, a unit of Commerce Bancshares Inc. that oversees $8.5 billion in St. Louis.

Still, Commerce Funds is in the process of reducing the equity allocation in its balanced portfolio to 55 percent from 60 percent and increasing the bond portion to 45 percent from 40 percent.

The reason: lingering concern that prices are too high relative to earnings.

``The market has had a couple of amazing years with not a lot of earnings support,'' Cliggott said. ``With (interest) rates shifting higher rather than lower, we need to shift to an earnings-driven market.''

The earnings growth that could justify higher share prices may not be on the horizon anytime soon. Some of the companies that propelled the S&P 500 and Nasdaq higher have been issuing sales warnings.

Oracle Corp., the No. 1 database software maker, reported unexpectedly weak sales growth, sparking concern that demand for its programs is slowing. Microsoft Corp., the world's biggest software maker, said this week it expects sales to fall short of estimates in its current quarter because of a delay in the introduction of the Office 2000 word-processing and spreadsheet program. The warnings came after Dell Computer Corp. and Compaq Computer Corp. reported slower sales growth.