After Monday's incredible sell-off, many investors were expecting a rally during Tuesday's session. They got one. The Nasdaq bounced back hard during trading Tuesday, crossing 2000 and ignoring bad news from a number of big players. It seems that investors are overlooking technology woes and think some shares are at bargain prices, despite the lack of fundamentals in the market.
On Monday, Cisco Systems Inc.'s (CSCO) layoffs and L.M. Ericsson Telephone Co.'s earnings warning sent the market into a downward spiral. On Tuesday, Cisco CEO John Chambers told investors, "Inventories are a big problem, and this will be at least a two quarter phenomenon to correct," at the Merrill (MER) Lynch Global Technology Outlook Conference.
And Motorola Inc. (MOT) said it would cut 7,000 jobs and take the charge against first- and second-quarter results. But tech investors seemed hardened to the markets ills and scooped up stocks that were demolished Monday.
At the end of the day, the Nasdaq gained 91.42 points, or 4.75 percent, to finish at 2014.80. The Dow didn't recover as well from Monday's thrashing, but finished solidly in the black. The blue-chip index rose 82.55 points, or 0.81 percent, to close at 10290.80. Also up was the S&P 500, which tacked on 17.36 percent, or 1.47 percent, to end at 1197.52. Shares of Internet Economy companies led the rebound. The Industry Standard 100 was up 20.94 points, or 5.51 percent, to 401.12.
Cisco, which dragged down the market Monday, led the climb Tuesday despite Chambers' comments. The router giant gained US$2.31, or 12.29 percent, to $21.13.
JDS Uniphase (JDSU) also posted a solid gain. The component maker was up $1.50, or 6.56 percent, to close at $24.38. Despite the day's pick up, analysts said there are significant challenges facing the company.
"They have to reduce the price of their equipment a lot. This will be a long process," said Merrill Lynch analyst Tom Astle.
Despite Motorola's woes, the company gained 29 cents, or 1.93 percent, to close at $15.29. Rival Nokia (NOK) fared even better, adding $1.26, or 5.87 percent, to end at $22.71. And Ericsson's warning seemed like yesterday's news as bargain hunters propped the stock up 31 cents, or 4.98 percent, to end $6.59.
As the economy slows dramatically, it seems that some companies are able to stick their forecasts better than others are.
"We are on track to make our numbers for the quarter. We think this will be a process where the strong businesses emerge," said Afshin Mohebbi, president of Qwest Communications. The company posted a gain of $1.53, or 4.60 percent, to finish at $34.78.