Tech Stocks Hold Gains on Profit Hopes
Wednesday October 24
By Chelsea Emery
NEW YORK (Reuters) - Technology stocks held gains in late-afternoon trading on Wednesday, as investors took heart from upbeat profit news from companies like Citrix Systems Inc. (NasdaqNM:CTXS - news) and QLogic Corp. (NasdaqNM:QLGC - news). Blue-chip stocks were little changed.
Citrix, a specialty software maker, reported profits that beat forecasts and said sales would likely keep growing by 20 percent or more, while QLogic, a designer of network equipment, reported earnings that met estimates as demand for fiber channel-related products rose.
``People are thinking we're seeing a bottom,'' said Crit Thomas, head of growth equities for National City Investment Management Co. ``Some companies aren't revising outlooks down, and orders are looking better for others.''
But blue-chip stocks lagged as disappointing news from No. 1 photographic film maker Eastman Kodak Corp. (NYSE:EK - news) yanked the blue-chip Dow Jones industrial average (.DJI) lower, and some investors started to swap assets into tech shares.
``Blue chips tend to be the names you go to when you're worried, but if you're feeling like adding more risk, blue chips are the ones you'd use to generate cash,'' said Thomas.
The technology-laced Nasdaq Composite Index (.IXIC) rose 20 points, or 1.18 percent, to 1,724, but the Dow hovered just over the unchanged mark, rising 3 points, or 0.03 percent, to 9,342. Eastman Kodak slumped 11 percent to $30.15, limiting the Dow's gains.
The broader Standard & Poor's 500 Index (.SPX), seesawing in and out of positive territory, inched up just 0.84 of a point, or 0.08 percent, to 1,085.
Wall Street pros are betting the Federal Reserve's slew of interest-rate cuts, along with a $100 billion fiscal stimulus package working its way through Congress, will help Corporate America get back on its feet.
``I'm seeing companies' numbers come in a penny or two above expectations -- especially in the tech names,'' said Lynda Calkin, a money manager for Westwood Management, which oversees $4 billion. ``Earnings were probably revised down to what companies can actually show, stocks have corrected substantially and we're looking at the greatest infusion of liquidity -- both fiscal and monetary -- in years.''
Citrix jumped $2.33 to $23.70 after saying its quarterly net income rose 28 percent on strong sales of its MetaFrame XP line. The software maker also said sales should keep growing by at least 20 percent through 2002. Analysts said the company is riding high since its software helps cut information technology costs by making tech support cheaper and easing demand for new equipment.
QLogic, a designer and supplier of storage area network equipment, gained $4.67, or 12 percent, to $40.73 after reporting profits that met analysts' expectations as its key fiber channel market segment grew.
A warnings from phone giant AT&T Corp. (NYSE:T - news) also weighed on the Dow. The stock fell $1.41 to $16.29 after reporting a sharp drop in profits and warned its core telephone business would take a hit through 2002, amid a weak economy and stiff competition. Investment firm Lehman Bros. cut its rating on the company's shares.
Eastman Kodak tumbled sharply after it warned its fourth-quarter profit would likely fall short of Wall Street's estimates.
Together, Kodak and AT&T contributed 37 points to the Dow's decline.
Energy trader Enron Corp. (NYSE:ENE - news) took a hit, falling $4.02 to $15.77 after Prudential Securities cut the company's rating on concern the management is not being forthright.
Nextel Communications Inc.(NasdaqNM:NXTL - news), the nation's fifth-largest wireless telephone company, reported a 30 percent increase in revenues as its subscriber growth met estimates. Its shares gained $1.16 to $8.56.
In the Nasdaq market, Amazon.com Inc. (AMZN.O slumped sharply amid worries about slowing revenue growth at the online retail giant. It fell $1.85 to $7.70.
Traders said Wall Street mainly shrugged off the Federal Reserve's so-called ``Beige Book'' report, which said the Sept. 11 attacks on New York City and the Washington area ``sharply reduced'' economic activity at least temporarily in the overall U.S. economy. The Beige Book, an anecdotal look at the U.S. economy, is based on information compiled before Oct. 15.
``The Beige Book isn't having an impact on the equity market,'' said Robert Cohen, a trader at Credit Suisse First Boston. ``They're talking about continuing slowing, but that isn't a surprise to anyone. If anything, it's a positive in that it shows there's no reason for the Fed to change its posture'' about lowering rates further.
More than half of the companies in the S&P 500 index have now issued their corporate scorecards in what is one of the heaviest weeks of the reporting period. |
