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Tech Industry

MARKET CLOSE: Surprise rate cut sparks record day for Nasdaq

Investors got a belated gift from the Federal Reserve Board Wednesday when it surprised everyone by cutting short-term interest rates by a half percentage point. The Nasdaq composite stormed up 325 points to 2,616.52 while the Dow added 300 points to 10,945.75.

The 325-point jump marked a 14 percent improvement the day, both one-day records for the Nasdaq.

Technology stocks of all stripes and colors finally moved higher on the news, the first interest-rate cut since the fall of 1998.

“The markets needed this, but this was totally unexpected,” said Barry Hyman, chief investment strategist for Weatherly Securities. “The swiftness and the size clearly indicate the Fed is concerned about the economy. It is a catalyst and it is a catalyst that is going to stick. The important thing to believe is the Fed is on a scheme of lower interest rates for the first half of this year.”

The Fed also said it was prepared to cut rates further if needed to prevent the economy from slowing too much. The move, which came four weeks ahead of the year's first scheduled meeting of the rate-setting Federal Open Market Committee, takes the fed funds overnight bank lending rate to 6 percent.

It also cut the discount rate by a quarter point to 5.75 percent, a symbolic move that shows the Fed’s determined to protect the economy from any further deterioration.

PC stocks made strong gains Wednesday despite depressing comments from Lehman Brothers which called PC demand in December “terrible.”

Dell (DELL) rose $2.50 to $20 while Gateway (GTW) and Compaq Computer (CPQ) moved up $1.65 and $2.45 a share, respectively. Apple Computer (AAPL) closed up $1.50 to $16.38.

A pair of DSL stocks weren’t able to cash in on the rally as Efficient Networks (EFNT) fell $2.78 to $9.53 and Turnstone Systems (TSTN) shed 63 cents to $$5.94 after both issued profit warnings for the fourth quarter.

Intel (INTC) moved up $3.19 to $34.25. Advanced Micro Devices (AMD) added $1.88 to $16.25 and IBM (IBM) rallied up $9.81 to $94.63.

Tumbleweed Communications (Nasdaq: TMWD) tumbled $6.75 to $3.25 after it said it would miss estimates for its fourth quarter and will cut 20 percent of its workforce.

Sun Microsystems (SUNW) broke out of its extended slump, hustling up $7.56 to $33. Oracle (ORCL) picked up $5.63 to $32 and Microsoft (MSFT) rose $4.56 to $47.94.

Yahoo's (Nasdaq: YHOO) decision to garner fees from its auctions could add as much as a nickel a share to the portal's 2001 earnings, analysts said Wednesday. Wall Street analysts also said Yahoo could initially lose auction customers to eBay (Nasdaq: EBAY).

eBay shares finished up $9.19 to $39.38 while Yahoo! (YHOO) rose $2.75 to $30.94. CMGI (CMGI) tacked on 59 cents to $5.22 while America Online (AOL) and Amazon.com (AMZN) closed up $5.11 and $3.69 a share, respectively.

Cisco Systems (CSCO) shot up $8 to $41.31. Nortel Networks (NT) charged up $4.63 to $34.88 and Lucent Technologies (LU) closed up $1.88 to $15.19.

Battered fiber-optic stocks made huge gains as Ciena (CIEN) gained $19.06 to $84.94 while JDS Uniphase (JDSU) and SDL (SDLI) stormed up $14.38 and $53.69 a share, respectively.