Market Update: Stocks Rebounding at Midday; Dow, Nasdaq Near Session Highs - TheStreet

After weeks of drubbing and failed rallies, a few brave souls went to market this morning with cash in their pockets and an itch to spend.

A tepid initial bounce on the

Nasdaq quickly faded, but the tech-heavy index had come back to life by mid-morning and was climbing into the green. The blue-chip

Dow never lost its sparkle, and was lately rising steadily higher.

Most tech sectors were climbing except for the Internet stocks, though the semiconductors were getting the most love. The

Philadelphia Stock Exchange Semiconductor Index

was 6% higher. Elsewhere, buying was most enthusiastic in the interest-rate sensitive financials and retailers and in defensive sectors like paper, energy and tobacco. Other safety stocks like utilities, drugs and gold were down, however.

Earlier nibbling in tech stocks turned into buying, and some beaten-down bellwether tech stocks were getting a nice lift -- semiconductor

Intel

(INTC) - Get Report

was up 5.3% to $33.63, PC-maker

Dell

(DELL) - Get Report

was 3.4% higher to $17.22, and

Cisco

(CSCO) - Get Report

was up 8.2% to $39.50.

A major support on the Dow was

J.P. Morgan

(JPM) - Get Report

, which has helped make or break the blue-chip index several times in recent weeks. The financial titan was up 4.6% to $166.38, adding 44 points of upside to the index. Retailers

Wal-Mart

(WMT) - Get Report

and

Home Depot

(HD) - Get Report

were also helping, with 16 and 11 points, respectively. And Intel was delivering a 10-point boost to the Dow.

Yesterday, more than 700 stocks hit 52-week lows on the

Nasdaq, which broke below 2400 for the first time since the first week of June 1999. It wasn't just a 52-week low -- it was an 81-week low.

Some were wondering today if the tech-heavy Nasdaq could possibly have an eighth down day in a row. But the slowdown in tech earnings is starting to look more severe than anyone had expected, and some say this is no time to try buying on the

dips.

Another tsunami of companies lowered or missed earnings estimates last night and this morning, and investors were dumping these stocks furiously. Even those that didn't miss targets were being punished. Most notable among them were telecom equipment and networking company

Lucent

(LU)

and copy giant

Xerox

(XRX) - Get Report

. At $76 a share last December, Lucent was trading at a low not seen since March of 1997, down 9.3% to $14.13. Xerox, which has seen its stock plunge from $62 in January, was falling 17.7% to $4.94.

Hampering these stocks were fears of a serious liquidity crunch. Beleaguered Xerox announced that it would

miss its fourth-quarter earnings estimates by a "wide margin." And Lucent warned for the fourth time this year that it would miss earnings targets. The company said it would have significant losses in its current quarter and announced a restructuring plan this morning. This follows the announcement last night from former parent company

AT&T

(T) - Get Report

, which lowered its own

earnings guidance.

Lucent blamed its troubles on the problems among competitive local phone companies, the slowdown in capital spending among established telecom companies and lower software sales.

Slowing capital spending has been cited by several technology companies as the reason for earnings weakness in the past few months. And it illustrates the interdependency between the different technology industries. The economic slowdown bites into one company and then bites into all as weakness trickles down.

All of the big handheld organizer companies were also getting whacked, despite better-than-expected earnings from two of them last night. Both

Palm

(PALM)

and

Research in Motion

(RIMM)

beat expectations. But

Palm was falling over 27.4% to $27.69, while

Research in Motion was down 5% to $71.13 and

Handspring

(HAND)

was down 9.1% to $40.13.

Other warnings also crowded the post-close scene last night. Semiconductor company

Micron Technology

(MU) - Get Report

reported earnings 2 cents below its target, coming out with earnings of 58 cents per share. Internet-broadcasting enabler

RealNetworks

(RNWK) - Get Report

also

warned it would miss earnings targets, as did

wireless chipmaker

Conexant

(CNXT) - Get Report

. Micron was lately up $2.69 cents to $32.50; RealNetworks was plummeting, down $5.78 to $5.81; and Conexant was off 26.4% to $15.

The winds didn't shift much following this morning's economic data, in at 8:30 a.m. EST. Final third-quarter

gross domestic product

, known as GDP, showed that the market value of goods, services and structures produced in the economy grew more slowly than originally expected. GDP came in at 2.2% vs. the previous estimate of 2.4%. Jobless claims came in higher than expected, which might reduce concern over inflationary pressures from a tight labor market. Jobless claims for the week ended Dec. 16 rose to 354,000 from 320,000 the prior week.

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Sector Watch

TheStreet.com Internet Sector

managed to reverse its losing streak. The index was up 1.1% despite continued declines in

America Online

(AOL)

and

Yahoo!

(YHOO)

. AOL was off 2% to $36.34 while Yahoo! was down 1.8% to $27.50, a new 52-week low for the Internet portal company.

The

Dow Jones Utility Average

was giving back some of yesterday's gains, off 1.7%, as was the

Amex Pharmaceutical Index

, down 1.3%. These two sectors were the few spots that escaped yesterday's pain.

The tobacco stocks, which have fared fantastically this year, continued making modest gains. The

S&P Tobacco Index

was up 0.5%.

Philip Morris

(MO) - Get Report

wasn't rising though. The second-biggest gainer on the Dow this year was down 2.3% to $43.13.

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Bonds/Economy

The benchmark 10-year

Treasury note lately was down 1/32 to 105 2/32, raising its yield to 5.081%.

In economic news, the

Philadelphia Fed Index

(

definition |

chart |

source

), a regional manufacturing-sector indicator, dropped to 6.1 in December, its lowest level since September 1998, from 5.2 in November.

Initial jobless claims

(

definition |

chart |

source

) rose, indicating slackening demand for workers. First-time claims for unemployment insurance rose to 345,000 from 320,000 the previous week. The four-week average rose to 347,250, a new 29-month high, from 343,250.

Finally, third-quarter

gross domestic product

(

definition |

chart |

source

) was finalized at 2.2%, down from 2.4%. The third-quarter price deflator, a measure of inflation, was finalized at 1.6%, down from 1.9%. Economists polled by

Reuters

had forecast no revisions. The change in the GDP was due principally to slower rates of inventory-accumulation by businesses, federal government spending, and capital spending by businesses.

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