Nasdaq closes higher for second day
The Nasdaq composite index closes higher for the second day in row, stringing together its first two-day rally of the year despite some early jitters from Cisco Systems.
Shares of Cisco were an initial drag on the markets, falling by as much as 9 percent. The stock closed down 88 cents, or about 2 percent, to $36.25. CIBC World Markets analyst Steve Kamman lowered his rating to "hold" from "buy" on the network equipment maker.
Kamman said it is doubtful that San Jose, Calif.-based Cisco can continue its growth.
"We believe Cisco will not make consensus revenue estimates in fiscal year 2002 and expect it will no longer be able to rely on appreciating stock as a currency," Kamman stated in his report.
Despite the negative comments on the tech bellwether, the Nasdaq showed some resiliency, and closed up 82.88, or 3 percent, at 2,524.18 after falling by as much as 63 points earlier.
The Standard & Poor's 500 index also carved out some gains, rising 12.47 to 1,313.27, while the Dow Jones industrial average finished up 31.72 at 10,604.27, coming back from a 100-point deficit.
"There's no question that the mood among technology investors has improved as shown by the breadth and volume" in the markets, said Peter Rogers, director of research at WR Hambrecht. "But the question is sustainability."
Advancers outnumbered decliners by a two-to-one ratio on the Nasdaq, which posted a respectable volume of 2.45 billion shares. The New York Stock Exchange generated a heavy volume of 1.28 billion shares as 19 stocks rose for every 11 that fell.
"People are starting to figure out what they want to own and are looking...where they can find some value," said Mark Donahoe, managing director of institutional trading at U.S. Bancorp Piper Jaffray.
Donahoe said he does not think the Nasdaq's tenacity indicates an upturn from the gloomy market sentiment that has haunted investors over the past few weeks, but he said he believes that investors are testing the waters.
Rogers, who said Wall Street is hoping the U.S. economy will pick up steam in the second half of the year, added, "For now, things don't seem as dark as they did, but that doesn't mean they've brightened."
Some companies came out with positive earnings news.
Applied Innovation shares rose $1.59, or about 18 percent, to $10.63 after the telecommunications equipment maker announced Tuesday after market close that fourth-quarter earnings will exceed expectations.
The company expects more than $50 million in revenue and a net income of about $3.1 million for the fourth quarter. That compares with revenue of $14.4 million on a net income of $2.5 million the company earned during last year's fourth quarter.
Veeco Instruments climbed $9.47, or 20 percent, to $56.22. The builder of tools to make and test computer chips had fourth-quarter orders of $184 million, beating the company's forecast of $150 million.
Xerox announced that it has received $435 million in financing from General Electric, breathing life back into the beleaguered copier company's balance sheet. Xerox rose $1.25, or 21 percent, to $7.13.
BEA Systems shares jumped $7.13, or about 15 percent, to $56.25 after the company signed a three-year licensing deal with financial giant Charles Schwab.
Almost all of the 18 sectors tracked by CNET Investor gained ground. Internet e-tailers and providers of services to Internet companies led the rush higher, climbing 7 percent each. Network equipment makers were the only losers on the day, falling 0.52 percent.
The CNET tech index rose 56.34 to 2,160.35. Advancers out-muscled decliners, with 83 of the 97 stocks in the index rising, 13 falling, and one remaining unchanged.
Some semiconductor companies released unfavorable earnings news.
Varian Semiconductor fell as much as 13 percent in early trading. The chip equipment maker said it expects revenue for the fiscal first quarter of 2001 to be between $223 million to $228 million. In the previous quarter, the company made $229 million in revenue. Varian also said weak economic conditions have made financial visibility less clear and that it is updating its outlook for the remainder of fiscal 2001. Varian closed up $1.31 at $25.44.
Celeritek fell $14.06, or 45 percent, to $16.94. The maker of chips for mobile phones said it earned 21 cents a share in the fiscal third quarter. Analysts surveyed by First Call expected the company to post 23 cents a share.
Analyst comments also took a chunk out of SilverStream Software's market cap, sending the stock down $2.50, or almost 16 percent, to $13.38.
The company reassured Wall Street on Tuesday that earnings for the fourth quarter would come in within previous company estimates. Yet, analyst Mark Perutz at Robertson Stephens cut the maker of computer network software to long-term "attractive" from "buy."
Perutz said in an interview that even though the company will make numbers, its revenue from software license agreements will miss his estimates by 10 percent. The analyst also expressed long-term concern over the company's ability to compete with larger companies such as BEA Systems, BroadVision and Art Technology Group.