Tech rally may be
wishful thinking

The question remains whether
this latest rise will be long-lasting

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By Lisa Singhania
Associated Press

NEW YORK>> If this past week's technology gains -- made primarily on a handful of mediocre earnings reports with mostly dim outlooks -- have a familiar feel, your instincts are correct.

Wall Street has fallen into a pattern of selling tech stocks sharply lower at the first whiff of weak earnings and then boosting the same issues higher at the barest sign of a turnaround. The problem is that each time the market has rallied, the gains haven't stuck.

The question now is whether this latest rally will play out any differently.

"This is what we did in December and January, then March and April and now June and July," said Will Braman, chief investment officer at John Hancock Funds. "We sell these stocks off when we get into preannouncements and warnings, and when we get the first sign of better news we rally."

This past week, investors rewarded Motorola and Yahoo! for earnings reports that slightly beat Wall Street's conservative forecasts. Neither company offered any hint that business would improve this year, but investors didn't seem to care.

Motorola rose nearly 16 percent Thursday and Yahoo!, 7 percent, before both gave back some of their gains yesterday.

The companies' stocks had waffled in the days leading up to the announcements -- a reflection of investors' uncertainty about buying if companies can't predict when their business will improve. That reluctance has limited the market's efforts to rally.

But investors heard enough to make them want to buy. Thursday's advances also had some help from Microsoft, which upped its revenue estimates for the quarter. Its stock rose nearly 8 percent.

"There is the urge on the part of many investors to jump back into technology at the least bit of anecdotal evidence that things are improving or, as was the case with Motorola, said things aren't that bad," said Bob Stovall, market strategist at Prudential Securities.

Thursday's rally sent the Dow Jones industrials and Nasdaq composite index up by triple-digits in their biggest advance in two months. Yesterday's gains, while more modest, solidified the market's progress.

"These are the highest levels we've seen in two weeks," said Paul Hickey, an analyst with Birinyi Associates, which calculated the data. "This is definitely strong activity."

For the week, the Dow gained 286.38 points, or 2.8 percent, after rising 60.07 to 10,539.06 yesterday. The Nasdaq rose 80.63, or 4.0 percent, for the week after a 9.05-point gain to 2,084.79 yesterday. The S&P 500 index advanced 25.09 for the week, a 2.1 percent gain. It rose 7.54 points yesterday to 1,215.68.

The Russell 2000 index, which tracks the performance of smaller company stocks, rose 1.67 to 490.71 yesterday. It ended the week up 7.45 points, or 1.5 percent. The Wilshire Associates Equity Index, the market value of NYSE, American and Nasdaq issues was $11.271 trillion yesterday, up $212.33 billion from last week.