FINANCIAL MARKETS : Tech Stocks Pace Market’s Sharp Rebound

Technology shares zoomed as some investors flocked back to stocks and bonds Tuesday in the wake of the Federal Reserve Board’s interest rate cut.

The Nasdaq composite index of mostly smaller stocks--including many tech issues--rocketed 23.85 points, or 2.4%, to 1,026.41, the biggest one-day point gain in more than eight years.

The Nasdaq index had tumbled 27.92 points on Monday.

Among blue-chip indexes the Dow Jones industrials rose 34.68 points to 5,109.89 on Tuesday after losing 101.52 points on Monday.

The Fed’s decision to trim its overnight interest rate from 5.75% to 5.5% took many investors by surprise. Indeed, Monday’s market plunge had been caused at least in part by Wall Street’s loss of hope for a rate reduction.

With federal budget talks deadlocked, a growing number of analysts had feared that the Fed would refrain from cutting rates as a way of holding out a “carrot” for lawmakers struggling to agree on a long-term balanced-budget plan.

Instead, “The budget deliberations caused the Fed to throttle back a bit but did not derail its recognition that the economy needs lower interest rates,” said William Dodge, investment strategist at Dean Witter Reynolds in New York.

Some analysts also said the central bank may have been worried about triggering a deeper market plunge if it failed to offer some sort of rate relief, with market interest rates already anticipating a half-point Fed cut.

Once the Fed made its announcement Tuesday bond yields fell across the board. The 30-year Treasury bond yield, which had jumped from 6.09% to 6.20% on Monday, tumbled back to 6.10%.

The yield on 6-month T-bills slid from 5.38% Monday to 5.31%, lowest since September, 1994.

The bond market’s enthusiasm was greater than the stock market’s, despite the surge in battered tech shares: In heavy trading, rising stocks outnumbered losers by 15 to 9 on the New York Stock Exchange, a good showing but not a great one, analysts said.

Concerns about corporate profits may have held stocks back, some experts say. “The market is justly becoming more concerned with the earnings outlook,” said Legg Mason Funds President William H. Miller.

Among Tuesday’s highlights:

* Bargain-hunters in the tech sector drove Intel up 3 1/8 to 60 3/8, Hewlett-Packard up 6 5/8 to 83 7/8, Sun Microsystems up 7 1/2 to 48 5/8, FileNet up 4 1/8 to 48 5/8 and Cisco Systems up 7 3/8 to 78 1/4.

Among other tech issues, Netcom On-Line surged 4 3/4 to 45 1/2, 3Com leaped 5 1/4 to 42 3/8 and Texas Instruments added 3 1/4 to 49 3/4.

“As investors start to focus on 1996 and look for companies that will provide good earnings growth, they’ll turn to technology stocks,” said James Broadfoot, manager of the Ivy Emerging Growth Fund.

* Many industrial issues also soared as lower interest rates stoked optimism about the economy. Alcoa leaped 2 5/8 to 56 1/2, Caterpillar gained 3 1/8 to 60 7/8 and Rockwell added 1 1/4 to 52.

* On the down side, investors appeared to sell some consumer growth stocks as they bought technology and industrial issues. Merck fell 1 1/4 to 63 5/8, McDonald’s lost 1 to 44 5/8 and Colgate-Palmolive eased 3/8 to 72 3/4.

Outside the U.S., Wall Street’s rebound helped push Mexico City stocks to their highest levels in 14 months. The Bolsa index soared 90.86 points to 2,747.46.

But most European and Asian markets closed lower, keying off Monday’s U.S. market slump.

In commodities trading natural gas futures soared to their highest level in more than 5 1/2 years as another cold wave hit the Midwest and East.