Bounce Buoys Nasdaq to 2nd-Biggest Point Gain
Waiting for the Nasdaq market to calm down? Don’t hold your breath.
The tech sector’s wild ride continued Tuesday, as the Nasdaq composite index staged a furious rebound that left it with its second-biggest point gain ever.
The index surged 228.75 points, or 6.6%, to 3,711.23, recouping all of Monday’s 160-point loss, and then some. The broad market also advanced, lifting blue chips and smaller stocks alike.
Led by gains in Intel, Apple Computer, JDS Uniphase and other major tech stocks, the Nasdaq’s rise was second only to its 254.41-point surge on April 18. In percentage terms, Tuesday’s gain was the third-largest ever.
Microsoft, which helped trigger Monday’s rout with its forecast of weaker sales growth, rose $2.75 to $69.38 after surrendering $12.31 on Monday.
But Nasdaq trading volume, at 1.63 billion shares Tuesday, remained well below recent peaks, suggesting the rally lacked conviction, some analysts warned.
The battered tech sector’s attempts at recovery in recent weeks have generally occurred amid slowing share volume--and each time, the recoveries have given way to renewed heavy selling.
Tuesday’s rally had a fundamental underpinning thanks to well-received earnings reports from such tech firms as Compaq Computer, which surged $4 to $30.25, and fiber-optics leader Corning Inc., which jumped $26 to $177.
What’s more, disappointment over first-quarter earnings reports from some “old economy” companies, including DuPont and 3M, may have helped push some investors back to tech stocks.
DuPont slid $4.38 to $51.63 and 3M lost $3.56 to $93.81, mainly on concern about whether their earnings growth for the rest of this year can match strong first-quarter results. 3M, for example, declined to raise its full-year earnings guidance, even though its first-quarter profit was well above estimates.
While DuPont and 3M weighed on the Dow, strength in the blue-chip index’s tech components--including Intel, up $8.88 to $125--pushed the Dow up 218.72 points, or 2%, to 11,124.82, its highest level since April 12.
The Nasdaq composite, meanwhile, is only slightly above its level of last Wednesday, and still down 26.5% from its 2000 peak.
Although winners topped losers by nearly 3 to 1 on the New York Stock Exchange and by about 2 to 1 on Nasdaq, traders said the breadth could have been influenced as much by technical factors as by genuine bargain-hunting.
For example, “short sellers” who had bet on a continuing decline in tech stocks may have been forced to buy stocks late in the day to close out their bets, as the Nasdaq rally failed to fall apart.
Still, the fact that the rally continued right to the closing bell encouraged some analysts.
“It appears for now that many Nasdaq stocks are oversold,” said Alan Ackerman, analyst at Fahnestock & Co. in New York.
A key test for the market overall comes Thursday, when the government reports on the employment cost index for the first quarter. That is an important measure of wage inflation that is closely watched by Federal Reserve Chairman Alan Greenspan.
Bond yields rose Tuesday in part on concerns that the wage figure may be stronger than expected. The 30-year Treasury bond ended at 5.93%, up from 5.87% on Monday and the highest since March 29.
Meanwhile, the euro currency fell to yet another new low, reaching 92.1 U.S. cents, down from 94 cents on Monday, as traders continue to bet that U.S. economic growth--and interest rates--will rise faster than European rates.
The euro’s dive is boosting U.S. purchasing power in Europe. One dollar now buys 7.1 French francs, for example. That’s up from about 6 francs in October, and the most since the 1980s.
Among Tuesday’s highlights:
* Major tech stocks advancing included Apple, up $7.81 to $128.31; IBM, up $6 to $112.50; Sun Microsystems, up $6.13 to $93.75; and Oracle, up $3.13 to $75.56.
Cisco Systems also rose, but posted a smaller gain than many of its peers, adding $2.56 to $66.
* In the telecom sector JDS Uniphase rose $13 to $93.31 ahead of its earnings report, which topped expectations. The shares slipped to about $91 in after-hours trading.
* Internet-related shares that have been beaten down in recent weeks revived again. Juniper Networks jumped $17.94 to $192.50, Tibco Software surged $14.38 to $79.38, and Sapient, which reported a surge in earnings, rose $15.69 to $75.69.
* Among old-economy shares, buyers snapped up many retail, food and electric utility names. Kellogg jumped $1.63 to $27.75 and Sears gained $2 to $42.50.
* Despite the general market rally, several Southland stocks slid to new 52-week lows, including Protection One, down 31 cents to $1.06, and Diedrich Coffee, down 50 cents to $2.38.
Market Roundup, C11-C12
Associated Press contributed to this report.
