Market rally sends techs, indexes higher

After nearly a week of selling sparked by tensions over the presidential election standoff, stocks race higher as investors begin to bargain shop and focus on positive economic news.

5 min read
After nearly a week of selling sparked by tensions over the presidential election standoff, stocks raced higher Tuesday as investors began to bargain shop and focus on positive economic news.

The Nasdaq composite index rose 171.55, or nearly 6 percent, to 3,138.27, and the Standard & Poor's 500 index climbed 31.69, or 2 percent, to 1,382.95. The Dow Jones industrial average rose 163.81, or about 2 percent, to 10,681.06.

The Nasdaq posted the 10th largest percentage gain in its history on volume of 1.78 billion shares. Thirteen stocks rose for every seven decliners.

About nine stocks rose for every five that lost on the New York Stock Exchange, which recorded volume of 1.11 billion shares.

Large-capitalization tech stocks led the rally. At the end of regular trading, Oracle rose $3.63, or about 15 percent, to $28.38; WorldCom inched up 69 cents to $17.06; Cisco Systems climbed $2.75 to $53.13; Intel gained $2.75 to $40.94; and Microsoft closed up $2.38 at $68.81.

Oracle was the most active stock on the Nasdaq, generating a volume of about 77 million shares, more than twice the stock's average daily volume.

Tech stocks have been roughed up during the past several days as the standoff in the results of last week's presidential election remain undecided. The Nasdaq set a new 52-week intraday low Monday, falling as low as 2,859.39.

"A lot of our angst has been over who's going to be president, when in reality either one would be fine for Wall Street," said Arthur Hogan, chief market analyst for Jefferies & Co.

Hogan said that bargain hunters stepped in late Monday to cut the Nasdaq's losses and continued the buying trend into Tuesday.

Some prominent market analysts--including the widely followed Abby Joseph Cohen--maintain a positive outlook despite the political uncertainty.

"The fundamental picture remains favorable," Cohen, an investment strategist at Goldman Sachs, wrote in a research report released Tuesday. "As expected, economic and profit growth have slowed from last winter's rapid pace, yet remain at or above trend rates."

Cohen, one of the most vocal bulls during the stock market rally of the late 1990s, added that the downturn has helped the markets by slashing the high valuations of many stocks. That should lead "to better balance within the equity market," Cohen wrote.

Other market watchers also believe the U.S. economy is fundamentally sound.

"Inflation, not high (price-to-earnings ratios), not the duration of bull markets...in our opinion ends bull markets," said Thomas Galvin, chief investment officer at Credit Suisse First Boston, in a Monday conference call.

The Federal Reserve has raised interest rates six times from June 1999 to May 2000 to combat inflation and cool the economy. The Fed meets Wednesday to discuss interest rate policy again. Most market analysts think the Fed will leave rates unchanged as they have for the past three meetings, given economic data pointing to a slowing economy.

Investors also reacted Tuesday to the release of some benign economic news. Sales at the nation's retailers edged up just 0.1 percent in October, reflecting a large decline in car sales, the Commerce Department said Tuesday. Analysts' expected that sales would remain flat with the previous month.

The slim October gain followed a big 0.9 percent increase in September and was the weakest showing since August, when sales were flat.

"We interpret this as a 'soft landing' number," said Maury Harris, chief economist at WBS Warburg, who added that consumer spirits are holding up reasonably well considering that the most recent University of Michigan consumer sentiment index rose to 107.7 from 105.8 in October.

The CNET tech index rose 124.67 to 2,523.40. Advancers dominated decliners, with 91 of the 97 stocks in the index rising and 6 falling.

All of the 18 sectors tracked by CNET Investor climbed. Server software makers and the computer data storage sector led the charge higher, rising about 10 percent and 9 percent, respectively.

Oracle helped move the server software sector higher, while PeopleSoft gained $5.75, or 15 percent, to $43.25. Veritas Software climbed $11.31, or 10 percent, to $124.06.

Shares of Global Crossing rose 88 cents to $18.50 after the phone and data communications company reported losses Monday of $571.8 million, or 65 cents per share. Analysts surveyed by First Call/Thomson Financial expected the company to lose 79 cents a share.

WebMD shares also rose after the company reported earnings. The health-focused Internet site reported a loss of $65.8 million, or 27 cents per share, compared with a loss of $55.5 million, or 28 cents per share in the year-earlier period. Analysts polled by First Call/Thomson Financial expected the company to lose 22 cents per share. Shares of WebMD rose 84 cents, or 8 percent, to $10.97.

MicroTouch Systems made huge gains Tuesday, rising $5.69, or 38 percent, to $20.56, making it the largest percentage gainer on the Nasdaq. Volume topped 5.5 million shares, nearly 9 times more than the stock's average trading volume of about 62,000 shares.

3M agreed to buy the maker of touch screens for about $160 million in cash. 3M will pay $21 for each MicroTouch share. Dow component 3M rose 19 cents to $95.

But the rally did not extend to all stocks. Gemstar-TV Guide International fell $10, or 18 percent, to $44.69 on a volume of about 20.5 million shares, about six times the stock's average daily volume of 3.4 million shares.

The maker of software for interactive TV program guides said second-quarter sales fell to $337.7 million from $341 million a year earlier.

Redback Networks, a maker of equipment used to clear bottlenecks in communications networks, announced that CFO Craig Gentner will retire in the first quarter of 2001, citing a family medical matter. The stock fell $2.69 to $70.06.

CMGI rose 31 cents to $14.81. Chief executive David Wetherell said Monday that the Andover, Mass-based business incubator for Internet companies will take a $90 million restructuring charge and will sell or shut down its unprofitable online entertainment service, iCast, because of heavy capital costs. Wetherell said free Internet service provider 1stUp.com also will close its doors.

Wall Street did not take the news lightly. Analysts from Merrill Lynch and Credit Suisse First Boston on Tuesday downgraded CMGI to the equivalent of "hold."

The Philadelphia semiconductor index climbed 37.18, or about 6 percent, to 688.4, led by chipmaker Altera, which gained $3.38 to close at $31.63.