Market Update: Stocks Gain After U.S. Supreme Court Sends Presidential Case Back to Florida - TheStreet

Market Update: Stocks Gain After U.S. Supreme Court Sends Presidential Case Back to Florida

<LI>Nasdaq still hurting, however.</LI> <LI>Qualcomm rising on TXN deal, pact with Chinese government.</LI> <LI>Beaten down retailers, opticals getting a lift.</LI>
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(Updated from 10:43 a.m EST)

The

Nasdaq and the

Dow started to climb after the U.S. Supreme Court sent the presidential case back to Florida. It wants the Florida Supreme Court to state more clearly why it told Flordia's secretary of state that she had to extend the deadline to accept recounts.

As more details of the decision were announced, some of the gains were given back, but the major indices are still higher than they were before the news of the decision was reported. The Dow was lately up 148 to 10,522. The Nasdaq was coming off steeper losses, lately down 26 to 2619.

Earlier the Nasdaq was trying to retest its last Thursday's intraday low of 2523. Widespread weakness in biotechnology stocks and selected semiconductor and PC-making stocks was weighing on the index today.

The Dow was climbing back into the green after a steep two-day selloff; it was being helped strength in retailers such as

Wal-Mart

(WMT) - Get Report

, commodity and cyclical names. The retailers have been beaten down lately on concerns that the slowing economy may put a pinch on consumer pocket books and lead to disappointing holiday sales this year.

Florida's Leon County Court is going to rule on whether to allow

another

recount of thousands of ballots in the state. That ruling, which would determine who gets the state's 25 electoral votes, could determine who wins the U.S. presidency.

Qualcomm

(QCOM) - Get Report

was an investor favorite this morning after it signed a cross-licensing deal with

Texas Instruments

(TXN) - Get Report

and signed a pact of understanding with China's Ministry of Information Industry for deployment of its proprietary CDMA technology in China. The pact with China's government means it may finally do a deal with China's No. 2 wireless carrier

China Unicom

. Qualcomm said China Unicom could begin awarding contracts to build a 10 million subscriber network using the CDMA technology by 2001. Qualcomm was lately up 6.4%.

Meanwhile, a second correction to once-frothy tech valuations over the past two months has taken valuations sharply lower. And some investors think a few stocks are looking cheap enough to buy again. In that vein,

ABN-Amro

analyst Dave Kang this morning recommended buying optical networkers

Corning

(GLW) - Get Report

,

JDS Uniphase

(JDSU)

and

Digital Lightwave

(DIGL)

on "trading weakness." JDS was up 1.7%, Corning was 1.7% higher, and Digital Lightwave was lifting 3.8%. The optical networkers were some of the last tech "growth" stocks to fall.

But most valuations are still

relatively high in historical terms. And elsewhere tech stocks were well into the red this morning.

Over on the

NYSE,

Pepsi

(PEP) - Get Report

was one of the day's most actively traded stocks after it tied the knot with

Quaker Oats

(OAT)

over the weekend. Investors found both the stocks appetizing after the deal: Pepsi was trading 4% higher, and Quaker was up 2.8%.

The maker of hot cereals, snacks and sports beverage Gatorade agreed to do a deal with the beverage giant after an earlier bid and previous talks with cola rival

Coca-Cola

(KO) - Get Report

and France's

Danone

(DA)

fell through. Pepsi agreed to buy Quaker for some $13.4 billion in stock, while Pepsi's Chairman and CEO Roger Enrico said he would transfer both titles to Quaker President Steven Reinemund. Quaker Chairman and CEO Robert Morrison will also remain at the newly merged firm.

Meanwhile, as more data showing an economic slowdown accumulate, the likelihood grows of a change in the Fed's policy outlook on inflation when it next meets Dec. 19. This is important because a move away from a bias toward concerns about inflation is the first step towards an interest-rate cut. And lower rates help stimulate economic growth by letting consumers and companies borrow money more cheaply.

October

new home sales came in this morning at 928,000, a little higher than the expected 910,000 but down from the previous month's 946,000. The report measures the selling rate of new one-family houses and is important because, historically, changes in consumer spending patterns have appeared first in autos and housing.

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Sector Watch

Investors were shopping for beaten down retail stocks this morning, taking the

S&P Retail Index

1.9% higher. Leading gains in percentage terms were

Gap

(GPS) - Get Report

, up 3.3%;

Best Buy

(BBY) - Get Report

, 5.2% higher; and Dillards

(DDS) - Get Report

, rising 5.1%.

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Bonds/Economy

Treasuries are rallying because investors are increasingly optimistic that the

Fed will lower interest rates in the months ahead. The 10-year Treasury was up 6/32, to 101 30/32, yielding 5.488%.

Today's

Wall Street Journal

reports that the Fed is "leaning heavily toward" changing its assessment of the economy at the

Federal Open Market Committee's next meeting on Dec. 19. Such a move is seen as the first step in a process that could eventually lead the Fed to lower interest rates.

In the

statement it releases after meetings, the FOMC opts for one of three assessments of the economy. Either the risk of rising inflation is paramount, or the risk of slowing growth is paramount, or the two risks are in balance. Since early 1999, the committee has declared inflation the greater risk. It will probably switch to a risks-balanced assessment on Dec. 19, the Journal story suggests.

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