Tech stocks returned to life in a big way Tuesday after being thoroughly devastated a day earlier. Investors were shopping for bargains among some of the leading names, and many traders, amazingly, were plunging back into bloated Internet shares.
Generally speaking, though, the market remains weak and battle-scarred, and hardly anyone thinks the worst is over for the tech 'n' Net gang.
The Nasdaq Composite Index, which posted its second-biggest point drop on Monday, rose 64.10 to close at 2409.71. Most observers had expected the index to bounce back after falling so hard. While the actual recovery was impressive, few believe the gains will last long.
The Dow Jones Industrial Average climbed 8.02 to 10448.55, staging some fancy footwork of its own after being down more than 100 points in the morning. The Wired Index advanced 7.18 to 627.08, and the S&P 500 was up 16.69 at 1306.17.
"We typically see a sharp snap-back when stocks have gone down so much," said Brian Belski, chief investment strategist at George K. Baum & Co. "I don't know if this one will have the same longevity as we've seen in the past.
"People over the last week or so have recognized that there's more to life than just chasing momentum," he added. "Some of these ultra-high-growth stocks have been up for so long, the potential is very high for disappointment." For this reason, Belski expects the retreat from technology and Internet shares to continue, possibly for the next four or five months.
And in a way, he figures this is a good thing for Wall Street. "People are returning to bare-bones investing," Belski observed. "They're looking for companies with quantifiable revenues, not ones trading at 50 or 60 times earnings, or more. This is very positive from a macro view of the market."
That said, he acknowledges that there are still some pretty attractive stocks out there among the techs and dot coms, particularly those with established leadership in their group. Microsoft (MSFT), for example, may be trading at nearly 70 times earnings, but the company has the muscle to carry to such a hefty multiple. The software giant, which was slated to report its quarterly results after the closing bell, advanced US$2.13 to $83.13.
Texas Instruments (TXN) shed $5 to $100 even as it posted stronger-than-expected earnings for the first quarter. With a 16 percent hike in revenue under the belt, the company's profit came in at 65 cents a diluted share, excluding charges. This was 4 cents ahead of estimates.
At the same time, an outfit called sTupidPC (STPX) soared 47 percent to $3.50 after unveiling a new line of computers for students priced below $600. The company said its target market ranges from kindergarten to college-age PC users, and claimed to have "taken the high price and intimidation out of computer equipment." Sure.
Net stocks were back in the black as brokerages cranked out the "buy" recommendations following Monday's double-digit declines. "The way analysts see this is that if you loved a stock at $100, you'll love it even more at $50," Belski said. Investors dutifully wiped the blood and body parts from their clothing and returned for more.
RealNetworks (RNWK) was among the highest climbers, rising 41 percent to $181.06 after tumbling 25 percent a day earlier. The company was due to announce its first-quarter results after the market closes, and a loss of 3 cents a share was anticipated. But there was whispering on the Street that not only might RealNetworks top this number, but it could even turn a profit. Revenues were expected to be up more than 70 percent from a year ago.
And ETrade Group (EGRP) jumped 22 percent to $89.81 as it boasted a smaller-than-expected loss for the quarter. The online broker's 12-cents-a-share setback was a nickel ahead of estimates, and its revenue doubled. ETrade said it added another 233,000 accounts over the past three months, and credited a $60 million ad campaign with raising its visibility.
Among software makers, Network Associates (NETA) fell 27 percent to $11.06 after warning that its second-quarter sales -- like those of most other software firms -- will reflect weak demand related to Y2K jitters and Asia's ongoing slump. But Citrix Systems (CTXS) rose 13 percent to $34.25 as it beat estimates with quarterly income of 30 cents a share, and iced the cake by announcing it will hawk its wares via the Web.
When will the merest whiff of e-commerce stop being sufficient reason to throw money at a particular stock? Let's all just accept it, folks: The Net's here to stay, and practically all companies will do at least a portion of their business online.
In telecom, BellSouth (BLS) eased 25 cents to $41.63 even as record sales boosted its first-quarter profit to 46 cents a share, a penny more than anticipated. But this amount doesn't include a $280 million hit that resulted from Brazil devaluing its currency, which would place BellSouth's income more in the 32-cents-a-share range. Traders also are still digesting word that the company will shell out billions for a 10 percent stake in Qwest Communications International.
For its part, Sprint (FON) advanced $3 to $100.44 as it reported quarterly earnings of 93 cents a diluted share, 3 cents ahead of estimates. The company credited its success to an increase in both wireless and long-distance customers.
Worth watching: The planet's biggest (to date) merger is being negotiated over in Europe, where Deutsche Telekom is looking to get hitched to Telecom Italia in a deal worth more than $94 billion. If it goes through, it's entirely possible that the merged entity then would make a play for Sprint, which already is partnered with Deutsche Telekom in the Global One joint venture.
A rough day for Monsanto (MTC). The biotech gained 88 cents to $43 even as its new arthritis drug Celebrex was linked to 10 deaths and nearly a dozen cases of gastrointestinal hemorrhages, according to a report in The Wall Street Journal. The drug is one of a new breed called COX-2 inhibitors, which are touted as an effective way to ease pain without the side-effects of aspirin and its kin.
Lastly, and speaking of painkillers, Ben & Jerry's Homemade (BJICA) surged 17 percent to $29.75 as the maker of magnificently bad-for-you treats crushed expectations with quarterly income of 16 cents a share. Not only did Ben & Jerry's introduce Southern Pecan Pie ice cream during the last three months, but also unveiled its S'mores -- chocolate ice cream bars with marshmallow, graham cracker and a chocolate coating.
Now there's an e-commerce prospect that Market Cap likes, if only one could iron out the delivery question.
