2HRS2GO: Discretion fuels tech gains

COMNMENTARY -- Are we coming too fast today or did we reach a natural bottom yesterday?

After several lousy sessions, techs are rebounding today on positive words from Gateway (NYSE: GTW) and, to a lesser extent, PMC-Sierra (Nasdaq: PMCS). Looks great on the surface, but don't assume things have bottomed out yet, but people are wondering if this isn't merely another respite before the fall resumes. After all, false starts happened a few times over the last few months, as recently as 13 days ago, when the Nasdaq Composite Index picked up 122 points before plunging for the next two weeks.

I won't pretend to analyze the charts this time, and others have already pointed out optimistic technical indicators such as put/call ratios. But there are also fundamental reasons to be hopeful.

If you look at the last two upward spikes -- Sept. 28 and Sept. 19 -- they were fueled by nothing more than end-of-quarter buying in the former case and bargain hunting in the latter.

This time, Gateway stepped forth as a leader who can bring investors back to the land of milk, honey and strong PC sales. That Gateway's business model differs from other PC vendors makes no difference to Wall Street; Gateway reported strength in Europe -- the bogeyman of the quarter for so many tech firms -- as well as consumer and small business fields in general. In other words, PCs aren't dying.

Of course, Micron Technology (NYSE: MU) said that last week. For that matter, Gateway and Compaq (Nasdaq: CPQ) said so last month, but people prefer to hear more concrete results; they needed to hear Gateway's actual quarterly report before accepting the thesis.

Just as encouraging is the fact that Wall Street didn't need Gateway to blow out the bottom line numbers. Gateway executives basically said the future remains bright and the company would make our fourth quarter estimates, and that provided all the reassurance necessary.

In other words, expectations have become reasonable.

Add that to a positive report from PMC-Sierra (Nasdaq: PMCS) and an upbeat preannouncement from Corning (NYSE: GLW) yesterday, and it underscores the point that demand for technology remains strong, despite stumbles from some major vendors.

But the really encouraging thing about today's rally isn't who's taking part in it, but rather, who's being left out.

You might have noticed that dot-coms remain sedated today because of advertising uncertainty spawned by Doubleclick (Nasdaq: DCLK) and MyPoints (Nasdaq: MYPT). Even Yahoo! (Nasdaq: YHOO) remains anchored by Wall Street's frown on the sector.

Too bad for the pure Internet folks, but it's a good sign for the market. Folks are differentiating between areas with a truly solid outlook (optical networking) and fields built on an earthquake fault (pure Net plays).

No doubt there are exceptions, and Wall Street will continue with its occasional bursts of nonsensical enthusiasm for fad companies. But that always happens in any market.

At least the general trend looks positive. It shows investor discretion, which leads to a smarter, more rational market. 22GO>