Tech Stocks Lift Nasdaq Above 4,000, Highest Since April Crash

The Nasdaq composite index on Tuesday clawed its way back above 4,000 for the first time in more than two months, as major technology stocks continued to resurge.

Key blue-chip indexes, meanwhile, ended the day lower, reviving memories of the “old economy-new economy” split that dominated Wall Street’s action in the early part of this year.

The Nasdaq index rose 23.53 points, or 0.6%, to 4,013.36, overcoming a midday sell-off to finish at its highest since April 11--the week of the worst Nasdaq plunge in history.

Almost 1.7 billion shares changed hands, the heaviest since June 2 and a sign of stepped-up buying by institutional investors.

Nasdaq has climbed almost 18% this month, far outperforming the 4% rise in the blue-chip Standard & Poor’s 500 and the 1% decline in the Dow.

On Tuesday, the Dow fell 122.68 points, or 1.2%, to 10,435.16, weighed down by losses in old-economy shares such as General Motors and Honeywell amid increasing concern about their earnings growth prospects in a weakening economy.

Though not as pronounced as the trend earlier in the year, investors lately have been snapping up tech-related shares such as semiconductor and biotechnology issues, while shunning old-economy cyclical companies whose fortunes could be hurt by a slowing economy.

Recent earnings warnings from a number of old-economy companies, including diversified manufacturer Honeywell and banking giant Wachovia, have helped drive investors out of those stocks.

At the same time, many Wall Street pros have continued to pound the table for technology stocks, arguing that fast-growing tech companies can better withstand general economic weakness.

“Nasdaq has been going through a tremendous rehabilitation process in the past 10 weeks that’s very impressive,” said Richard Eakle, head of Eakle & Associates in Fair Haven, N.J.

He believes the Nasdaq composite index will be back above 5,000 by early 2001, if not sooner.

The index peaked at 5,048.62 on March 10, then went into a free fall as concerns about record tech stock valuations amid rising interest rates triggered a massive selling wave.

At its low of 3,164.55 on May 23, the index had lost more than 37% from its peak, the deepest Nasdaq decline since the mid-1970s.

Even now, Wall Street bears argue that many tech stocks remain far overvalued, though Nasdaq still is down 20.5% from its peak.

What’s more, many institutional investors remain wary of committing more money to tech stocks until they can gauge the effect of a slowing economy on second-quarter profits.

Although some major old-economy companies have warned of earnings weakness, so too have some technology firms. On Tuesday, computer services firm Computer Sciences said its growth will be less than what analysts had expected. The stock sank $12.38 to $71.

Nonetheless, expectations for second-quarter earnings growth in the tech sector overall remain high.

Concerns about the broad market’s health have been rising in recent weeks even though the Nasdaq index has climbed. On Tuesday, falling stocks outnumbered winners by 20 to 19 on Nasdaq and by 16 to 13 on the New York Stock Exchange. That negative “breadth” can indicate a rickety market.

Many investors remain concerned about the effect on markets should the Federal Reserve raise short-term interest rates again. The Fed meets next Tuesday and Wednesday.

But optimists say that, even if the Fed raises rates, it is likely to signal that it is finished for the time being, after a yearlong campaign to tighten credit and slow the economy.

In the bond market Tuesday, Treasury yields edged higher but remained near seven-week lows.

Among Tuesday’s highlights:

* Tech stocks leading Nasdaq higher included Apple, up $4.63 to $101.25; QLogic, up $7.19 to $56.88; Macromedia, up $6.56 to $114.56; and 3Com, up $2.06 to $50.19.

But IBM fell $4 to $116.38 and Hewlett-Packard eased $1.31 to $116.50.

* Internet stocks sparked to life. Many have lagged the general rebound in tech in recent weeks. Big gainers included Yahoo, up $8.94 to $148; Inktomi, up $7 to $145.25 after trading as high as $156.50; and America Online, up $3.38 to $57.88.

* Human-genome-related biotech stocks remain a market hot spot. Abgenix gained $14 to $137, Millennium Pharmaceuticals rose $7.44 to $135.94 and Genome Therapeutics added $2.06 to $31.94.

* In the Dow, Honeywell continued to sink after its earnings warning Monday, losing $3.63 to $36.63. Auto stocks also were weak: GM fell $2.38 to $62.06, Ford lost $1.63 to $43 and DaimlerChrysler dropped $1.06 to $54.19.

* Retail stocks were broadly lower on renewed fears about consumer spending trends. Target slid $2.19 to $55, Sears lost 69 cents to $31.69 and Home Depot fell $1.13 to $48.88.

* Energy stocks were mostly lower even as crude prices jumped again, rising $1.36 to $33.05 a barrel, a 3 1/2-month high, on concern that any production increase adopted by OPEC members at a Vienna meeting today will be on the low end of expectations. Exxon Mobil fell 81 cents to $83.25 and Chevron lost $1.13 to $90.25.

Market Roundup, C10-C11

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4,000 . . . Again

The Nasdaq composite index closed above 4,000 on Tuesday for the first time since April 11, as tech stocks continued to rebound from the spring plunge. Weekly closes and latest: Tuesday: 4,013.36 *

Source: Bloomberg News