MIDDAY MARKETS: Cautious buying continues

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Investors continued on their cautious buying spree at midday, snapping up battered technology stocks and blue chips. The Nasdaq rose 14.50 points to 1,943.18, and the Dow Jones industrial average gained 132.86 points to 9,637.64.

The Inter@ctive Week @Net Index rose 3 points to 186.23.

Despite what appears to be a resurgence in investor optimism, analysts were skeptical that the indexes had reached their bottoms.

The case for a near-term rally looks strong, according to J.P. Morgan Chief Market Strategist Doug Cliggott. But to the question "Is the U.S. equity market cheap enough to buy, even if earnings have further to fall?" Cliggott answered with a firm "no" in his Monday research note entitled "Cheaper...but Maybe not Cheap."

Monday's biggest gainer was C-Cube Microsystems (Nasdaq: CUBE), which soared $5.53, or 63 percent to $14.34 after LSI Logic (NYSE: LSI), down 2.33 to $18.36, said Monday it will snap up the company in a stock swap valued at around $878 million. LSI said the deal will boost its position in the broadband entertainment market.

Communications chip company PMC-Sierra (Nasdaq: PMCS), off $2.06 to $31.88, on Monday warned it would miss revenue and earnings expectations for the first quarter, citing weak demand and cancelled orders.

Competitor Conexant Systems (Nasdaq: CNXT), off 50 cents to $10.63, also warned Monday that second-quarter revenue would be down as much as 40 percent, and said it would let go 1,500 people, about 20 percent of its work force.

Transmeta (Nasdaq: TMTA) jumped $4.69 to $20.69 after it announced a joint effort with Microsoft to produce a number of development-stage Tablet PC machines that will be widely distributed. Microsoft (Nasdaq: MSFT) was off 3 cents to $56.53.

AOL Time Warner (NYSE: AOL) rose $1.43 to $40.95 even amid signs that Wall Street is growing skeptical. Gerard Klauer cut its estimates for the company Monday, following a move by ABN Amro a few weeks ago. Amazon (Nasdaq: AMZN) was up 61 cents to $10.80, and Yahoo (Nasdaq: YHOO) gained 38 cents to $40.95.

Cisco Systems (Nasdaq: CSCO) fell 75 cents to $40.95, Intel (Nasdaq: INTC) fell 63 cents to $28.1 and Oracle (Nasdaq: ORCL) rose 57 cents to $16.45.

ZDII staff and Reuters contributed to this roundup.