Market Update: The Running of the Tech Bulls
(Updated from 11:13 a.m.)
Like a bloodhound sniffing for a scent, the market is searching for direction.
So far, it has fetched only mediocre tidbits. Communications chipmaker
Xilinx
(XLNX) - Get Report
reaffirmed its first-quarter outlook last night, calming fears about another preannouncement from a semiconductor company. (
Altera
(ALTR) - Get Report
, the company's principal rival, warned about problems last Thursday.) Boosted by the news, the
Nasdaq Composite was up about 55 points, or 2.6%, to 2211.
Over the past three sessions, stocks have paddled higher in the absence of a catalyst. The reason, stock traders say, is a lack of major earnings preannouncements.
"There hasn't been any really negative news since
Sun Microsystem's
warning," said Giri Cherukiri, head trader at
Oak Brook Investments
, which manages $370 million in assets. "People are thinking that the economy and earnings have bottomed." Stocks fell sharply in reaction to Sun's warning last Tuesday, but started to climb again late last week.
The Nasdaq is also getting a bump from
Lucent
(LU)
. This morning, the telecommunications-equipment maker said it expects third-quarter sales to be modestly higher. The firm also said it's confident about its restructuring plan, which was put in place to turn around the company's business and debt problems. "Our job now is to build on the progress we have made and pick up the pace," Chairman Henry Schacht said in a statement. Shares of Lucent, down from their 52-week high of $67.19, jumped 6.6% to $8.53.
The
Dow Jones Industrial Average was lately up 18 points to 11,079. Technology components of the
blue-chip index were strong:
Microsoft
(MSFT) - Get Report
climbed 1.9% to $72.13,
IBM
(IBM) - Get Report
rose 1.6% to $115.40 and
Intel
(INTC) - Get Report
advanced 3.5% to $29.51.
The broader market
S&P 500 was ahead 7.5 points to 1275.
Running of the Tech Bulls
While tech bulls were running the show this morning, investors were awaiting further confirmation that the corporate outlook is improving. On Thursday, Intel will release its midquarter update. Over the past three quarters, Intel has warned of revenue shortfalls, so some analysts are again forecasting a disappointment.
A warning from the chipmaker could sock the major stock market averages. Ahead of Intel's announcement, volume -- particularly on the
New York Stock Exchange -- has been light.
"All eyes are on Thursday's meeting at Intel," said Matt Johnson, head of Nasdaq trading at
Lehman Brothers
. "There's no reason for volume to pick up." Johnson said he expects the Nasdaq and the S&P 500 to outperform the Dow today, because investors rotated out of Old Economy names into tech. Among sectors, networking, Internet, and computer stocks were rising, while drug, utility, and cyclical companies were falling.
In its midquarter business update last night, specialty chipmaker Xilinx told analysts that cancellations and delays have slowed considerably. It expects to match first-quarter revenue targets, which call for a 15% to 25% decline compared to the fourth quarter. Xilinx was up 7.6% to $44.78, while Altera was 7.8% higher to $26.75. The
Philadelphia Stock Exchange Semiconductor Index
, which tracks the chip sector, was jumping 5.6%.
As Productivity Goes ...
Investors took in stride this morning's surprisingly soft
productivity and labor costs
data released before the bell, which showed that productivity in the first quarter
softened dramatically. Unit labor costs jumped 6.8%, their biggest gain since the fourth quarter of 1990. Only a 5.8% gain was expected. High productivity levels in recent years have been credited with allowing the U.S. economy to grow at a rapid "New Economy" pace, with little threat to runaway inflation. But now, productivity -- which grew 2% in the fourth quarter of 2000 -- is slipping.
Meanwhile,
OPEC
ministers are meeting today in Vienna to decide whether to increase their oil output. On Monday, OPEC promised to match any output shortfall that would result from Iraq's suspension of oil exports. Iraq exports 2.1 million barrels a day of oil. Shares of
ExxonMobil
(XOM) - Get Report
, which advanced 2.1% yesterday on news of a natural gas deal in Saudi Arabia, were lately down 0.1% to $90.70.
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