Wall Street's renewed infatuation with technology stocks continued Monday, as shares of IBM Corp., Intel Corp., Microsoft Corp. and others soared on reports that the long drought in corporate spending for new tech gear may be over.
The interest in tech stocks also drove the broader markets higher, as investors adopted optimistic expectations for second-quarter profits companies soon will begin reporting. The Dow Jones industrial average gained 146.58, or 1.6 percent, to end at 9,216.79, while the Standard & Poor's 500 broke the 1,000 barrier again, rising 18.72, or 1.9 percent, to 1,004.42.
The tech-heavy Nasdaq Composite index added 57.25, or 3.4 percent, to close at 1,720.71, its highest point since May 2002 and up nearly 29 percent for the year.
The run-up was sparked by somewhat upbeat assessments for tech companies from two Wall Street analysts who follow different corners of the sector. Analysts at Goldman Sachs issued a report on the outlook for spending on information technology that began, "At last, the bleeding stops."
Goldman said it detected improved sentiment among information technology managers at large companies whom it surveyed in mid-June. The bank's analysts found "a little brighter" outlook for tech spending for the rest of this year and "moderate growth" in IT spending of 3.5 percent in 2004. While Goldman cautioned that the overall outlook still remains "far from rosy," it nonetheless does suggest the long-awaited upward turn in spending on tech projects is nearing.
Shares of IBM were up $2.14, or 2.6 percent, to close at $86.09. Intel was up more than 5 percent, to close at $22.91 while Microsoft gained 3.7 percent, to close at $27.42. Separately, the Financial Times reported Monday that Microsoft is considering paying shareholders a special dividend of as much as $10-billion. Microsoft declined comment.
And the widely followed Philadelphia Stock Exchange Semiconductor Index soared 26.60, or 7.2 percent.
Meanwhile, Brian Williamson, an equities trader at Boston Company Asset Management, said shares of companies that supply gear to semiconductor makers soared after a Morgan Stanley analyst predicted Monday that firms in this volatile sector will report second-quarter profits in line with expectations.
"And the market said, "Oh, my goodness, that's huge. The whole group is going to make their numbers, and that's got to be a good sign for technology,' " Williamson said. Morgan Stanley declined comment.
An additional factor moving markets could be the return of retail investors anxious to plow money into their accounts after seeing the powerful second-quarter rally, said Kevin Gaughan, a portfolio manager and equity strategist at Strong Financial Corp., an investment management firm in Menomonee Falls, Wis.
Noting that trillions of dollars remain parked in money market accounts, Gaughan said, "Everyone is starting to get engaged (in investing again) particularly after the publicity of the second-quarter numbers. So the herd instinct is beginning to take effect."
As well, the confidence of U.S. chief executive officers increased in the second quarter to the highest in a year, reflecting an improving outlook for profits, the Conference Board's business confidence index suggested.
The index rose to 60 in April-June. That compares with a first-quarter reading of 53, which was the lowest since the final three months of 2001. Chief executives were more optimistic about the outlook for the economy.
About 65 percent of the 100 CEOs surveyed said they expect their profits to rise. Stronger balance sheets make it easier for companies to invest in new equipment, which economists say is needed to help the economy strengthen.
_ Information from Bloomberg News Service was used in this report.