Posted at 12:29 p.m., Thursday, January 3, 2002

Stocks rally on hopes of tech rebound

By Lisa Singhania
Associated Press

NEW YORK — An analyst's bullish comments about Intel sent tech stocks sharply higher today as Wall Street bet the sector would lead a market recovery.

Analysts said investors were buying in what they hoped was the early stage of a tech turnaround despite economic news that suggested business is still weak. The broader market also moved higher, although its advance was less spectacular as buyers gravitated toward technology.

The Dow Jones industrial average closed up 98.74, or nearly 1.0 percent, at 10,172.14, according to preliminary calculations.

The technology-focused Nasdaq composite index fared much better, gaining 64.98, or 3.3 percent, to 2,044.23. The Standard & Poor's 500 index, another broader market indicator, advanced 10.60, or 0.9 percent, to 1,165.27.

"Whenever you can get a story that's positive for technology, it's going to move that sector," said Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum. "Intel is a large-cap leader in the sector and it needs to participate for there to be a recovery."

Investors bid Intel up $2.52 to $35.52 after a J.P. Morgan analyst recommended the stock because of what he believes are improving business conditions. That assessment gave Wall Street a reason to believe that momentum might be returning to the beleaguered tech sector, which has stagnated for the past year on a mix of terrible earnings and anemic demand.

The resulting buying spread across technology stocks. Intel competitor Applied Micro Devices rose $2.98 to $19.37. Software maker Oracle also advanced, gaining $1.31 to $15.29.

General Motors gained 71 cents to $49.35, while Ford rose 51 cents to $16.73, after both companies said 2001 would probably be their second-best sales year ever, even though sales fell from 2000.

But the enthusiasm came at the expense of some other sectors including pharmaceutical and consumer goods. Merck dropped 73 to $59.03, while Procter & Gamble fell 77 cents to $79.23. Both sectors are considered stable, low-risk investments in times of economic uncertainty, but when business is growing and the economy prospers, they are often regarded as unnecessarily conservative choices.

Investors shrugged off a reminder of how weak the economy remains and how potentially fragile consumer spending might be. The Labor Department reported new claims for unemployment insurance shot up for the second week in a row, suggesting many U.S. workers are still losing their jobs. Consumer spending, which accounts for two-thirds of the economy, is closely watched.

"If people lose their jobs and are not able to get other jobs after a few months, they start to re-evaluate their budgets. I imagine that would affect consumer confidence and spending," said Robert Harrington, head of listed block trading at UBS Warburg.

In another report, the Commerce Department said construction activity rose a solid 0.8 percent in both October and November — primarily because of government and commercial projects. Residential construction by private builders dipped 2.2 percent.

The market has traded in a narrow range in recent weeks — about 10,000 on the Dow and 2,000 for the Nasdaq — as investors wait for firmer evidence that the economy is strengthening. Although stocks have rebounded smartly from their post-terror attack lows, analysts say Wall Street is still waiting to hear companies say business is indeed improving before making any big commitments to the market.

Advancing issues led decliners 2 to 1 on the New York Stock Exchange. Volume came to nearly 1.4 billion shares, compared with 1.18 billion yesterday.