Tech Stocks Rebound; Bank Shares, Bonds Sag

Technology stocks rocketed Wednesday as bargain hunters swept into those downtrodden issues, while the broad market finished mixed as long-term bond yields rose again.

The Nasdaq composite index of mostly smaller stocks, heavily weighted with tech shares, soared 21.02 points, or 1.7%, to 1,269.08, recouping a chunk of the 10% decline the index has suffered since peaking in mid-January.

But the blue-chip Dow Jones industrial average eked out only a small gain, adding 4.53 points to 6,880.70. And the New York Stock Exchange composite index closed slightly lower.

In the broad market, winners topped losers by 21 to 19 on Nasdaq and by 13 to 12 on the NYSE.

Analysts said many stocks were held back by another rise in bond yields, one day after the Federal Reserve Board tightened credit for the first time in two years.

The latest economic data fanned expectations that the Fed, which raised its benchmark short-term interest rate by a quarter of a point Tuesday, may have to raise rates further to slow the economy.

The government said durable-goods orders rose 1.5% in February, well above expectations.

In the bond market, long-term yields rose, with the bellwether 30-year Treasury bond rising as high as 7.02% before falling back to close at 6.98%, up from 6.97% on Tuesday. Shorter-term yields, however, were flat or lower.

The durable-goods report “adds to the assumption that the economy is a little stronger than some people had believed,” said Alan Day, bond manager at Stratevest Group in Burlington, Vt. “Everybody is expecting another rate hike coming” when Fed policy-makers next meet May 20, or even before, he said.

The bond market also was pressured by the Treasury’s sale of new five-year notes Wednesday. The average yield on the notes was 6.66%, the highest auction yield since June.

But on Wall Street, some investors paid little mind to interest rates, instead focusing on possible bargains in the beaten-down tech stock arena.

Several brokerages have made positive comments about the sector in recent days. Salomon Bros. on Wednesday recommended IBM, Intel and Cisco Systems, saying it believes the tech industry’s fundamentals remain healthy despite the stocks’ recent slide.

“With investors focused on earnings, technology and energy companies are the best bets,” said Michael Carmen, a money manager at State Street Research & Management Co., which oversees $12 billion in stocks.

But some analysts were disappointed that the tech sector’s gains didn’t help the broad market.

“We had a reversal in the malaise in the technology sector, but it did not rub off on the rest of the market,” said Alfred Kugel, senior investment strategist at Stein Roe & Farnham.

Among Wednesday’s highlights:

* In the tech area, IBM surged 4 3/8 to 140 1/4, Intel rocketed 7 3/8 to 140 5/8, Cisco Systems jumped 4 1/2 to 52 3/8, Remedy gained 2 3/8 to 41 1/2, Micron Techology rose 2 1/8 to 40 7/8, PairGain Technologies soared 2 9/16 to 32 5/16 and Vitesse Semiconductor rocketed 4 5/8 to 30 1/8.

Also, Motorola rose 2 3/16 to 60 9/16. But after the market closed the company repeated that it expects earnings to be lower until later this year.

* Energy stocks also rebounded, even though oil prices remain weak. Exxon jumped 3 5/8 to 109 3/8, Schlumberger surged 2 1/8 to 114 7/8 and Sonat gained 1 3/8 to 55 1/8.

* Food stocks were broadly higher. Campbell Soup rose 1 to 48 5/8, Unilever jumped 2 3/8 to 192 1/8 and Hershey added 3/4 to 52 3/4. (Investor Spotlight, D8.)

* On the downside, banks--which may see profits harder to come by when interest rates go up--declined. Citicorp fell 2 1/8 to 113 5/8, BankAmerica lost 2 3/4 to 109 1/4, NationsBank fell 1 1/4 to 59 3/4, Banc One dropped 1 to 42 3/4 and First Union fell 1 5/8 to 87 1/8.

* Viacom Class B shares plunged 3 5/8 to 32 1/2. Merrill Lynch & Co. analyst Jessica Reif lowered her first-quarter estimate to a loss of 13 cents a share from a loss of 2 cents because of weak cash flow from films and continued problems at the company’s Blockbuster Entertainment Group unit.

Reif also lowered her rating on the company to medium-term “neutral” from “accumulate.” She said Viacom’s shares won’t rise for two more quarters unless Viacom sells some assets.

* Gold issues gained on reports that Bre-X Mineral’s Indonesian gold find, touted just last week as the world’s largest, may be a flash in the pan. That would mean world reserves are significantly lower than previously estimated--good news for other producers. Newmont Gold rose 1 3/8 to 42 3/4, Echo Bay rose 5/16 to 6 7/8, Santa Fe Pacific Gold gained 5/8 to 17 7/8 and Placer Dome added 1/4 to 19 1/4. Trading of Bre-X was halted on the Toronto Stock Exchange.

At the Commodity Exchange in New York, near-term gold futures rose $3.30 to $351 an ounce.

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Market Roundup, D6