Tech stocks drive Nasdaq, Dow upward

A late-day surge led by technology companies helps propel the markets into positive territory to start the week.

3 min read
A late-day surge led by technology companies helped propel the markets into positive territory to start the week.

"The rally was a recovery for the Dow and an anticipation of what earnings season will bring," said Richard Cripps, a market strategist at Legg Mason.

Cripps said he predicts stocks in the Standard & Poor's 500 index will show average earnings growth of 15 percent--less than the first quarter of the year but double historical averages.

Investors today forged ahead unfazed about the possibility of another interest rate hike. Cripps said he believes there will not be a rate hike in June.

"(Federal Reserve chairman Alan) Greenspan has got to like what he's seeing here," said Cripps, who believes the recent economic data will persuade the Federal Reserve to leave interest rates unchanged. "The economy is showing signs of cooling, which buys some time until the next Fed meeting in August."

Phil Dow, a market strategist at Dain Rauscher Wessels, said he thinks the Federal Reserve is close to ending its series of rate hikes, but that Greenspan "might raise rates again just to scare us."

Dow said he sees a market rally ahead but advises investors to have more courage with their picks, adding that investors have been wishy-washy about their holdings.

"These are such volatile markets that a lot of the buying moves have been trading moves rather than investment moves," he said.

"The buying during the past few weeks has been tentative, and these bets are going to have to be more permanent," Dow added. He said the tendency to sell even big-name stocks at the first sign of trouble has done investors a disservice. "For 10 years, the decision to sell Cisco has always been the wrong one until recently."

The Nasdaq composite index rose 129.27 to 3,989.83, and the S&P 500 rose 21.54 to 1,486.

The Dow Jones industrial average rose 108.54 to close at 10,557.84, led by IBM and Intel.

At the end of regular trading, Intel closed up $10.44 at $136.50, IBM rose $7.13 to $120.38, and Microsoft rose $1.13 to $73.69.

Intel said it will spend $1.8 billion to build its third manufacturing plant in Ireland to meet demand for its microprocessors used in personal computers.

The CNET tech index gained 87.76 to close at 2,937.42. Winners thumped losers, with 75 of the 97 stocks in the index rising, 19 falling and three remaining unchanged.

Of the 18 sectors tracked, semiconductor makers posted the sharpest gains, rising 7 percent. Wireless companies were the day's largest losers, sliding 1 percent.

Crossroads Systems was the Nasdaq's largest loser in percentage terms, falling $12.50, or 32 percent, to $26.25 on a volume of 5 million shares, more than 18 times the stock's average daily volume.

The maker of storage routers for high-speed computer networks was downgraded to "market perform" from "outperform" by Morgan Keegan.

Among members of the CNET tech index, Inktomi and Advanced Micro Devices posted strong gains.

AMD rose $8.88, or about 11 percent, to $91.38. The company unveiled its new low-end Duron processor.

Inktomi rose $21.81, or nearly 19 percent, to $138.25. Analyst Henry Blodget at Merrill Lynch reiterated his near-term "buy" and long-term "buy" ratings on the software maker.

The Philadelphia semiconductor index rose 76.57, or almost 7 percent, to 1,234.87, led by chip equipment maker KLA Tencor, which gained $6.63 to close at $61.50.

Rambus also posted strong gains. The chipset designer rose $7.88, or 9 percent, to $91.25 on a volume of 48.6 million shares, more than nine times the stock's average daily volume, making it the most active stock on the Nasdaq.

Analysts said NEC and Hitachi will follow Toshiba's decision to pay royalties to Rambus for use of computer memory patents.

Honeywell, the biggest maker of automated controls, warned that second-quarter profit will be below forecasts because of lower sales, higher costs and an aerospace parts shortage. The company's shares fell $8.13, or 17 percent, to $40.38.