MIDDAY MARKETS: Chip sector upgrades ignite rally

A round of upgrades for the chip sector and soaring Cisco shares helped boost the Nasdaq more than 3 percent at midday. The index rose 59.67 points to 1,911.70.

The Dow Jones industrial average fell 54.79 to 10,047.95, and the Inter@ctive Week @Net Index rose 9 to 176.25.

Technology stocks posted huge gains on the back of an upgrade for semiconductor companies from Salomon Smith Barney analyst John Joseph.

"Joseph was the first to call the top in semiconductors and now apparently he is going to do some buying in the semis," Larry Wachtel of Prudential Securities told Reuters. "That's going to be very helpful."

Intel (Nasdaq: INTC), up $2.87, or 12 percent, to $27.64, and fellow chipmakers rallied Wednesday as the influential Wall Street analyst raised his ratings on a host of stocks. Joseph argued semiconductor stocks could gain despite sluggish fundamentals. The conclusion counters a bearish report from Lehman Brothers on Monday. Applied Micro (Nasdaq: AMCC), up $4.44 to $20.82, and Micron Electronics (NYSE: MU), up $4.77 to $42.92, were some of the bigger gainers.

But Cisco (Nasdaq: CSCO) was the biggest contributor to the Nasdaq's rise. The most actively traded stock, it was up $1.68 to $17.54. Sun Microsystems also posted big gains, up $1.67 to $16.32.

Networking stocks also buoyed the index, as Redback (Nasdaq: RBAK), up $1.79 to $17.73, and Juniper (Nasdaq: JNPR), up $4.42 to $44.89, rose ahead of their imminent earnings reports. The companies report their first-quarter results after the bell, today and tomorrow, respectively.

Motorola (NYSE: MOT) shares were up 31 cents to $13.41 despite the company's loss report. It caused a stir by predicting an alarming retro trend: a return to the 1970s economy. Motorola CEO Chris Galvin said in a conference call today that the technology sector is in a recession and "reflects the boom and bust of the high-tech cycles of ྐ-ྑ, or perhaps even the ྆-྇ time frame."

Another disappointment for investors came from EMC (NYSE: EMC), off 98 cents to $33.42. The data storage giant said its first-quarter earnings will fall short of Wall Street estimates amid a slowdown in information technology spending. The company also cut its growth projections for 2001.

Amazon (Nasdaq: AMZN) was up 88 cents to $12.89, AOL Time Warner (NYSE: AOL) rose $1.08 to $41.09 and Yahoo (Nasdaq: YHOO) gained 71 cents to $16.73.

Among other tech bellwethers, Oracle (Nasdaq: ORCL) rose 44 cents to $15.41, and Microsoft (Nasdaq: MSFT) was up 94 cents to $60.62.

ZDII staff and Reuters contributed to this roundup.