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Markets ride high on Cisco news

Optimism sparked by Cisco's preannouncement drives techs firmly into positive territory despite mixed signals about the economy.

Cisco Systems' financial preannouncement sparked a rally in the networking sector that spread across the Nasdaq on Friday, sending the tech-heavy index up 4 percent. A report on new home sales also boosted the markets.

The Nasdaq composite index rose 73.83 to 1,916.80, while the Dow Jones industrial average advanced 194.02 to 10,423.17 .

A report on new home sales indicated sales surged 4.9 percent to a 950,000 annual rate in July, surpassing analyst estimates for a 918,000 rate and rising at the fastest pace since March.

The Federal Reserve's seven interest-rate cuts this year may have helped the sales remain strong. "Low mortgage rates are helping, and personal income growth has remained positive," noted Raymond James & Associates analyst Scott Brown.

Economists say home sales should rub off on the rest of the economy, especially in consumer spending, as homeowners have to furnish their new abodes.

A report on durable-goods orders earlier in the day wasn't as rosy. Orders for costly U.S. manufactured goods dipped 0.6 percent in July to $182.02 billion, falling for the second month in a row despite strong demand for cars, which helped offset some of the decline. The Commerce Department's report matched economists' forecasts.

Cisco gained $1.49, or 8.9 percent, to $18.25 after news that the networking-equipment maker has seen sales stabilizing this quarter and is on track to meet estimates. The company has also reworked its management structure.

Competitor JDS Uniphase rose 64 cents, or 9.1 percent, to $7.66. Nortel Networks was up 41 cents to $7.06. CNET's Networking index picked up 4 percent. The CNET Telecom Equipment Index gained 4.5 percent.

Microsoft was also up, rising $2.93 to $62.05, after news that a federal appeals court sent the software giant's antitrust case back to a lower court. The company also said it released the final Windows XP code to computer makers Friday, the first step in a promotional blitz that will lead up to the operating system's Oct. 25 retail release.

The Nasdaq's top percentage gainer was, up $2.21, or 31.8 percent, to $9.16. Newspaper publishers Tribune and Knight Ridder agreed to buy the company in a deal valued at $9.25 a share.

Among other heavily traded techs, Intel rose $1.41 to $29.08, Oracle rose $1.16 to $15.17 and Sun Microsystems gained $1.15 to $14.97. rose 60 cents to $10.23, AOL Time Warner rose $1.73 to $41.81 and Yahoo gained 85 cents to $14.11.

Staff and Reuters contributed to this report.