Whose House? Nasdaq's House! Techs Reassert Dominance

For today, at least, the lately torrid Dow is taking a break while the Nasdaq enjoys a chunky gain and biotechs bounce back.
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Blue-chip stocks were feeling a little spent after yesterday's post-rate-hike race, but tech stocks got a second wind this morning and picked up right where they left off.

The

Dow Jones Industrial Average

slipped into negative territory after a fleeting gain this morning and was lately off 85, or 0.8%, to 10,822. The 30-stock average sprinted up 227 points yesterday, taking the news of 25-basis-point increases in both the fed funds and discount rates in stride. The tech-laden

Nasdaq Composite Index

was up 117, or 2.5%, to 4829, continuing to make up for any time it may have lost in recent action.

After hitting a record close yesterday, the

S&P 500

index was a little weaker, lately down 1 1/2 to 1492, while the small-cap

Russell 2000

was busy powering ahead with a gain of 13, or 2.3%, to 566.

"You're starting to see a little bit of a respite in the rush to megacap stocks, and a nice snapback in some of the small-to-mid-cap stocks," said Brian Belski, chief investment strategist at

George K. Baum

in Kansas City, Mo. The comeback kids he noted include

Veritas

(VRTS) - Get Report

,

Chiron

(CHIR) - Get Report

and

MedImmune

(MEDI)

, all of which were in the green today.

"The quality names are taking a bit of a rest after the recent gains and the techs and the biotechs are starting to come back a little," said James Maguire Jr., managing director at

LaBranche

. "We have become a segmented market and now it seems we are getting a little bit of reversal" with respect to sectors, he said.

The

Nasdaq Biotechnology Index

was showing some muscle, lately up 7.2%, while the

American Stock Exchange Biotechnology Index

was hopping 9.4%.

Biotech stocks have certainly given investors a wild ride this year. Though both the Amex and Nasdaq biotech measures have plummeted more than 35% since their early-March highs, the indices each boast hefty gains for the year. The Amex biotech index is up about 27% since Jan. 3, while the Nasdaq biotechs are up about 20%.

Chip Sector Pays Little Mind to Micron

Chip and semiconductor stocks seemed to have no problem shrugging off the weak earnings report from

Micron Technology

(MU) - Get Report

which fell well below analyst estimates because of a drop in average selling prices for its semiconductor memory products. After falling more than 11 points in after-hours trading last night, the stock bounced out of the gate this morning and was lately up 15 1/4, or 12.8%, to 134 1/3.

For those unable to comprehend the absence of gloom and doom that usually surround such news, look no further than the optimistic defense quickly erected by a number of analysts who note that in the big picture, computer fundamentals are firming and demand in the second half of 2000 is expected to be strong.

Warburg Dillon Read

and

Deutsche Banc Alex. Brown

raised their price targets on the stock, while

Morgan Stanley Dean Witter

reiterated an outperform.

"Micron is a minor issue. This is a pricing problem and not a fundamental problem. The fact is that PC demand is very strong and pricing problems with DRAM are common," said Brian Finnerty, head of trading at

C.E. Unterberg Towbin

.

TheStreet.com Internet Sector

index was jumping 32 1/2, or 2.6%, to 1263, boosted by strength in bellwethers including

Yahoo!

(YHOO)

, up 3.2%, and

America Online

(AOL)

, up 3.8%.

Despite the mixed look of the markets today, most observers expressed optimism about the recent strength, particularly in blue-chip stocks. "I'm very encouraged by the fact that you are seeing decent earnings in the blue-chips," said Maguire, noting the recent positive earnings reports from financials including

Lehman Brothers

(LEH)

and

Goldman Sachs

(GS) - Get Report

.

Belski noted that a lot of the big-cap stocks have "come back to where they were originally and back in line with what people are thinking. People are trying to surmise how much premium to build into these but now we are at least back to fair value."

Belski also thinks the strength in regional banks and retail stocks is a sign that we are nearing the end of a series of interest rate hikes from the Fed. "The question is, 'Are they going to raise rates again?' Probably. Are they going to raise another 100 basis points like some people originally thought" earlier in the year? "Probably not," he said.

Lately in the bond market, the 10-year Treasury was up 15/32 to 102 25/32, its yield at 6.12%, while the 30-year Treasury was up 9/32 to 103 27/32, its yield at 5.98%.

Market Internals

Breadth was about even on the Big Board, and sharply positive on the Nasdaq, both on moderate volume.

New York Stock Exchange:

1,432 advancers, 1,431 decliners, 624 million shares. 53 new 52-week highs, 24 new lows.

Nasdaq Stock Market:

2,296 advancers, 1,687 decliners, 1 billion shares. 52 new highs, 55 new lows.

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