Updated from 4:06 p.m. EDTStocks ended at session highs on Wednesday, overcoming a sluggish start amid an earnings warning from Texas Instruments ( TXN). For the second straight day, the broader market rallied into the close, with the Dow Jones Industrial Average ending up 128.33 points, or 1.4%, at 9183.22. The Nasdaq closed up 18.35 points, or 1.1%, at 1646.02. The S&P 500 rose 12.64 points, or 1.3%, to 997.48. "The mood is generally positive today, and I think we're seeing a sustained tech rally and people wondering if it's for real or not. Last few days even now and then, the market goes down, but the general trend seems to be positive," said Giri Cherukuri, head trader at OakBrook Investments. "And with interest rates going down, that's helped some too. When they're down, lower borrowing costs and lower interest rates also help consumers, so they can buy more." Texas Instruments trimmed its revenue and earnings estimates for the second quarter, blaming costly restructuring charges and the SARS virus in Asia. Banc of America Securities cut its rating on the stock to neutral from buy. Shares of Texas Instruments were down $1.53, or 7.5%, at $18.86. Chip-equipment company Cymer ( CYMI) also cut its guidance. The company lowered its second-quarter revenue estimate by 12% because inventories at semiconductor companies remain high. Shares of Cymer were down $74, or 2.3%, at $31.90. The dual warnings put pressure on semiconductor names, with Intel ( INTC) falling 9 cents, or 0.4%, to $21.88, and rival Advanced Micro Devices ( AMD) off 27 cents, or 4%, at $6.41. The Philly chipmakers were down 0.6%. Treasuries reversed direction late in the session as equities rallied, after the yield on the 10-year bond hit the lowest level in nearly 50 years. The 10-year was down 6/32, boosting its yield from 3.15% to 3.21% by the end of the day. In economic news Wednesday, the Federal Reserve's Beige Book report, a study of economic conditions in the U.S., showed prospects were still mixed. "Although reports from the 12 Federal Reserve districts indicated some signs of increased economic activity in April and May, conditions remained sluggish in most districts," the Fed said.
The bad news continues for Freddie Mac ( FRE). Trading of its shares was halted early Wednesday after the company said the Securities and Exchange Commission will be conducting a formal probe of its finances. The shares, which resumed trading in the morning, were down $1.50, or 2.9%, at $50. Long-distance operator Sprint ( FON) expects charges of $500 million in its second quarter, resulting from the loss of 500 jobs related to the closing of Web site operations. Sprint shares were up 31 cents, or 2.2%, at $14.18. Computer hardware maker IBM ( IBM) was up $2.26, or 2.8%, at $83.97 after Merrill Lynch added the stock to its focus list. In what could be interpreted as a sign that PeopleSoft ( PSFT) is starting to warm up to Oracle's ( ORCL) hostile $5.1 billion bid, the business software maker withdrew a complaint it was planning to file against its suitor. PeopleSoft had initially described the offer as "atrociously bad behavior." In other Oracle news, Wells Fargo upgraded the company to buy from hold, telling investors that the company has moved beyond database technology to be a more diverse software company. Wells set a new price target of $18 on Oracle shares. Oracle was up 25 cents, or 1.9%, at $13.27, while PeopleSoft was down 28 cents, or 1.6%, at $17.62. Meanwhile, United Technologies ( UTX) was expected to announce that a $1.1 billion bid for British security services provider Chubb was accepted by the target company. United Tech was up $2.05, or 2.9%, at $72.75. Technology news dominated analyst research on Wednesday, with semiconductors, wireless carriers and telecommunications all subject to downgrades. Taiwan Semiconductor ( TSM) was downgraded to neutral from buy at Merrill Lynch. Shares were down 20 cents, or 1.9%, at $10.19. In wireless, Sprint PCS ( PCS) was cut to outperform from strong buy at SG Cowen. SG Cowen upgraded rival Nextel ( NXTL) to strong buy from outperform. PCS was up 3 cents, or 0.6%, at $5.44, while Nextel was up 67 cents, or 4.8%, at $14.75.
Handset maker Ericsson ( ERICY), one day after posting sizable gains, was downgraded to sell at Fulcrum Global Partners. Elsewhere, Vodafone ( VOD) was cut to in line from outperform at Goldman Sachs. Ericsson was up 42 cents, or 3.7%, at $11.77, while Vodafone was up 2 cents, or 0.1%, at $21. A pair of positive notes on the biotech sector helped push the Amex Biotech Index up 3.2%. Merrill Lynch told investors that the recent spate of profit-taking in the sector was likely to wane soon and that shares would see more upside because of increased mutual fund flows and a more accommodating Food and Drug Administration. Separately, CSFB raised its price targets on a dozen biotech firms in its coverage universe, including Amgen ( AMGN), Millennium Pharmaceuticals ( MLNM) and Biogen ( BGEN). Homebuilder Lennar ( LEN) beat expectations in its second quarter with the help of low mortgage rates. The company also raised its earnings outlook for fiscal 2003 and 2004. Lennar was up $5.70, or 8.2%, at $75.45. Overseas markets were largely positive, with London's FTSE 100 closing up 37 points, or 0.9%, at 4150 and Germany's Xetra DAX ending up 38 points, or 1.2%, to 3178. In Asia, Japan's Nikkei closed up 101 points, or 1.2%, at 8890, while Hong Kong's Hang Seng lost 42 points, or 0.4%, to 9662. On Tuesday, the Dow gained 74 points, or 0.8%, to 9054. The S&P 500 rose 8 points, or 0.9%, to 984 and the Nasdaq gained 23 points, or 1.5%, to 1627.