Tech stocks rise above fray

News from the semiconductor sector helps technology stocks stage a late-day turnaround. The Nasdaq gains after falling to a low of 1,817.70 earlier in the day.

3 min read
News from the semiconductor sector helped technology stocks stage a late-day turnaround.

The Nasdaq composite index gained 28.71 points to 1,860,01 after dipping to 1,817.70 earlier in the day. The Dow Jones industrial average gained 102.76 to 10,276.90.

The Nasdaq's earlier plunge left analysts at a loss, considering it followed Tuesday's Federal Reserve announcement that it cut interest rates by a quarter-point--a move that investors had expected. While some speculated that it could have been a reaction to Fed Chairman Alan Greenspan's bearish statements about the economy, others assumed it was a reaction to indications that the Fed's easing of interest rates could be nearing an end.

According to a Reuters poll, most economists agree the Fed will probably cut rates only one more time this year. According to the poll, 14 of the 25 dealers of U.S. government securities predicted the Fed would cut borrowing rates at least once more this year. Eleven predicted no more rate changes.

"Traders were hoping for a paragraph or even a clause that hinted that the Fed was seeing or sensing some minor benefit from the earlier cuts," UBS Warburg analyst Art Cashin wrote in a research note Wednesday. But, he added, the Fed released a statement that was almost exactly the same as June's.

"That is hardly calling the turn...or even seeing the turn. The fact that the Fed virtually Xeroxed the June statement will focus attention on tomorrow's release of the June minutes," Cashin added. The minutes of the June 26-27 Federal Open Market Committee meeting are due at 11 a.m. PDT Thursday.

In industry news, the semiconductor sector was enjoying moderate gains after a report from Semiconductor Equipment and Materials International showed that the book-to-bill ratio rose to 0.67 in July, indicating that orders increased by 5 percent while shipments declined by 12 percent. The number was better than analysts had expected, and up from June's 0.56.

Analysts took it as a sign that declines in semiconductor equipment orders could be reversing.

"We expect August's book-to-bill will be up again as positive order growth continues," Thomas Weisel Partners analyst Eric Ross wrote in a research note.

CNET's Semi Cap Equipment index rose almost 4 percent. Chipmaker Intel was up 35 cents to $27.42, and chip-equipment company Applied Materials was up 37 cents to $42.38.

Telecommunications equipment maker Tellabs fell a penny to $13.60 after announcing it would cut 1,000 jobs, close two facilities, and take a third-quarter charge.

Active stocks included those trading on last night's earnings news. Intuit was up $6.59, or 22 percent, to $ 36.04 after the company announced that increased revenue from its tax-related business helped it beat fourth-quarter earnings estimates.

Triquint rose $2.92 to $22.32 after announcing it should easily hit analysts' predictions for the third quarter, and it sees signs of orders for cell phone products picking up by the end of the year.

Excite@Home recovered 16 cents to 56 cents after this week's plunge on news that the company may have to cease operations as it runs low on cash and risks getting booted off the Nasdaq. The Internet content and service provider announced Wednesday that it is firing auditing firm Ernst & Young, which had raised doubts about its ability to continue as a "going concern."

Among other heavily traded techs, Microsoft fell 12 cents to $60.66, Oracle rose 51 cents to $14.64, Cisco Systems rose 47 cents to $16.48, and Sun Microsystems fell 22 cents to $13.68.

Amazon.com rose 31 cents to $10.20, AOL Time Warner fell 40 cents to $39.50, and Yahoo rose 39 cents to $13.40.

Staff and Reuters contributed to this report.