Technology sell-off? Shift to cyclicals? Ancient history.
Tech stocks were once again in hog heaven Wednesday as investors heaped money onto old favorites. The panic that had surrounded all things silicon just a week ago, culminating in a massive exodus Monday from anything that even remotely resembled a circuit board, has simply disappeared. Poof. Gone.
Some encouraging news from Microsoft helped, as did a tsunami of bargain hunting that began Tuesday. But the reality -- at least this week -- is that Wall Street is a sucker for get-rich-quick growth, and there's nothing out there that satisfies the market's appetite like the Internet and its related industries -- tech and telecom.
The Nasdaq Composite Index catapulted 79.51 points to close at 2489.15, bolstered in large part by traders flocking back to leading Net shares. The Wired Index gained 22.76 to 648.89, and the S&P 500 was up 29.95 at 1336.12.
The Dow Jones Industrial Average advanced 132.87 to a record 10581.42, 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."
He's upbeat about leading tech shares. "It's all short-term," Adams 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$1.13 to $82 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 16 percent to $14.06 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 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, now that the company is 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 closed unchanged at $24.
The real proof in the computer industry's pudding was to come after the closing bell, when International Business Machines (IBM) revealed its first-quarter performance. Profit of $1.41 a share was expected, but traders were even more interested in Big Blue's view of the second quarter and beyond. IBM's stock rose $2.13 to $171.88.
As for Net shares, well, go figure. Considering how bad these guys got beat up a couple of days ago, it's incredible that traders would be in such a hurry to dump more cash into the hole.
"Greed," said Van Kasper's Adams. "It's total greed. People are obsessed because others in their vanpool are making more money than they are because they own AOL. That's all it is." Seems like as good an explanation as any.
Lycos (LCOS) led Net shares back into the promised land, climbing 37 percent to $101.50 on word that more people visited its online properties than Yahoo last month. According to market researcher Media Metrix, Lycos had 31.9 million visitors to its various sites, while Yahoo attracted 31.3 million. And we all know this disparity will only grow wider after Lycos completes its purchase of Wired News, and Market Cap's mega-traffic is factored into the equation. You bet.
RealNetworks (RNWK) advanced $9.25 to $190.31 after reporting a first-quarter loss of 2 cents a share, which wasn't quite as bad as the expected 3 cents. The company's revenue practically doubled, and a two-for-one stock split was announced.
Speaking of which, high-flying Qwest Communications International (QWST) -- as this column shrewdly predicted -- also announced a two-for-one split as it turned a quarterly profit of 1 cent a share. Investors, who had been expecting no better than break-even, promptly drove the company's stock $2 higher to $92.50.
Qwest hasn't made a single misstep in its ongoing construction of a nationwide high-speed voice and data network. Revenue more than doubled in the last three months, and BellSouth said Monday that it would fork over $3.5 billion for a 10 percent stake in the company. Qwest's shares are up more than 80 percent so far this year.
Lucent Technologies (LU), meanwhile, gained $4.25 to $58.50 after landing a $780 million contract to supply equipment and services for Sprint's wireless network. Separately, Lucent said it would join with Texas Instruments and an outfit called e.Digital to develop a pirate-proof Internet music player intended to compete with MP3 devices. Seems like just about everyone is vying to come up with an online music standard that the recording industry will embrace. One can only assume the money here is considerable.
Qualcomm (QCOM) soared 39 percent to $195.06 as the maker of wireless phones said profit for the latest quarter more than tripled to 82 cents a share, crushing the estimated 59 cents. That's excluding charges, though, which, if tossed in the soup, would have produced a net loss for the period. Qualcomm had its stock upgraded by several brokerages.
AMR (AMR), parent of American Airlines, rose $2 to $69.81 as it flew past estimates with quarterly income of 34 cents a share. But this amount was way down from a year before due to an unpleasant sick-out by pilots which resulted in as much as $225 million in losses. The pilots were ordered by a federal judge to pay $45.5 million to help cover the cost of their little labor action.
Lastly, it's our old pal K-tel International (KTEL) jumping 9.1 percent to $9 on news that it has, yes, launched an online auction service.
What can Market Cap say except ... $2 for that Captain & Tennille album? Or $3 for a mint-condition Veg-O-Matic?
