Tech stocks were looking more like their old selves again Wednesday as investors continued piling money back. Some encouraging news from Microsoft also helped to restore faith in the PC industry's prospects.
The Nasdaq Composite Index rose 52.16 points to 2461.80 in mid-afternoon trading, bolstered in large part by traders flocking back to leading Internet shares. The Wired Index gained 15.79 to 641.92, and the S&P 500 was up 15.31 at 1321.48.
The Dow Jones Industrial Average advanced 41.24 to 10489.79, finding renewed strength in better-than-expected earnings from Coca-Cola (KO) and Exxon (XON). Significantly, 12 of the 16 blue chips that have reported quarterly results have topped estimates, and the remaining four were in line with forecasts.
"It's only a handful of stocks that are overpriced," said Steve Adams, managing director of Van Kasper & Co. "Either they're going to correct down, or they'll trade sideways until the economics catch up with them."
Adams is generally upbeat about leading tech shares. "It's all short term," he said of recent turbulence in the sector. "Long term, everything's fine."
Microsoft (MSFT) would appear to support this outlook. The software behemoth reported a 43 percent increase in quarterly profit to 35 cents a diluted share, 3 cents more than anticipated. Chief financial officer Greg Maffei predicted that unit shipments of PCs should grow by at least 15 percent this year. "The PC market seems to be fundamentally healthy," he said.
Still, Microsoft's stock fell US$2 to $81.13 as Prudential Securities downgraded the company's shares to "hold" from "accumulate." Analyst Douglas Crook said a Y2K-related slowdown in software purchases by big-spending corporate clients has prompted him to take a "conservative" view of Microsoft's growth over the next few quarters.
Maybe that's not a bad call. PeopleSoft (PSFT) announced that its own first-quarter income plunged 78 percent from a year earlier, thanks to the Y2K glitch. But the company's stock nevertheless surged 19 percent to $14.44 as its 3-cents-a-share earnings beat estimates by a penny.
Expectations for PeopleSoft had been significantly lowered by analysts, and this was no less the case with Compaq Computer (CPQ), which just surpassed sharply lower estimates with a quarterly profit of 16 cents a share. Prior to warning earlier this month that its sales were way down, analysts had been looking for Compaq to come through with income of 32 cents a share.
However, with the company now without both a CEO and a chief financial officer, investors are less than enthusiastic about Compaq's near-term chances. The PC maker's stock slid 19 cents to $23.81.
The real proof in the computer industry's pudding will come after the closing bell, when IBM (IBM) reveals its first-quarter performance. Profit of $1.41 a share is expected, but traders will be even more interested in Big Blue's view of the second quarter and beyond. IBM's stock slipped $1.94 to $167.81.
