Tech Stocks Stage Rally, but Yahoo Might Stop It
A warning from tech goliath Cisco Systems couldn’t snuff out a broad rally in the sector Wednesday, raising hopes that Nasdaq might put together an extended run.
Then again, maybe not: After the market closed, Yahoo shares dived in the wake of its quarterly earnings report.
In regular trading, the Nasdaq composite jumped 82.88 points, or 3.4%, to 2,524.18, lifted by a surge of buying late in the day.
The broad market also was higher. Winners topped losers by about 2 to 1 on Nasdaq. Winners had a 19-11 lead on the New York Stock Exchange, where pop star Michael Jackson dropped in for a tour and a private meeting.
“I think folks are starting to get in their heads that we may have found a bottom here, so we have a lot of bargain hunters coming in. But it’s hard to know for sure,” said Arthur Hogan, chief market analyst at Jefferies & Co.
The Dow Jones industrial average closed up 31.72 points, or 0.3%, at 10,604.27, after spending most of the day in negative territory.
Nasdaq opened the day higher, then slumped when news hit that Cisco Chief Executive John Chambers had warned that the current quarter will be “a little bit more challenging” than expected, as corporate spending on computer networking equipment slows.
Cisco fell as low as $33.64 from Tuesday’s close of $37.13 on enormous volume.
But many other tech shares quickly regained their footing, lifting Nasdaq. Winners included PMC-Sierra, up $5.88 to $74.81; Broadcom, up $12.94 to $109.94; EMC, up $4.94 to $68.69; Agile Software, up $6.31 to $38.19; BEA Systems, up $7.13 to $56.25; and Redback Networks, up $5.44 to $40.88.
Cisco too rebounded, closing off just 88 cents at $36.25. All told, more than 213 million Cisco shares changed hands, the second-largest total ever traded in a U.S. stock.
After trading ended, however, Yahoo set a poor tone with its earnings report, which sent the stock down to $25 in after-hours trading from a Nasdaq close of $30.50.
But some analysts raised hopes that investors are starting to look beyond current earnings reports to a possible pickup in the economy later this year.
“If the market wants to look backward, it will focus on earnings. If it wants to look forward, it should focus on interest rate cuts, because there will probably be more and that will help the economy,” said Steven Goldman, strategist at Weeden & Co.
The Federal Reserve cut its key short-term rate last week and meets again Jan. 30.
In other trading Wednesday, Treasury bond yields rose as money flowed back to the stock market. The two-year T-note yield ended at 4.78%, up from 4.65% Tuesday. The 10-year T-note rose to 5.10% from 4.99%.
But many financial stocks rallied despite the reversal in bond yields. Bank stocks got a lift after FleetBoston Financial announced a deal to sell off about $1 billion of troubled commercial loans. FleetBoston shares rose $1.31 to $42.69.
Among other big banks, Bank of America rose $1.56 to $48.56, J.P. Morgan Chase gained $2.25 to $50.94, and Citigroup added $1.75 to $53.94.
Brokerage stocks also gained, with Merrill Lynch up $2.06 to $72.31 and Morgan Stanley Dean Witter up $3.75 to $86.
On the downside, profit takers hit drug shares. Johnson & Johnson fell $2.56 to $95.88, and Merck lost 81 cents to $83.19. But many HMO shares rocketed, led by WellPoint Health, up $6.31 to $107.13, and Oxford Health, up $1.63 to $36.63.
In commodity trading crude oil prices surged, with near-term futures up $1.84 to $29.48 a barrel in New York, after an industry report showed colder-than-normal weather last week reduced U.S. heating oil supplies.
Market Roundup: C6-7
