Once again, all it takes is reassuring investors that things aren't getting any worse.

Nokia

(NOK) - Get Report

said Tuesday that its previously disclosed fourth-quarter targets appear to be reachable, and the announcement touched off a buying spree in the wireless communications sector.

The cell-phone maker was among the most actively traded stocks on the

New York Stock Exchange, where the company's shares advanced 8.2% to $25.75 going into the end of the session.

Rivals

Motorola

(MOT)

and

Ericsson

(ERICY)

were caught up in the momentum but off their best levels of the day. Motorola gained 0.4% to $16.71, while Ericsson climbed 4.5% to $6.08.

RF Micro Devices

(RFMD)

, a maker of integrated circuits for wireless, broadband and cable communications, rose 9.1% to $25.69, and

Texas Instruments

(TXN) - Get Report

tacked on 2 cents at $31.13. Communications chip maker

Xilinx

(XLNX) - Get Report

rose 2.4% to $41.60 despite saying after Monday's close that its fiscal third-quarter sales will fall about 5% from second-quarter levels.

Altera

(ALTR) - Get Report

,

Applied Micro Circuits

(AMCC)

and

Broadcom

(BRCM)

were also higher.

Despite Nokia's outlook, as long the economic slowdown remains a reality, industry watchers will keep a close eye on consumer demand for mobile phones. Given the situation facing the world's economies, there are reasons to worry that the edgy consumer will hold back this Christmas, resulting in an accumulation of dusty inventories. Industrywide, the

projected demand for handsets has come down from around 600 million going into 2001 to a current range of about 380 million. Plus, any

product delays could make the pop in Nokia's stock short-lived.

"Right now, Nokia is saying that inventory in the channel is still at normal levels," said Blaine Carroll, an analyst at Adams Harkness & Hill. "But the question is, are handsets coming out of the channel? The sell-through is definitely something we need to keep our eyes on over the next couple of weeks."

Nokia, the world's largest maker of mobile phones, on Tuesday projected overall

fourth-quarter sales growth of about 20% from the previous quarter, with sales at its mobile-phone unit showing 25% growth, largely confirming prior guidance. The company expects the industry to ship 105 million to 110 million mobile phones in the fourth quarter.

The company also sees fourth-quarter earnings at the upper end or even above its earlier forecast range of 16 cents to 18 cents a share. The company provided the estimates, based on its sales during October and November, as part of a scheduled midquarter update. The fourth quarter ends Dec. 31, and Nokia is scheduled to report its earnings for the quarter in late January.

Avoiding the Hangover

Nokia's outlook suggests that holiday sales could be firm, said John Bucher, an analyst at Gerard Klauer Mattison. Nevertheless, according to his checks with mobile-phone carriers, Bucher said, most are trying to avoid ending the year with too much inventory.

"This year no one wants to run out of handsets for the holiday season, but at the same time, I think people are going to be very careful that they don't end up with a hangover from January," Bucher said. "I do think we're going to see the typical first-quarter correction from the fourth quarter in January."

Beyond the fourth quarter, analysts see other limitations. For instance, consumers tend to upgrade their handsets only if a new application comes along that encourages people to replace their older phones, Carroll said. New mobile-phone services will probably be needed to drive the next upgrade cycle, and "people aren't replacing their phones as rapidly as originally thought," he said. Carroll has a buy rating on Nokia's stock, which he believes has some upside. His firm hasn't done any underwriting.

Analysts and investors tend to view Nokia as the king of the hill in the sector. For instance, Carroll has a market perform rating on Ericsson, because the company relies heavily on the infrastructure market. Motorola has various business segments, including cable television and semiconductor units, that remain under pressure, he said.

Buchor has a neutral rating on Nokia, believing that the shares are trading around the right level. "We admire

Nokia's achievements, and we have a great deal of respect for the 35% market share that we think the company has," he said. (His firm hasn't done any underwriting for Nokia.) "If you apply

our valuation model to our 2002 earnings-per-share estimate of 71 cents, we come out with a fair valuation of $25. So it's presently neutral for valuation reasons."

Nokia and its rivals have made impressive comebacks since the market tanked after September's terrorist attacks. Nokia is up 52% since Sept. 21. Motorola has gained 11.6%, and Ericsson has risen 73%. Outlooks like Nokia's may continue to fuel buying for the near term, but investors probably won't stick around if next year turns into a repeat performance of 2001.