Market Update: Nasdaq Marches Higher, Dow Shuffles Near Flat

Stocks diverged at the open like a banana split, with tech in favor and blue-chips out. But the Nasdaq Composite Index was lately making middling gains while the Dow was lounging around the flatline. The broader market S&P 500 was up 0.6%.

Still, as the earnings season begins to wind to a close and after a rash of important economic data, the market doesn't have much wind under its wings this morning. Meanwhile, there's been plenty of negative tech earnings in the past month, peppered with a few pleasant surprises. And until investors see concrete signs that tech fundamentals -- demand, inventories and capital spending -- are improving, they'll likely continue to buy defensive stocks like energy, tobacco and consumer staples.

Major Indices INDEX CHANGE % VALUE Dow 4.75 0.04% 10,951.47 S&P 500 8.44 0.63% 1349.33 Nasdaq 39.67 1.52% 2647.49 Russell 2000 0.91 0.18% 507.99 TSC Internet 12.67 3.65% 359.68 NOTE CHANGE PRICE YIELD 10-Year Treasury 14/32 98 28/32 5.145% Market data as of: 10:37 AM ET, Thu Feb 8 2001

Cisco(CSCO) remained the most popular trade today, after its earnings miss Tuesday night motivated a selloff yesterday.

But today the networking darling was moving up. It was lately 1.8% higher to $31.63.

Most tech bellwethers, in fact, were climbing higher. Chipmaker Intel (INTC) was 3% higher, PC maker IBM(IBM) was up 0.8% and Internet and media goliath AOL Time Warner(AOL) was lifting 3.6%.

Microsoft(MSFT) was dribbling lower, however, after Merrill Lynch cut its long-term rating to accumulate from buy. The software giant was losing 1.7% to $63.56.

Financial American Express(AXP) was coming to the Dow's aid, as were Intel, IBM, Honeywell(HON) and Disney(DIS).

But paper stock International Paper(IP) and drug czar Merck(MRK) were sloshing in the other direction.

Investors were happy enough with inline earnings from troubled telecom heavyweight WorldCom(WCOM). WorldCom reported fourth-quarter earnings per share of 25 cents, meeting analyst estimates. But like a lot of companies this earnings season, the analyst estimates had been reduced.

WorldCom has seen its stock price sliced from a high of $63.50 all the way down to the midteens in the past year and a half. It's been hurt by weakness in the consumer long distance business, as well as the company's failure to buy competitor Sprint(FON).

Meanwhile, investors continue to keep a close watch on each and every data point to help divine the Federal Reserve next move on interest rates. This morning, initial jobless claims for the week ended Feb. 3 showed that claims increased 361,000. Economists polled by Reuters expected new claims to rise to 348,000 from 346,000. Yesterday's productivity report showed that workers continued to be more productive during the fourth quarter.

The Fed began cutting interest rates in early January to jumpstart economic growth, and market-watchers have been expecting the cuts to help corporate earnings and the economy turn around in the second half of this year. But that depends on the economy's ability to react to rate cuts. After a year and a half of raising interest rates to reign in a runaway economy, the Fed cut interest rates twice last month. Those moves slashed short-term rates by a full point to 5.5%, almost an unprecedented drop in so short a time.

Historically, stocks tend to perform very well following Fed interest rate cuts. But some expect that stocks are going to have to move lower before they put in a real rally.

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Sector Watch

The chipmakers were recovering from a five-day selloff this morning. A couple of sector heavyweights were leading the way, with LSI Logic(LSI) climbing 2.8%, Altera(ALTR) rising 3.8% and Micron Technology (MU) higher by 3.6%.

The Philadelphia Stock Exchange Semiconductor Index was up 2.5%.

Financials were also rebounding from a one-week slide. The American Stock Exchange Securities Broker/Dealer Index was up 2.1%, while the Philadelphia Stock Exchange/KBW Bank Index was inching up 0.6%. J.P. Morgan Chase(JPM) was up 0.99% to $52.85.

Financials sold off following the Fed's most recent interest rate cut, as investors feared that stocks had ratcheted up to much before the fact. The Fed announced it was cutting the interbank lending target by a half point on Jan. 31.

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Bonds/Economy

The benchmark 10-year Treasury note was lately down 14/32 to 98 28/32, yielding 5.145%.

Treasuries ended lower Wednesday after a day of light trading volume, despite some early "safe haven" buying amid a Cisco-led selloff in equities. The long bond again slid more than the others: It finished down by about half a point.

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