Chips a Tenuous Source of Strength

Updated from 7:05 a.m. EDT

To the relief of aggrieved investors, semiconductor stocks have been enjoying a modest rally of late. Optimists hope the rebound means rumors of the chip cycle's death were somewhat exaggerated.

On Tuesday, the Philadelphia Stock Exchange Semiconductor Index rose 2.5%, its sixth consecutive up session. To be sure, the rally followed a period of pronounced weakness; from its intraday peak on Jan. 12 to its intraday low on May 3, the SOX fell 22.8%. (On Wednesday, however, the index was under pressure -- recently down 3.5% -- as specialty chipmakers such as Altera(ALTR Quote), Broadcom(BRCM Quote) and Xilinx(XLNX Quote) fell sharply in the wake of Cisco's(CSCO Quote) less-than-spectacular results and outlook.) ...