Technology stocks rose today as Wall Street bet that embattled chip makers like Intel may turn the corner, but blue chips slipped as the murky economic outlook kept investor enthusiasm in check.
The market has been range-bound over the last few weeks as investors wait for hints of an economic pick-up. The Federal Reserve has slashed interest rates six times this year and is expected to cut again at its policy-setting meeting next Tuesday to spark growth in the world's largest economy.
"We were forced to wade through 800 pre-announcements of earnings — it seemed like the largest confession season that I have ever live through," said Ted Oberhaus, manager of equity trading at Lord Abbett & Co., echoing investors' growing frustration over the market's lackluster performance. "We were rewarded for our patience with more bad numbers, layoffs and dividend cuts. We really need a catalyst to get this market going."
The tech-rich Nasdaq Composite Index rose 25.31 points, or 1.29 percent, to end at 1,981.78. The blue-chip Dow Jones Industrial average slipped 0.34 points, to 10415.91. The broader Standard & Poor's 500 Index added 1.05 points, or 0.09 percent, at 1,191.21.
In its bullish call, Goldman Sachs added Intel, the world's largest maker of chips for personal computers, to its recommended list. Other tech companies added to that list included microchip maker Analog Devices, communications chip maker Broadcom and wireless technology firm Qualcomm.
The investment house said it had raised its ratings on Intel, Analog Devices and a third company, Maxim Integrated Products Inc., in anticipation of the business environment turning positive toward the fourth quarter.
On Broadcom and Qualcomm, Goldman believes the inventory correction in the telecom sector is well on its way.
Intel rose 50 cents to $30.45, boosting the Nasdaq and offering support to the Dow. Analog Devices, which trades on the New York Stock Exchange, moved up $1.70 to $49.15. Maxim jumped $2.97 to $51.16 on the Nasdaq.
The Philadelphia Stock Exchange semiconductor index, the leading gauge of the sector, perked 1.39 percent.
"There's likelihood of a pretty big knee jerk reaction when that [tech] group starts to move, particularly semiconductors," said March of Armada. But the general view, he said, is "growth may be slower for the coming cycle than it was in the last one primarily due to maturity in the personal computer market."
Network computing giant Sun Microsystems lost 3 cents at $16.19. Merrill Lynch slashed its estimate of Sun's earnings for the first quarter of 2002, to 1 cents per share from 4 cents.
Stocks to Watch
Alcoa Inc., the world's No. 1 aluminum producer, rose 21 cents to $37.22, reversing an early loss. The Dow component revised its earnings downward after some of its customers filed for bankruptcy earlier this month.
Oracle Corp., the most active issue on Nasdaq, added 53 cents to $15.69. The stock managed to erase an earlier loss after ABN Amro cut its earnings estimate for the business software maker, saying it does not believe Oracle will be able to mount a serious threat against rivals such as Siebel Systems Inc..
BEA Systems Inc. lost 20 cents at $18.30 after ABN Amro slashed its rating for the software maker to "add" from "buy" partly because of weakness in international markets.
AOL Time Warner Inc. fell $1.50 to $42.80. A round of layoffs is about to hit the company's Internet unit as the media giant tries to ensure it will meet its 2001 financial targets, sources familiar with the situation said.
ROHN Industries Inc. tumbled more than 37 percent, or $2.17 to $3.68. The telecommunications equipment provider, warned it would not meet its 2001 financial forecasts due to the continued spending cuts by customers amid the global economic slowdown.
Cendant Corp. agreed to buy discount air ticket seller Cheap Tickets Inc. for $425 million in cash, as the franchising giant looks to break into the online travel agency business. Cheap Tickets soared 37.80 percent, or $4.48 to $16.33, while Cendant was up 46 cents at $19.66.
Investors Await Key Earnings, Economic Data
This week Wall Street braces for earnings reports from key companies such as home improvement retailer Home Depot, retailing giant Wal-Mart Stores, top computer-chip equipment maker Applied Materials and computer maker Hewlett-Packard.
Investors will also take cues from a heavy economic calendar that includes weak July retail sales, ahead of the open on Tuesday.
Also on the plate this week are reports such as June business inventories as well as July figures for U.S. industrial production and capacity utilization, due on Wednesday, and Thursday's U.S. Consumer Price Index for July, a key gauge of retail level inflation, and weekly jobless claims numbers.
Friday brings a preliminary consumer sentiment reading for August from the University of Michigan.
But no key data was slated for release today.
"I don't think anyone is looking to be very aggressive unless we get some surprise information, some major takeover or something. This week we have a lot of economic numbers, that will bounce us around," said Tom Sparico, trader at hedge fund Bengal Partners in Stamford, Connecticut.
"The big picture is that the (economic) slowdown is decelerating but given the murkiness of the future outlook as far as how long it will take to really get capital spending going … the recovery is going to be sluggish."
Friday’s Dow Rally
U.S. blue-chip stocks posted their biggest rise in a month Friday, reversing steep losses, as Wall Street bet that good inflation news would encourage the Federal Reserve to whittle away again at interest rates and spur growth in the nation's floundering economy.
Technology stocks notched small losses, recovering from a more than 2 percent tumble early in the day after analysts slashed their earnings forecasts for software giants like Oracle.
The Dow Jones industrial average climbed 117.69 points, or 1.14 percent, to 10,416.25, and the Nasdaq composite indexdipped 6.85 points, or 0.35 percent, to 1,956.47. The broader Standard & Poor's 500 index advanced 6.73 points, or 0.57 percent, to 1,190.16.