NEW YORK >> Technology buyers returned to Wall Street today, sending the sector higher after a series of ratings upgrades of semiconductor stocks by Merrill Lynch suggested business is about to improve.
Tech upgrades lead
stock market higher
The market welcomed the upgrades, which included Texas Instruments and Applied Materials, following a litany of weak second-quarter earnings reports often accompanied by profit warnings for the future. Merrill Lynch's shift also followed comments from semiconductor companies in recent weeks that the worst might be over.
"We are starting to see corporations give us evidence that there is a bottom in sight. That is a major shift -- enough of a shift to say the market is going from a bear market to a stable market, eventually to a bull market," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
The tech-dominated Nasdaq composite index rose 41.25 to 2,068.38, and the Standard & Poor's 500 index gained 4.70 to 1,215.93. The attention to tech, along with some profit taking, pulled blue chips slightly lower. The Dow Jones industrial average fell 12.80 to 10,510.01, after rising as much as 77 earlier in the session and ending yesterday with a 121-point gain.
Advancers outnumbered decliners nearly 3 to 2 on the New York Stock Exchange, with 1,791 up, 1,296 down and 203 unchanged. Volume was 1.29 billion shares vs. 1.14 billion shares yesterday.
The NYSE composite index edged up 0.21 to 617.15, the American Stock Exchange composite index lost 2.76 to 893.45 and the Russell 2000 index, the barometer of smaller company stocks, rose 4.46 to 489.24.
The Treasury's 10-year note fell 332 to 99 12; its yield rose 1 basis point to 5.06 percent. The 30-year bond fell 232 to 97 2632; its yield was unchanged at 5.53 percent.
Bullish comments from influential analyst Abby Joseph Cohen added to Wall Street's buying. Goldman Sachs' chief investment strategist reaffirmed her lofty year-end targets for the market, saying the Dow will rise to 12,500, about a 19 percent increase from its current level, and the S&P will reach 1,550. "It's an excellent time to look at technology," Cohen told CNBC today, adding that she also likes consumer cyclicals, including home builders and retailers, and financial-services firms.
Cohen's comments and Merrill Lynch's upgrades allowed investors to take in stride two disappointing economic readings on manufacturing and construction. The National Associ- ation of Purchasing Management reported that activity in the nation's factories declined for the 12th consecutive month in July, while the government reported that construction spending fell for the fourth straight month, dropping by 0.7 percent in June.
Merrill Lynch, in a research note for clients, also upgraded companies that supply semiconductor makers with equipment. "Although the semicon- ductor industry continues to struggle with a combination of overcapacity and weak demand, we believe that the worst of the downturn is now behind us," the investment firm said.
Chip makers Texas Instruments advanced $2.13 to $36.63 and Micron Technology rose $1.70 to $43.70. Among semiconductor equipment makers, Novellus climbed $2.09 to $53.06, while Applied Materials rose $2.44 to $48.30.
Other tech gainers included Priceline.com, rising 65 cents, or 7.5 percent, to $9.52 on its first quarterly profit, which the company announced late yesterday. The name-your-price online travel agent earned 5 cents a share, beating analysts estimates of a penny a share.
The Dow's losses were curbed somewhat by its tech components. IBM rose $1.85 to $107.06, Hewlett-Packard rose 85 cents to $25.51, and Intel advanced 94 cents to $30.75.
Outside of technology, the market was mixed, which analysts attributed to the fact that the overall economy remains weak. Home Depot fell 59 cents to $49.78 and General Motors declined 93 cents to $62.67, while American Express advanced $1.16 to $41.49 and Philip Morris rose 23 cents to $45.73.