Tech Stocks Post Solid Gains - TheStreet

Tech Stocks Post Solid Gains

Blue-chips end mostly flat after Monday's rally, while tech stocks advance.
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Updated from 4:05 p.m. EDT

Blue-chips ended mostly flat Tuesday following Monday's big rally, but tech stocks posted solid gains.

The

Dow Jones Industrial Average

finished up 6.30 points, or 0.07%, at 9223.09, while the

Nasdaq

gained 25.79 points, or 1.5%, to 1746. The

S&P 500

gained 3.42 points, or 0.3%, to 1007.84. The 10-year Treasury note was lower, with the yield at 3.75%.

Volume on the

Big Board

was 1.5 billion shares, with advancers ahead of decliners by 18 to 13. On the Nasdaq, almost 2 billion shares changed hands, with winners beating losers by a 2-to-1 margin.

Among sectors seeing the most activity, biotechs rose 2.3% and computers climbed 1.8%, while telecoms rose 0.8% after being down for most of the day. At the NYSE, financials rose 0.6%, while utilities lost 0.6%.

"We are beginning to sort out whether yesterday's advance represents a new breakout for the markets which could extend the advance or just a last gasp for the bulls," said Ken Tower, chief market strategist at CyberTrader. "In terms of market internals, there's been a lot of cooling off on the bull side, with signs of diminishing upside strength," Tower added. He noted the 10-day moving average of the total number of stocks in the NYSE making six-month highs is down to 130 from 491 on June 12, and from 708 on June 4.

Another cautious note came from David Rosenberg, chief North America economist at Merrill Lynch, who wrote in his daily report: "Is the Nasdaq rally for real? All but 11 of the Nasdaq 100 are up year-to-date and just about two in every three are beating the S&P 500's advance this year. Half of the top 10 winners this year lost money in the first quarter and in all of 2002. Is it really a good thing to have excitement replace nervousness this quickly?"

In merger news, data-storage equipment maker

EMC

(EMC)

said it's acquiring

Legato Systems

(LGTO)

for $1.3 billion in stock in a bid to strengthen its position in the software business. EMC also said it expects to meet or beat analysts' estimates for its second-quarter earnings on strong revenue. EMC shares fell 50 cents, or 4.3%, to $11.24, while Legato shares advanced 79 cents, or 8.7%, to $9.89.

ArvinMeritor

(ARM)

made a $2.2 billion all-cash hostile bid for

Dana

(DCN)

, a deal that could create the world's largest maker of axles for trucks. ArvinMeritor shares slid 65 cents, or 3.1%, to $20.34, while Dana shares gained $4.20, or 35%, to $16.22.

Investors bought

Alcoa

(AA) - Get Report

, which was scheduled to announce earnings Tuesday. On Monday, the company received news that it could face a big rival if

Alcan's

(AL) - Get Report

$3.91 billion hostile bid for

Pechiney

(PY) - Get Report

goes through. Alcoa shares rose 7 cents, or 0.3%, to $25.78.

Meanwhile,

Pepsi Bottling

(PBG)

said second-quarter profit fell 5.8% as soft drink sales lagged because of the unusually cool spring weather. Nonetheless, shares climbed $1.55, or 7.5%, to $22.28.

Harry Potter couldn't keep

Scholastic

(SCHL) - Get Report

from issuing a fourth-quarter profit warning late Monday. The company said results, which were finalized before the release of the new Potter book, will miss analysts' expectations because of weaker sales at book fairs. Goldman Sachs downgraded the stock to in line from outperform, based on questions about management's ability to control costs. The shares closed $1.04 lower, or 3.7%, to $27.30.

Research analysts were also active, with Lehman Brothers upgrading

Broadcom

(BRCM)

to overweight from equal weight on expected strength in the company's core enterprise networking business. Shares rose 96 cents, or 3.4%, to $29.51.

Merrill Lynch reduced 2003 and 2004 profit estimates for

Honeywell

(HON) - Get Report

, while Smith Barney cut its 2003 earnings projections for

Eastman Kodak

(EK)

. Honeywell shares lost 6 cents, or 0.2%, to $28, while Eastman Kodak fell 26 cents, or 0.9%, to $27.39.

In the pharmaceutical sector, Swiss health care group

Roche

said it bought the rights to market

Genentech's

(DNA)

cancer drug Avastin in all countries outside the U.S. Genentech will continue to market the product in the U.S. The company's shares ended up $1.07, or 1.4%, at $76.62.

Overseas markets had a mixed session, with London's FTSE 100 down marginally at 4073 and Germany's Xetra DAX up 0.1% to 3335. In Asia, Japan's Nikkei closed 1% higher at 9898, while Hong Kong's Hang Seng gained 1% to 9992.

Crude oil for future delivery was little changed, while the dollar was stronger against the yen and euro.