Techs Lead Nasdaq Up 5.6% as Market Rally Broadens
Stocks stormed ahead in a broad-based advance Tuesday, raising Wall Street’s hopes for a sustained year-end rally.
The Nasdaq composite index, which has slumped in recent sessions even as blue chips gained, led the way Tuesday with a 178.23-point surge to 3,369.63.
The 5.6% rise ranked as the index’s 10th-biggest percentage gain ever.
The Dow industrial average added to its powerful rally of the last two sessions, tacking on 135.37 points, or 1.3%, to 10,971.14.
The surge of the last few days was enough to pull the Dow higher for October despite its dive in the first half of the month. The Dow rose 3% in October, though it is still down 4.6% year to date.
Nasdaq, however, lost 8.3% in October and is down 17.2% for the year.
Tuesday’s Nasdaq rebound was led by depressed technology issues in such sectors as semiconductors, Internet services and telecom.
“We’re seeing a recovery of the technology sector that’s been beaten up so badly,” said Chris Dickerson, an analyst with Global Market Strategists in Gainesville, Ga. “There’s no doubt a lot of this is going to be bargain hunting. There’s a lot of money on the sidelines wanting to come in.”
Whether Nasdaq can sustain the rally, however, remains a much-debated question on Wall Street.
The tech sector has been hammered since early September, in part on concerns about slowing sales and earnings growth, and those worries aren’t fading, analysts note.
On the plus side, however, October’s end also means the end of tax-related selling by mutual funds. Many managers have been selling troubled tech names to record losses that can be used to offset previously realized capital gains. Funds generally take those losses by Oct. 31 each year.
Now, “It’s trick-or-treat time, and we’re seeing the treat,” said Benjamin Hock, who helps manage about $1.5 billion for AIM Management. “It’s the end of tax selling, so we’re seeing a rebound. If this isn’t the end of [stocks’] declines, we’re close to it.”
But market bears point out that many individual investors have yet to do their tax-related selling for the year, and that tech issues would be likely candidates.
What’s more, despite the strength of Tuesday’s Nasdaq rally, the index has recorded seven larger one-day percentage gains since mid-March, when the current Nasdaq decline began. Yet all of those rallies gave way to more selling in the following weeks.
Still, analysts were impressed by the breadth of Tuesday’s advance, as winners topped losers by 28 to 13 on Nasdaq and by 21 to 9 on the New York Stock Exchange.
Trading was very heavy in both markets.
Market bulls note that seasonal factors favor the market now.
“We’re entering November, and the period from November to April is historically a very good season for stocks,” said Bill Barker, an investment consultant with brokerage Dain Rauscher.
In other markets Tuesday, three-month Treasury bill yields hit a fresh nine-year high of 6.37%, which traders said reflected rising supply of T-bills while demand has waned. But longer-term Treasury yields were little changed for the day.
Among Tuesday’s highlights:
* Tech giants up sharply included IBM, up $5.19 to $98.50; Sun Microsystems, up $6.88 to $110.88; America Online, up $2.75 to $50.50; and Cisco Systems, up $5.81 to $53.88.
But Microsoft lost 19 cents to close at $68.88.
In the networking sector, Juniper Networks surged $28.63 to $195, Extreme Networks rose $11.75 to $82.94 and Lucent Technologies jumped $2.94 to $23.31.
* Among semiconductor issues, Motorola jumped $2.44 to $24.94, Vitesse Semiconductor surged $5.31 to $69.94, Emulex jumped $23.19 to $146.88 and Applied Micro Circuits gained $12.38 to $76.44.
* In the telecom sector, Nextel Communications surged $4.06 to $38.44 and Ciena jumped $14.44 to $26.31. But WorldCom fell $1.13 to $23.75 ahead of its restructuring announcement, expected today.
* The Dow advanced even though Procter & Gamble slid $5.44 to $71.44 on worries about its sales growth. Dow gainers included Boeing, up $3.13 to $67.81; GM, up $2.25 to $62.13; and J.P. Morgan, up $6.13 to $165.50.
* Retail stocks were hot despite a downbeat consumer confidence report. Home Depot jumped $2.06 to $43, Gap surged $2.56 to $25.81, Ann Taylor leaped $3.19 to $30 and Wal-Mart gained $1.63 to $45.38.
* Defense stocks also continued their recent rally. Northrop Grumman jumped $2.63 to $84, General Dynamics gained $1.44 to $71.56 and Raytheon added $1 to $32.
* Drug stocks pulled back in profit taking. Johnson & Johnson fell $2.25 to $92.13, Abbott Labs lost $1.19 to $52.81 and Alza fell $3.25 to $80.94. But Eli Lilly gained $1.38 to $89.38.
But biotech stocks rebounded. Amgen rose $3.81 to $57.94, Genentech gained $5.81 to $82.50 and Regeron surged $5.38 to $26.75.
Market Roundup: C10-11
