NEW YORK (CNNfn) - The Nasdaq composite index surged for the first time in four sessions Tuesday as buyers flocked to U.S. technology stocks, betting that much of the negative news about corporate results has been factored into these beaten-down issues.
Further confidence also was prompted by the belief that the Federal Reserve will continue to lower interest rates if economic indicators warrant it.
"We've done a lot of discounting already about the fact that earnings are not going to be good here," Bryan Piskorowski, market analyst with Prudential Securities, told CNNfn's market coverage. "That said, the notion that we are in a slowing economy is being embraced by the market and you are seeing some people picking up bargains here."
Analysts said the economic slowdown that had been plaguing investor sentiment, and causing concern about earnings to grow by leaps and bounds, was starting to abate.
With a large number of statements expected in the next couple of weeks, many investors are betting that previous guidance -- from the companies and analysts who follow them -- has brought stock prices down to reasonable levels.
"If they don't meet expectations, I think we're in trouble -- but I think the bar has been lowered across the board," said Art Hogan, chief market analyst with Jefferies & Co. "It's more about the guidance and what they say about future quarters."
This holds true for all sectors -- but particularly in the technology sector, which has suffered from overvaluation concerns since late summer.
The Nasdaq rose 45.38, or nearly 2 percent, to 2,441.30. This is only the second positive session for the composite this year, with the first one prompted by a surprise interest rate cut by the Federal Reserve.
While analysts liked the resilience, they voiced caution about its ability to hold onto gains, especially if the rally is being driven largely by bargain hunting.
Rallies have been brief encounters and I'm not sure we're in the kind of market where rallies are sustainable," said Alan Ackerman, senior vice president with Fahnestock & Co. "However as we come closer to the next Fed meeting, and hopes are that the Fed will cut interest rates, we might have a relief rally."
 The Dow Jones industrial average fell for its fourth straight session, losing 48.80 to close at 10,572.55. The blue chip index, which hasn't shown gains since the Fed's rate cut, initially showed some strength before succumbing to heavier selling. The S&P 500 gained 4.94 to 1,300.80.
Market breadth was positive. Advancers beat decliners on the New York Stock Exchange 1,619 to 1,289, as more than 1.19 billion shares changed hands. On the Nasdaq, winners topped losers 2,237 to 1,564, as more than 1.95 billion shares were traded.
In other markets, Treasury securities fell. The dollar rose against the euro and the yen.
Nokia shrugged off as tech bargains unearthed
Investors braced for bad news on a daily basis were able to shrug off news by Helsinki, Finland-based Nokia that its cell phone sales fell short of expectations. Analysts said the resilience of the markets was positive.
"It's impressive that the Nasdaq is holding gains in spite of Nokia saying sales are disappointing to some analysts," said Peter Coolidge, senior trader with Brean Murray & Co. "A lot of this is already built into stocks and some cash is being put to work."
Nokia (NOK: Research, Estimates), the world's biggest mobile-phone maker, fell $4 to $39.13 after saying it sold more than 128 million phones in 2000 -- a 64 percent increase from a year earlier, but well short of some analysts' forecasts of as many as 140 million.
Other wireless companies stumbled after Nokia's report.
Ericsson (ERICY: Research, Estimates) slid 56 cents to $10.81 while Motorola (MOT: Research, Estimates) shed $1.06 to $20.69. Motorola will report its quarterly results after Wednesday's close, and is expected to report earnings of 15 cents a share, down from the 26 cents a share earned in the year-earlier period.
Among other companies reporting results, Yahoo! (YHOO: Research, Estimates) will post its figures for the fourth quarter late Wednesday. The company is expected to post a profit of 13 cents a share, up from the 10 cents a share earned in the fourth quarter of 1999.
Yahoo! shares gained $2.94 to $30.13.
Andrea Rice, Internet analyst with Deutsche Banc Alex Brown, told CNNfn's In the Money that Yahoo!'s guidance will dictate its future. (366K WAV) (366K AIFF).
 Other tech sectors showed tenacity, led by hardware and software providers. Dell Computer (DELL: Research, Estimates) rose 69 cents to $19.81, Oracle (ORCL: Research, Estimates) gained $1.56 to $31.50, and Microsoft (MSFT: Research, Estimates) added $2.88 to $51.81.
AT&T (T: Research, Estimates) jumped $2.38 to $22.44 after Morgan Stanley Dean Witter upgraded the telecommunications company to "strong buy" from "hold" and set a $35 price target on AT&T shares.
While tech stocks attracted the buyers, the Dow was weighed down by selling in industrial, consumer cyclical and financial companies, led by a downgrade in DuPont by J.P. Morgan Chase.
 DuPont (DD: Research, Estimates) lost $1.88 to $46.44 after Morgan downgraded the chemical maker to "market perform" from "buy" based on an expectation of further economic deterioration and its effects on earnings.
Other "old economy" companies taken down Tuesday included 3M (MMM: Research, Estimates), which fell $1.81 to $113.44, and American Express (AXP: Research, Estimates), which lost $2 to $46.94.
Investors keen on Fed
Analysts said investors were showing growing confidence after comments from two Federal Reserve governors that the Fed will step in and temper the economy if warranted.
"I think earnings season will be one of the catalysts to get money in off the sidelines and the other will be the Fed's ongoing ability to push down interest rates," said Jefferies' Hogan.
And another analyst agreed. "I do think we're searching for a bottom on the Nasdaq and the action looks good so far. I see a lot of stocks doing well and people are going bottom fishing," Ned Riley, chief investment strategist with State Street Global Advisors, told CNNfn's Street Sweep. "Interest rates matter and clearly the Federal Reserve needs to focus on the Nasdaq."
Just last week, the Fed cut its rates by a half percentage point and signaled it would cut rates further in a bid to give the economy a lift. Lower rates tend to spur spending by businesses and consumers, boosting economic growth and fattening corporate profits.
Two regional Fed governors issued comments Monday that indicated the central bank is watching the economic slowdown closely in order to prevent a recession.
The gist of remarks by Atlanta Fed President Jack Guynn and Dallas Fed chief Robert McTeer is that they don't believe the economy is shrinking just now; in fact, they think the slowdown is a healthy thing for the economy in the long run. 
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