Tech Industry

Tech giants push markets higher

The Nasdaq composite index and the Dow Jones industrial average recover from early losses to close higher, thanks in large part to a rally by technology bellwethers.

The Nasdaq composite index and the Dow Jones industrial average recovered from early losses to close higher, thanks in large part to a rally by technology bellwethers.

The Nasdaq fell as much as 149 points before closing up 42.59 at 3,272.16. The Standard & Poor's 500 index squeaked down 0.46 to 1,364.44.

The Dow rose 53.64 to 10,380.12, led by tech giants. Intel rose $3.38 to $44.69; IBM gained $4.94 to $92.50; and Microsoft climbed $3.19 to $64.44.

Optical stocks, battered for much of the week, fared better on Thursday. JDS Uniphase, which fell as much as $9, closed up $3.44 at $74.44. Applied Micro Circuits fell as much as $27 before closing down $9.50 at $138.50; Ciena dropped $5.38 to $103, but traded as low as $84; and Nortel Networks rose 13 cents to $45.

On Wednesday, the Nasdaq composite index dropped about 6 percent, sparked by earnings news from Nortel. The telecommunications equipment maker reported that third-quarter earnings rose 64 percent, but sales numbers fell short of some expectations.

"The rally was a surprise to everybody," said Mike Palazzi, head of Nasdaq trading at CIBC World Markets.

Palazzi noted that tech stocks were helped throughout the day by expectations of good earnings from JDS Uniphase; positive comments about Sun Microsystems from Salomon Smith Barney; and the fact that the markets became oversold earlier on little negative news.

Declining stocks on the Nasdaq were about even with advancers. On the New York Stock Exchange, advancers outpaced decliners by a ratio of about 15-to-14.

The market volatility arose despite relatively strong earnings performance among companies that have reported so far.

As of Thursday morning, 77 percent of the S&P 500 reported earnings, according to First Call/Thomson Financial. Of that number, 60 percent have exceeded analysts' expectations; 30 percent have matched; and 10 percent have fallen below expectations. Senior research analyst Joe Cooper of First Call said the majority of S&P companies revised third-quarter earnings downward during preannouncement season.

First Call forecasts earnings growth for the third quarter at 19 percent, compared with second-quarter growth of 22 percent and 24 percent growth for the first quarter of this year.

The forecast for upcoming quarters is not as rosy as previous quarters.

First Call is now predicting 13 percent growth for fourth-quarter earnings this year. On Oct. 1, First Call's estimate for fourth-quarter earnings growth was 15.5 percent.

The disparity reflects a growing pessimism that technology companies will issue bleak earnings warnings as the fourth quarter closes.

"We're seeing far more (earnings) revision activity than normal," Cooper said. "The earnings growth rate has been coming down so fast that we don't know where it's going to bottom."

The CNET tech index gained 42.96 to 2,566.13. Advancers led decliners, with 63 of the 97 stocks in the index rising, 32 falling and two remaining unchanged.

Of the 18 sectors tracked by CNET Investor, semiconductor equipment makers and semiconductor companies were the day's largest gainers, climbing 6 percent and 4 percent, respectively. Server hardware makers and computer data storage companies posted the sharpest drops, falling 5 percent and 4 percent, respectively.

Sun Microsystems helped lead server hardware makers down, sliding $6.63 to $102, and falling as low as $94.88.

The Philadelphia semiconductor index rose 40.88, or 6 percent, to 705.97, led by Altera, which gained $4.06, or about 13 percent, to $36.38. Teradyne rose $3.25, or nearly 12 percent, to $31, and Lattice Semiconductor climbed $2.25, or 10 percent, to $24.75.

Storage sector companies took some losses. Storage device maker EMC fell $4 to $86, and Network Appliance dropped $5.44 to $116.81.

Storage networking equipment makers also fell. McData lost $5 to $72, and Brocade Communications dropped $25, or 10 percent, to $216. Emulex closed up $8.31 at $156.13, falling as low as $116.50.

WorldCom shares fell $3.50, or about 14 percent, to $21.75. The telecom giant matched Wall Street's earnings estimates for the third quarter but declined to announce plans for its eroding long-distance business.