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PC makers up on strong earnings

The sector catches a ride on the coattails of Microsoft and IBM, and both the Nasdaq and the Dow move higher.

The Nasdaq Composite Index moved higher today, carried by strong earnings news yesterday from bellwethers IBM and Microsoft.

Microsoft, the third most actively traded stock on the Nasdaq market today, gained 6.05 percent, while IBM, the sixth most actively traded stock on the New York Stock Exchange today, gained 3.49 percent.

The Dow Jones Industrial Average rose 13.38 points or .16 percent to 8,519.23, posting gains for the sixth consecutive day. The blue chip index had dipped as much as 59.73 points during the day. The technology-heavy Nasdaq, meanwhile, climbed 35.31 points or 2.15 percent to 1,674.50.

The broader market was unsettled as many investors moved to take profits.

"People were expecting good earnings--perhaps not such good earnings--and had already built them into the overall market," said Brean Murray senior equity trader Peter Coolidge. "So when the earnings were announced, they didn't move the market too much."

Many analysts argued that the markets in general had gained too much too fast during the past week to expect any dramatic movement today, even in light of Microsoft and IBM's positive earnings.

"The market is just doing some re-balancing as it gets back in line," said Coolidge. "Just as the market got overdone on the downside, it got a little overdone on upside, so we are seeing some profit-taking."

But the PC sector apparently did manage to catch a ride on the coattails of Microsoft and IBM.

"Microsoft performed better than expected, and they sell software to the PC sector," said Chuck Jones, an analyst with Salomon Smith Barney.

Leading PC makers such as Apple, Compaq, Dell, and Gateway all closed higher today. Gateway led the way with a gain of more than 8 percent.

Jim Poyner, an analyst with CIBC Oppenheimer, said IBM's improved PC performance instilled investors with confidence that the sector is bouncing back from a dour first half of the year.

"IBM and Compaq were having problems in the first half, but Compaq reported a good third quarter, and with IBM's announcement, it's reinforced that sense of recovery from the first half," he said.

Also today, shares of beleaguered business software maker PeopleSoft plunged as much as 25 percent today despite an earnings report from the company yesterday that met expectations.

Several influential analysts today downgraded their outlook on the company because of growing competition coupled with an overall slowdown in the sector. Merrill Lynch downgraded PeopleSoft to "accumulate" from a near-term "buy," CIBC Oppenheimer lowered its rating on the company to "hold" from "buy," and Prudential Securities downgraded it to "hold" from "accumulate." The stock, which was the second most actively traded on the Nasdaq market today, fell 23.3 percent or 6 points, to 19.75. It has traded as high as 57.44 and as low as 18.5 during the past 52 weeks.

Another technology-related company hit hard today was online computer retailer Egghead.com, which saw its stock fall 16.24 percent to 6.12. The company said that its fiscal second-quarter loss deepened and that sales fell after it closed 80 stores. Revenue from its Internet sites, however, soared 73 percent to $35.1 million. The company's shares have traded as high as 29.13 and as low as 4.31 during the past 52 weeks.