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MARKET PREVIEW: Palm, Nortel take wind out of rally

More warnings from big-name technology companies Nortel and Palm could dampen enthusiasm for tech shares. Asian markets were mixed, Europe was down, and the Dow is set to open sharply lower.


Tuesday's consumer confidence report came in stronger than expected, reassuring investors that the economy wasn't spiraling into recession and provoking a rally.

But the markets may find it difficult to hold those gains Wednesday after communication equipment maker Nortel Networks (NYSE: NT) warned that its loss for the first quarter will be greater than expected, and said it will slash another 5,000 jobs.

Palm (Nasdaq: PALM) also preannounced a disappointing quarter as it reported third-quarter earnings that were slightly above analysts' forecasts. The handheld computer maker said late that it will post a loss for its current quarter rather than the profit that Wall Street had expected.

Agere, Nortel and Palm will be among the heavily traded issues. Agere makes its market debut priced at $6 a share.

Blue chip and technology stocks moved higher Tuesday, buoyed by a better-than-expected consumer confidence report and bargain-basement prices for sector leaders. The Nasdaq composite picked up 54 points to finish at 1,972.28, while the Dow Jones industrial average shot up 260 points to end at 9,947.54.

At the Bell

The Dow Jones industrial average may open 123 points lower. The Standard & Poor's 500 index for June futures contracts was down 14.5 points to 1175 at 7:25 a.m. EST in 24-hour electronic trading.

The Inter@ctive Week @Net Index rose 6 to 187.89.


Trading in Asia was mixed. The Nikkei 225 rose 127.18 to 1,3765.51 Singapore's Strait Times index fell 25.07 to 1,654.32 and Hong Kong's Hang Seng gained 143.51 to 1,2851.41.


European markets were down. London's FTSE 100 fell 83.80 to 5,644.30, the CAC 40 in Paris lost 62.62 to 5,172.98 and the Xetra DAX in Frankfurt was down 85.56 to 5,852.65.

Reuters contributed to this report.