Technology stocks rose today, yet finished below session peaks, as investors shortened their horizons as the trading day wore on, pocketing quick gains built on Merrill Lynch's bullish outlook for the battered semiconductor industry.
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The Nasdaq composite index rose 41.25 points, or 2.03 percent, to 2,068.38, according to the latest data. The Dow Jones industrial average fell 12.80 points, or 0.12 percent, to 10,510.01. The Standard & Poor's 500 index crept up 4.70 points, or 0.39 percent, to 1,215.93.
In earlier trade, the Dow rose to nearly 10,600, while the Nasdaq peaked intraday at almost 2,080.
"The market is doing better, but it's still a little tentative," said Hugh Johnson, chief investment officer at First Albany Corp. "The confidence in buying stocks again, without the worry that you are going to get blindsided by a bad earnings report or warning, is coming back slowly. But confidence in the market doesn't turn on a dime."
Merrill Comes Out Charging
Merrill, noting the worst may be over for the chip companies, raised its opinion on the global semiconductor sector and upgraded the brokerage's recommendations on 12 stocks worldwide. Industry fundamentals suggest global demand had hit a trough and supply was stabilizing after strong growth, it said.
Among firms it upgraded, Analog Devices, Linear Technology Corp., Maxim Integrated Products Inc. and ST Microelectronics were raised to "buy" from "neutral" in the intermediate term. RF Micro Devices Inc., Texas Instruments Inc. and two others were upgraded to "buy" from "accumulate." Texas Instruments rose $2.13 to $36.63 on the New York Stock Exchange.
Merrill warned some chip giants still deserved a cautious look. Intel Corp. and Advanced Micro Devices , the largest makers of microprocessors for personal computers, face price cuts this year that will be "far worse than either company expects," it noted. Yet Intel rose $1.01 to $30.82, while Advanced Micro stock climbed 93 cents to $19.19.
"Whether or not we are at the bottom today I don't know, but we are going to be pretty close," said Eugene March, portfolio manager at the $1 billion Armada Equity Growth Fund.
"I think the [year-on-year earnings] comparisons over this summer in semiconductors are probably going to be the worst ones in this cycle," March said. "After August, the comparisons are still going to be bad but less bad and then they will turn positive next year for sure."
Manufacturing Remains in a Slump
Investors largely ignored a report from the National Association of Purchasing Management that painted a bleak picture for the manufacturing sector.
NAPM said its key manufacturing activity index stood at 43.6 in July, down from 44.7 in June, with the decline taking the reading below economists' forecasts of a 44.5 reading. A reading below 50 indicates the sector is shrinking. The NAPM index has held below 50 since August 2000.
Priceline’s Pleasant Surprise
Sentiment got a bit of a boost from some upbeat earnings reports from companies such as Priceline.com Inc., the name-your-own-price Web commerce firm, which posted quarterly earnings that easily beat Street estimates. Priceline.com, which also raised its quarterly revenue and earnings outlook, gained 69 cents to $9.56.
KLA-Tencor Corp., which makes equipment to test semiconductors, jumped $1.86 to $56.25 after it said profits declined, but beat estimates.
The Philadelphia Stock Exchange semiconductor index rallied 4.45 percent. The index broke above its 200-day moving average for the first time since June 8, flagging bullish sentiment on the sector.
Lucent Technologies Inc., the most active stock on the New York Stock Exchange, slipped 56 cents to $6.14 for a loss of more than 6 percent. The beleaguered telecom equipment maker said it expects to raise $1.75 billion through a private offering of redeemable convertible preferred stock.
Industrial conglomerate Danaher Corp. said it has offered to buy Cooper Industries Inc. for up to $5.5 billion, aiming to bulk up its product offerings with Cooper's broad line of electrical products, tools and hardware. Cooper jumped $11.24 to $52.75, while Danaher lost $1.26 to $55.33.
Quaker Oats Co. rallied $12.48 to $100.48. The U.S. Federal Trade Commission allowed PepsiCo Inc. to proceed with its $13.9 billion purchase of Quaker despite concerns the deal would leave the company in a position to dominate the sports drinks market.
Dow component General Electric Co. shed 82 cents to $42.68. The Bush administration said it will order the industrial conglomerate to dredge the Hudson River to remove toxic waste it dumped into the river over several decades, a huge project that will cost several hundred million dollars.
Stocks rose Tuesday as Wall Street took heart in a government report showing consumer spending — the main engine of the nation's economy — grew at a better-than-expected clip in June.
Investors brushed off data revealing a dip in consumer confidence in July and a tumble in manufacturing in the Chicago area. The Street, hungry for hints of economic strength after a dismal second-quarter earnings reporting season, instead zeroed in on a government report that said consumer spending rose 0.4 percent last month, beating estimates of a 0.3 percent rise.
The blue-chip Dow Jones industrial average closed up 121.09 points, or 1.16 percent, at 10,522.81. The technology-laden Nasdaq Composite Index ended up 9.28 points, or 0.46 percent, at 2,027.12, and the broad Standard & Poor's 500 Index edged up 6.71 points, or 0.56 percent, to 1,211.23.