SAN FRANCISCO -- Yesterday, stocks rallied across the board after the Federal Reserve raised interest rates. Today, technology stocks commanded the lion's share of buying interest while investors rushed back into recently battered highfliers. Even Micron Technology (MU) - Get Report soared despite posting disappointing earnings as chip names led the upswing. Meanwhile, blue-chips lagged.
In other words, things were back to what has come to be viewed as "normal" on Wall Street. (For one day, at least).
After trading above 4900, the
Nasdaq Composite Index
leapt 153.02, or 3.3%, to 4864.70, its fifth-biggest point gain in history.
The Comp's ascent was fostered by strength in bellwether "old tech" names such as
, plus Internet stalwarts such as
rose 3.3% while
TheStreet.com Internet Sector
index gained 39.48, or 3.2%, to 1270.27.
Spurred largely by tech bellwethers, the
rose 6.77, or 0.5%, to 1500.64, notching its second consecutive record close.
Arthur Hogan, chief market analyst at
, said investors were "enthusiastic" about the Nasdaq's ability to close above key support at 4500 yesterday, as well as the positive comments about demand by Micron in its conference call Tuesday night.
Indeed, chipmakers were standouts within technology despite Micron's earnings shortfall
last night. Micron rose 17% after several brokerage firms came out in support of the chipmaker.
, meanwhile, soared 31.4% after
Morgan Stanley Dean Witter
upped its price target to $500. Industry titan Intel rose 3.6% and
leapt 3.2%. The
Philadelphia Stock Exchange Semiconductor Index
roared up 9.2%. (For more on the move in chip stocks, see below.)
In addition to traditional tech leaders, the Comp got a boost from momentum favorites in tech and biotech, including
Inhale Therapeutics Systems
Like many, Hogan observed the "gap" between Old and New Economy stocks had become too wide heading into last week and that there was a "momentum shift out of intellectual property and into physical property" stocks.
Given the "gargantuan moves" by many momentum favorites there was "a lot of money to be taken off the table," he said. But "I wouldn't bet against tech, telecom and biotech. I think at the end of the year, you'll see the speculative stocks did better than the bread-and-butter, brick-and-mortar" types.
Missing out on the advance was
, which fell 15% after agreeing to acquire
, which leapt 105%.
Dow Jones Industrial Average
, meanwhile, fell 40.64, or 0.4%, to 10,866.70 after trading as low as 10,789.13.
Overcoming the positing influence of Intel and
was weakness in
In addition to tech favorites, the S&P got a boost from oil service stocks such as
and brokerage names such as
Philadelphia Stock Exchange Oil Service Index
rose 6.1% while the
American Stock Exchange Broker/Dealer Index
rose 18.39, or 3.3%, to 571.18 thanks largely to rebounding biotech names. The
American Stock Exchange Biotech Index
New York Stock Exchange
trading, 1.08 billion shares were exchanged while advancers led declining stocks 1,635 to 1,315. In
Nasdaq Stock Market
action 1.75 billion shares traded while gainers led 2,513 to 1,699. New 52-week highs bested new lows 69 to 36 on the Big Board and by 81 to 74 in over-the-counter trading.
Gambling vs. Investing
The S&P's reaching another record high cheered some Wall Street pros, but many were chagrined at the re-emergence of tech's dominance.
"Yesterday, it almost appeared as if we were returning some normalcy and balance between the old and new
economies," said Ned Riley, chief investment strategist at
State Street Global Advisors
. "Today's leadership split again reinforces the notion that the short-term investor/trader is starting to dominate again. The kind of volatility we're seeing in stocks like Rambus brings home the point that a lot of that speculation is still extremely strong within the Nasdaq."
Gains by the likes of Rambus and Vignette, along with recently battered names such as
Protein Design Labs
, suggest there's a "gambling instinct vs. an investing instinct," Riley said.
Some market watchers suggested investors were cautious ahead of the Fed's meeting yesterday and were thus emboldened today after the central bank did nothing shocking (like hiking rates by 50 basis points).
Riley agreed -- in theory -- but the Fed's refusal to address the margin requirement issue is the main reason why the "mania is still prevailing in the Nasdaq," he said. "If
the mania continues, it will work to the detriment of some Old Economy stocks that have had this small window of opportunity."
Among other indices, the
Dow Jones Transportation Average
fell 16.16, or 0.6%, to 2651.65; the
Dow Jones Utility Average
slid 2.65, or 0.9%, to 287.01; and the
American Stock Exchange Composite Index
gained 26.41, or 2.6%, to 1030.24.
SOX Rides Tide of New Old News
The Philadelphia Stock Exchange Semiconductor Index -- the SOX -- soared today on good if not new news coming out of an
an investment conference in New York focusing on chip equipment stocks run by trade association
Semiconductor Equipment and Materials International
The chip industry follows three- to five-year cycles. An upcycle ends when manufacturers build too many plants and flood the market with too many chips, and prices collapse. We're far from that point, said Gunnar Miller, chip equipment analyst at
. That's not news to many, but the SemInvest conference seems to have attracted investors new to chip stocks, and they may be hearing this for the first time. Ironically, he said, there has been more information in the past months at other recent investment conferences, since now many of the companies are in quiet periods because earnings announcements are due out soon.
Still, at the conference, investors new to semiconductors may be noticing for the first time that price-to-earnings valuations for many of the chip-equipment names are low compared with the valuations of leading companies in other sectors.
trades at 81 times trailing 12-month earnings, while many networking and Internet companies trade at hundreds if not thousands of times trailing earnings, if they have any earnings at all. (Goldman was an underwriter for Applied Materials in 1997.)
Between March 10 and March 21, the SOX had dropped 10%, its most dramatic drop since it first began its rally in October 1998. Investors, spurred by the talk at the conference, apparently decided to correct some of that perceived overselling in a hurry.
Shekhar Wadekar, a chip analyst at
Dain Rauscher Wessels
, said we will probably see more volatility in the chip market. Now that we are nearing the middle of the upcycle some investors are beginning to question when the tide will turn, and these are the stock sellers who create short-term declines in share prices. But at the same time, there are plenty of investors just waiting for prices to dip so they can buy. He said it's not too late to do so, as long as an investor is willing to hold onto the chip stocks for several years.
For coverage of today's top stocks in the news, see the Company Report, published separately