Techs Rise, Investors Cash In

N E W  Y O R K, Aug. 1, 2001 -- Technology stocks rose today, yet finished below session peaks, as investorsshortened 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 2.03percent, to 2,068.38, according to the latest data. The DowJones industrial average fell 12.80 points, or 0.12 percent, to10,510.01. The Standard & Poor's 500 index crept up 4.70points, or 0.39 percent, to 1,215.93.

In earlier trade, the Dow rose to nearly 10,600, while theNasdaq peaked intraday at almost 2,080.

"The market is doing better, but it's still a littletentative," said Hugh Johnson, chief investment officer atFirst Albany Corp. "The confidence in buying stocks again,without the worry that you are going to get blindsided by a badearnings report or warning, is coming back slowly. Butconfidence in the market doesn't turn on a dime."

Merrill Comes Out Charging

Merrill, noting the worst may be over for the chipcompanies, raised its opinion on the global semiconductorsector and upgraded the brokerage's recommendations on 12stocks worldwide. Industry fundamentals suggest global demandhad hit a trough and supply was stabilizing after stronggrowth, it said.

Among firms it upgraded, Analog Devices, Linear TechnologyCorp., Maxim Integrated Products Inc. and ST Microelectronicswere raised to "buy" from "neutral" in the intermediate term.RF Micro Devices Inc., Texas Instruments Inc. and two otherswere upgraded to "buy" from "accumulate." Texas Instrumentsrose $2.13 to $36.63 on the New York Stock Exchange.

Merrill warned some chip giants still deserved a cautiouslook. 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 eithercompany 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 thissummer in semiconductors are probably going to be the worstones in this cycle," March said. "After August, the comparisonsare still going to be bad but less bad and then they will turnpositive next year for sure."

Manufacturing Remains in a Slump

Investors largely ignored a report from the NationalAssociation of Purchasing Management that painted a bleakpicture for the manufacturing sector.

NAPM said its keymanufacturing activity index stood at 43.6 in July, down from44.7 in June, with the decline taking the reading beloweconomists' forecasts of a 44.5 reading. A reading below 50indicates the sector is shrinking. The NAPM index has heldbelow 50 since August 2000.

Priceline’s Pleasant Surprise

Sentiment got a bit of a boost from some upbeat earningsreports from companies such as Priceline.com Inc., thename-your-own-price Web commerce firm, which posted quarterlyearnings 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 testsemiconductors, jumped $1.86 to $56.25 after it said profitsdeclined, but beat estimates.

The Philadelphia Stock Exchange semiconductor indexrallied 4.45 percent. The index broke above its 200-day movingaverage for the first time since June 8, flagging bullishsentiment on the sector.

Lucent Technologies Inc., the most active stock on the NewYork Stock Exchange, slipped 56 cents to $6.14 for a loss ofmore than 6 percent. The beleaguered telecom equipment makersaid it expects to raise $1.75 billion through a privateoffering of redeemable convertible preferred stock.

Industrial conglomerate Danaher Corp. said it has offeredto buy Cooper Industries Inc. for up to $5.5 billion, aiming tobulk up its product offerings with Cooper's broad line ofelectrical products, tools and hardware. Cooper jumped $11.24to $52.75, while Danaher lost $1.26 to $55.33.

Quaker Oats Co. rallied $12.48 to $100.48. The U.S. FederalTrade Commission allowed PepsiCo Inc. to proceed with its $13.9billion purchase of Quaker despite concerns the deal wouldleave the company in a position to dominate the sports drinksmarket.

Dow component General Electric Co. shed 82 cents to $42.68.The Bush administration said it will order the industrialconglomerate to dredge the Hudson River to remove toxic wasteit dumped into the river over several decades, a huge projectthat will cost several hundred million dollars.

Tuesday’s Highlights

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 consumerconfidence in July and a tumble in manufacturing in the Chicagoarea. The Street, hungry for hints of economic strength after adismal second-quarter earnings reporting season, instead zeroedin on a government report that said consumer spending rose 0.4percent last month, beating estimates of a 0.3 percent rise.

The blue-chip Dow Jones industrial average closed up121.09 points, or 1.16 percent, at 10,522.81. Thetechnology-laden Nasdaq Composite Index ended up 9.28points, 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.

The Associated Press and Reuters contributed to this report-->