Fueled by quarterly earnings reports and an apparent influx of momentum traders, both the Nasdaq and the NYSE jumped yesterday on the strength of tech stocks. Nasdaq's gain of 7.2 percent was its second biggest ever. The tech rally broadened in its second day, but analysts still saw plenty to be cautious about.
Most outlets cited earnings reports for much of the rise, though why they did so was a bit of a head-scratch. AOL (dossier) and Qualcomm reported numbers that were better than expected, with the result that AOL's stock went up a few percent while Qualcomm stayed flat. IBM (IBM) reported little growth, and its stock was flat. Intel (INTC)'s stock rose nearly 15 percent on expectations of the company's earnings report, but CNET (CNET) reported that when the chipmaker's report actually did come out, after the market closed, it raised questions about the company's earnings and future.
The Wall Street Journal led with analysts' puzzlement over the continuing rally, reporting a hedge-fund manager's comment that investors were paying 20 percent more Tuesday for the same stocks they had avoided last Friday. The paper attributed the rise to back-to-basics investors buying historically strong earners such as Sun (SUNW), HP, Compaq (CPQ) and Intel. The New York Times echoed the sentiment, calling Cisco (CSCO), Sun and Oracle (ORCL) the "ballast of the new economy."
The Mercury News' Matt Marshall took a long and balanced look at the two-day rally. Noting jumps in such speculative issues as Ariba, E.piphany, eToys and Women.com, he quoted Morningstar (dossier) analyst Pat Dorsey: "Just what is so tremendously different between now and Friday?" Marshall delivered a studly analysis of the four factors his sources saw driving this week's rebound. But he closed the piece on a sobering note: "Few analysts interpret the two-day rebound this week as proof that the bear market in tech stocks is over." - Keith Dawson
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