Tech Hunger Takes Nasdaq to 2-Month High
The renewed hunger for technology shares drove the Nasdaq composite index to its highest level in almost two months Wednesday, while much of the rest of the market treaded water.
But heavy trading on Nasdaq and big gains for some highly speculative tech shares caused some analysts to warn the rally may be getting too hot.
Nasdaq jumped 52.36 points, or 2.4%, to 2,220.60, the highest close since March 7.
The Dow Jones industrials, by contrast, eased 21.66 points, or 0.2%, to 10,876.68. The Standard & Poor’s 500 inched up 0.1%.
Although winners topped losers by 24 to 15 on Nasdaq, they were nearly evenly matched on the New York Stock Exchange.
Heavy buying of such tech leaders as Cisco Systems, Sun Microsystems and Oracle drove Nasdaq volume to more than 2.5 billion shares.
“There’s a fear factor of not being in large-cap technology stocks if we start a recovery,” said Eric Wiegand, who helps manage $7 billion at Credit Suisse Asset Management’s private-client group.
The Nasdaq composite has jumped 35.5% since reaching a multiyear low of 1,638 on April 4. That marks the biggest rally in the index since it began its descent in March 2000. The previous largest rally was a 35.1% gain from May 23 to July 17 last year.
Despite the advance of the last few weeks, the index still is down 56% from its March 2000 peak.
Though market bulls say many tech stocks had become ridiculously cheap by early April, the rebound in the sector has spread this week to some issues considered highly speculative.
Internet-company incubator CMGI, for example, had languished even as many other tech stocks surged. On Wednesday, buyers flocked to CMGI, driving it up $1.67, or 40%, to $5.82.
Wall Street’s recovery in recent weeks has been tied to the growing belief that the economy will avoid recession and that corporate profits will recover by the end of the year. However, many pros caution that periodic bouts of profit-taking are likely as investors focus on still-troubling prospects for many companies, especially in tech.
In other markets Wednesday, bond yields rose slightly despite the Federal Reserve’s regional economic report, which painted a picture of an economy that remains quite weak.
Among Wednesday’s highlights:
* Cisco, the biggest computer-networking company, soared $2.20 to $20 and was the most active stock. There are signs of “stabilization” in the market for equipment used in large companies’ computer networks, said Morgan Stanley Dean Witter analyst Chris Stix.
Also, Brocade Communications, the largest maker of computer-system switches, jumped $6.98 to $49.94. Chief Executive Gregory Reyes said he expects the company to meet or exceed analysts’ expectations in the fiscal third quarter, which ends in July, as customers increase spending for computer storage products.
* Among other tech giants, Sun Microsystems surged $1.46 to $20.44, Oracle rose $1.13 to $17.17 and JDS Uniphase gained $1.75 to $23.85. Also, Broadcom soared $6.40 to $48.36 and EMC added $2.06 to $44.
* Besides CMGI, other tech shares below $5 that suddenly attracted attention included VerticalNet, up $1.23 to $3.29; EarthWeb, up 72 cents to $5.34; and Infospace, up 71 cents to $5.64.
* Brokerage stocks were hot as tech rallied. Charles Schwab rose $1.15 to $21.10 and Merrill Lynch rocketed $4 to $67.
* Blue chips hit by profit-taking included IBM, down $3.11 to $115.40; Philip Morris, down $1.09 to $51.01; and Wal-Mart, down 42 cents to $53.08.
The Dow index has risen near 11,000 four times since October, only to decline each time. So analysts are watching closely to see if the index can surmount that barrier.
* Utility shares were weak. American Electric Power fell $1.43 to $48, Williams slid $3.12 to $40.26 and Enron dropped $1.91 to $60.50. Also, many oil and gas stocks slumped as crude oil and natural gas prices tumbled.
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Market Roundup: C7, C8
