Nasdaq Reasserts Leadership Role While Dow Draws Skepticism - TheStreet

After yesterday's rare relief bounce in some beaten-down blue-chip names, most of the action has come back to where the market expects it.

The latest in the prodigious history of huge technology rallies had the

Nasdaq Composite Index

flying in record territory near midday. The Comp was up 95, or 2.1% to 4673, benefiting from strong performances from super-components like

Cisco

(CSCO) - Get Report

and

Intel

(INTC) - Get Report

, not to mention another massive surge in

3Com

(COMS)

. The index was on pace to set a closing record.

3Com has been lighting up the Nasdaq this year ahead of the initial public offering of its

Palm

(PALM)

unit, which raised its price range to $30-$32 a share from the original $14-$16 a share. 3Com plans to shed the remainder of its Palm holdings -- about 532 million shares -- by distributing them to existing shareholders.

3Com was up 10 7/8, or 13.8%, to 89 15/16.

Gains were more moderate in the broader big-cap market, with the

S&P 500

up 14, or 1%, to 1362. The

Dow Jones Industrial Average

, meanwhile, was up 71, or 0.7%, to 10,109.

You'd think that traders would be heartened by the fact that the Dow was faring as well as it was. Profit-taking in the proxy's financial components was minimal to nonexistent, with

General Electric

(GE) - Get Report

and

Citigroup

(C) - Get Report

each extending their strength, while

American Express

(AXP) - Get Report

, which had surged 6.5% yesterday, was suffering mere fractional losses.

But sentiment is tepid at best.

"A minor bounce" was how Sam Ginzburg, senior managing director of equity trading at

Gruntal

, bluntly characterized yesterday's rally in the Dow. "We're not there yet. Not a believer whatsoever. Any stock with a three-letter symbol, you don't want to own it."

That negativity is underpinned by what has become a fairly unambiguously hostile interest rate environment. Make no mistake, there are those who think the market has gone too far in discounting future rate hikes, that we're closer to the end of the Fed's tightening cycle than the beginning. But most traders remain cautious.

The latest

Reuters

poll shows about three-quarters of primary dealers of government debt thinking that the

Federal Reserve

will raise the fed funds rate by 25 basis points at each of its next two meetings. And

Alan Greenspan's

recent

Humphrey-Hawkins

testimony didn't suggest to anyone that the Fed would likely stop there.

"It's very uncertain," said Peter Boockvar, equity strategist at

Miller Tabak

. "You've still got the rest of the year facing rate hikes. And we've got an inverted yield curve. The banks don't make any money with an inverted yield curve." Any narrowing (much less inversion) in credit spreads puts pressure on banks' bottom lines because they borrow short-term and lend long-term.

The bond market was little changed, with the benchmark 10-year Treasury down 2/32 to 100 17/32, putting its yield at 6.43%. The 30-year Treasury, meanwhile, was 9/32 higher to 101 3/32 and yielding 6.17%. Bondsmen weren't particularly stirred by this morning's

Chicago Purchasing Managers' Index

, which came in at a softer-than-expected 56.7 for February. (For more on the fixed-income market, see today's

Bond Focus.)

While banks were mixed, brokerage stocks were running hard. The

American Stock Exchange Broker/Dealer Index

was up 3.2%, with

E*Trade

(EGRP)

and

Lehman Brothers

(LEH)

each up more than 5%.

What can you say about the biotechs? Just that the

American Stock Exchange Biotechnology Index

was up another 5.2%. BTK component

Protein Design Labs

had picked up 24, or 11%, to 242.

Semiconductor stocks were soaring, led by another eye-popping gain in Rambus, which has been bursting higher session after session on momentum and optimism over the upcoming release of

Sony's

(SNE) - Get Report

PlayStation 2

, whose DRAMs, made by

Toshiba

, are based on Rambus technology. Rambus was lately up a whopping 51, or 21.2%, to 292.

Rambus isn't alone up there today: The

Philadelphia Stock Exchange Semiconductor Index

was up 7.8%. The chips were getting lift from

Deutsche Banc Alex. Brown's

Erika Klauer, who wrote today that the market is at "the beginning of a substantial semiconductor industry up-cycle." Klauer resumed coverage of

Altera

(ALTR) - Get Report

,

Atmel

(ATML)

,

Xilinx

(XLNX) - Get Report

and

Micron Technology

(MU) - Get Report

.

The smallish-cap

Russell 2000

was flying up 14, or 2.5%, to 572.

Net stocks were also boffo, with the

TheStreet.com Internet Sector

index up 23, or 2%, to 1178.

Market Internals

Breadth was positive on strong volume.

New York Stock Exchange:

1,610 advancers, 1,222 decliners, 619 million shares. 56 new 52-week highs, 94 new lows.

Nasdaq Stock Market:

2,454 advancers, 1,509 decliners, 1.1 billion shares. 332 new highs, 65 new lows.

For a look at stocks in the midsession news, see Midday Movers, published separately.