Tech stocks march higher

The Nasdaq composite index rose 85.71, or 3 percent, to 2,768.49, and the Standard & Poor's 500 index climbed 18.50 to 1,347.97. The Dow Jones industrial average rose 93.94 to 10,678.28.

The Nasdaq is up 12 percent for the month.

The markets "have gotten to an inflection point where bad earnings are OK, and good earnings are great," said Arthur Hogan, chief market analyst at Jefferies.

Hogan also believes that the markets have been bombarded with so much bad news that stocks have become oversold. Traders "have priced in a recession that may not show up," he said.

The Nasdaq generated a volume of 2.53 billion shares with two stocks rising for every one that fell. The New York Stock Exchange posted a heavy volume of 1.36 billion shares as winners outnumbered losers by a 16-to-13 ratio.

The CNET tech index rose 99.76 to 2,347.38. Advancers thumped decliners, with 77 of the 96 stocks in the index rising, 17 falling and one remaining unchanged.

Tony Cecin, head of trading at U.S. Bancorp Piper Jaffray, says investors have discounted the sluggish earnings that are expected to come out in the near term and have placed their bets on an upswing in the second half of the year.

"Everyone has written off the fourth quarter and probably the first quarter," said Cecin, who added that traders are also taking advantage of the depressed markets to shop for some deals.

"Valuations have come down to a range that people can stomach," he said.

Upbeat fourth-quarter earnings from IBM helped drive the tech sector higher. Big Blue said net income increased 28 percent to $2.67 billion, or $1.48 a share, from $2.09 billion, or $1.12 a share, a year earlier. Revenue climbed 5.6 percent to $25.6 billion from $24.2 billion.

Wall Street expected IBM to post earnings of $1.46 a share, the consensus estimate of analysts polled by First Call.

The company said in a statement that it expects the size and reach of its businesses in Europe and Asia to offset any turbulence in the U.S. market for the coming year.

IBM rose $11.63, or 12 percent, to $108.31.

The news lifted other box makers. Hewlett-Packard gained $3.06, or almost 10 percent, to $34.69, and Gateway rose $2.16, or almost 11 percent, to $22.38.

Other tech titans led the markets into the green. Intel rose $1.69 to $32.19; Cisco Systems advanced $2.88, or 7 percent, to $41.88; Microsoft climbed $2.56 to $55.50; and Sun Microsystems gained $2.50, or about 8 percent, to $34.88.

Of the 18 sectors tracked by CNET Investor, PC hardware makers were the day's largest gainers, climbing almost 10 percent. Providers of services to Internet companies posted the only drops, falling 0.26 percent.

Shares of Apple Computer also gained despite lackluster earnings, rising $1.88, or 11 percent, to $18.69. The computer maker met Wall Street expectations by reporting a loss of $247 million, or 73 cents per share, on total revenue of $1 billion, a 57 percent drop compared with revenue in the same quarter a year ago.

The company had told analysts to expect a loss of $225 million to $250 million, excluding investment gains, on revenue of about $1 billion.

Investors were not as forgiving with other companies.

Software maker Vignette said Thursday it plans to shut some offices and trim its work force by approximately 15 percent to reduce expenses as it looks toward weaker earnings.

The Austin, Texas-based company, which develops e-commerce and content-management software, also lowered its financial guidance for fiscal 2001. For that period, Vignette said it expects revenues of $500 million and a profit of 9 cents per share. First Call analysts expected the company to post fiscal-year revenue close to $600 million.

Shares of Vignette fell $4.69, or about 38 percent, to $7.81, on a volume of 68.1 million shares, nearly 14 times more than the stock's daily average of about 5 million shares. CNET Networks, the publisher of News.com, owns an equity stake in Vignette.

Extreme Networks and Redback Network fell Thursday after posting earnings that met expectations.

Extreme posted a fiscal second-quarter profit of $12.6 million, or 11 cents a share, on sales of $144.7 million Wednesday, matching most analysts' estimates.

Wall Street expected Extreme to make 11 cents a share on sales of $142.3 million.

Redback squeaked past analysts' fourth-quarter estimates, posting a profit of $7.8 million, or 5 cents a share, on sales of $114.6 million.

First Call consensus expected it to earn 4 cents a share on sales just north of $100 million.

But traders subjected the network equipment makers to a lashing after analysts downgraded the stocks. Extreme fell $5.38, or 11 percent, to $42.50 as analysts at Thomas Weisel downgraded the stock to "buy" from "strong buy," while Redback lost $7.69, or nearly 16 percent, to $40.88 after six investment banks made negative comments on the stock.

Advanced Micro Devices helped boost the chip sector, rising $4.19, or about 23 percent, to $22.69. AMD missed analysts' fourth-quarter earnings estimates Wednesday, but company executives said the general health of the PC market isn't as bad as rival Intel described Tuesday.

The chipmaker reported a net income of $177.9 million, or 53 cents a share. Analysts polled by research firm First Call had predicted a profit of 55 cents a share for the December quarter.

The company predicted that it would be able to take market share away from arch-rival Intel over the coming year.

The Philadelphia semiconductor index rose 48.69, or 7 percent, to 726.09, led by AMD. Micron Technology rose $5.19, or 13 percent, to $44.44; and KLA-Tencor gained $5.69, or 14 percent, to $46.06.