Tech Stocks Continue Rally; Gold Nears a 22-Year Low
Technology stocks rallied Thursday for a second straight session, but bad news from two key players after trading ended raised new questions about the sector’s growth prospects.
The broad market also moved higher, despite another rise in Treasury bond yields.
Meanwhile, gold tumbled to near a 22-year low.
On Wall Street the tech-heavy Nasdaq composite index jumped 61.51 points, or 2.5%, to 2,552.91, bringing its two-day gain to 5.2%.
But Nasdaq had been up as much as 102 points before fading late in the day.
The Dow industrial average rose 95.61 points, or 0.9%, to 10,891.02. It has gyrated in a narrow range the last two weeks.
Tech stocks were boosted early Thursday by telecom equipment supplier Ciena’s bullish earnings report and growth outlook. Ciena shares soared $12.19 to $89.
The buying spread across the tech universe, lifting many semiconductor, networking and software shares that have been hammered in recent weeks.
Winners included Agilent Technologies, up $5.85 to $53.85; Lexmark, up $4.70 to $56.75; Comverse Technology, up $8.75 to $108.81; Cisco Systems, up $1.44 to $30.81; Rambus, up $5.13 to $49.56; and Interwoven, up $6.13 to $26.19.
Still, analysts cautioned against reading too much into the upturn.
“We’re in a trading range. We’re going to have periodic rallies that are quite strong and then corrections that are quite nasty. This is part of that pattern,” said Peter Anderson, chief investment officer at American Express Financial Advisors.
Year to date, the Pacific Stock Exchange index of 100 major tech shares is up 8.4%, after rising 2.6% on Thursday.
After trading ended, Nortel Networks and Hewlett-Packard became the latest tech giants to warn that near-term sales and earnings growth will be weaker than the already-lowered estimates of analysts. Their stocks fell in after-hours trading.
In the broad market Thursday, winners topped losers by 22 to 15 on Nasdaq and by 17 to 14 on the New York Stock Exchange in active trading.
Stocks seemed to ignore the continuing rise in bond yields amid bond traders’ concern that the Federal Reserve may opt against dramatic interest rate cuts in coming months if economic signals don’t worsen.
The yield on the 10-year Treasury note rose to 5.17% from 5.12% on Wednesday. The yield was at 5.03% a week ago. The one-year T-bill yield rose to 4.89% on Thursday, from 4.84% on Wednesday and 4.67% a week ago.
Hopes for large rate cuts were further reduced after Federal Reserve Bank of St. Louis President William Poole said Thursday that “the current [economic] situation is not one of continuing deterioration.”
Investors’ sense that the economy may be better off than believed may have helped boost some heavy-industry shares. Gainers included United Technologies, up $2 to $79; nickel giant Inco, up $1.56 to $18.49; and Caterpillar, up $1.20 to $44.12.
On the downside, Baker Hughes slid $2.33 to $40.17 after the oil field services firm said 2001 earnings could be as much as 18% below expectations because of a shortage of drilling rigs and crews. Rival Halliburton fell $1.61 to $41.53, and Schlumberger lost $1.19 to $64.25.
Crude oil futures fell 91 cents to $28.80 a barrel in New York, the biggest drop in two months, after OPEC President Chekib Khalil said he doesn’t see a need for an output cut when the producer group meets next month.
Elsewhere in commodity trading, near-term gold futures slid $4.30 to $255.10 an ounce in New York, nearing the 22-year low of $253.20 set in July 1999.
More gold producers are again resorting to a hedging practice involving the sale of borrowed metal. That kind of trading contributed to a plunge in prices in 1999, traders said, and it is driving prices lower this year amid weaker demand.
Market Roundup: C5, C6
