Tech stocks post modest gains

Investors bet that the Federal Reserve will make another big interest rate cut, pushing selected tech shares higher.

3 min read
The Nasdaq inched into positive territory Monday as investors shrugged off earnings worries and fears of a recession to bet that interest rates would continue to fall.

The Nasdaq rose 7.68 points to 1695.38, and the Dow Jones industrial average slipped 0.34 points to 9,605.51.

Last Friday's news that the unemployment rate had risen to 4.9 percent, its highest level in nearly four years in August, led the market to a lower open Monday. Investors bought stocks after good news from RF Micro Devices.

Economists suggested the sharp rise in unemployment makes the Federal Reserve more likely to ratchet interest rates down 50 basis points, rather than the 25 basis points previously expected, by October. But it also implies the U.S. economy could be on the verge of a recession.

"Every time the unemployment rate has risen by more than one point in the past, the economy has gone into recession," said Deutsche Banc Alex Brown analyst Peter Hooper.

Morgan Stanley Dean Witter analyst Richard Berner said Monday he now sees a "kinder, gentlier U.S." and lowered his growth estimates for the U.S. economy to 2.6 percent, down from 2.8 percent, for 2002. But Berner was upbeat on the prospects for deeper interest rate cuts from the Fed considering the unemployment news.

"We now see the Fed easing by another 50 basis points in the fourth quarter; previously we thought the Fed was done or nearly so," Berner said.

RF Micro Devices was one of the Nasdaq's most active gainers, up 42 cents to $22.78. The maker of radio frequency products for mobile phones said it expected to hit breakeven in its second quarter, an improvement over its previous prediction for a loss of 3 cents a share.

Qwest Communications was up $1.76, or 9 percent, to $19.90 despite news that the voice and data services company lowered its estimates for 2002. The company also said it will cut 4,000 jobs, or 6 percent of its work force and trim its budget.

"I am still very bullish about this industry. I really like our position. I like our assets, and I like the way we're addressing (the market). In the short term, we have to be more efficient," said Qwest CEO Joe Nacchio during a conference call Monday morning.

CNET's Communications index showed a slight gain.

The personal computer sector was also holding up well after a report from market research firm IDC said that shipments of consumer personal computers worldwide are set to fall 10 percent this year compared with last year. That's far worse than the flat growth rate which had been forecast. CNET's PC Hardware index was up around three-quarters of a percent.

Microsoft was up $2.18 to $57.58 after reports that the company drafted a settlement proposal for a new round of talks with the U.S. government. Separately, two states participating in the Microsoft antitrust case have said that they are ready to push for stronger sanctions even without help from the Justice Department.

Among other heavily traded techs, Intel rose 18 cents to $26.07; Oracle rose 39 cents to $11.46; Cisco Systems lost 11 cents to $14.47; and Sun Microsystems fell 30 cents to $10.29.

Internet companies were making strong gains, with AOL Time Warner up $2.13 to $34.41 and Yahoo up 99 cents to $11.74, making content companies one of the strongest sectors. CNET's Internet Content index was up more than 4 percent. Amazon.com rose 12 cents to $8.63.

Staff and Reuters contributed to this report.