NEW YORK (CNN/Money) -
U.S. stock markets snapped back Tuesday, with technology cheering on the broader market after a three-session selloff sparked by worries about interest rate hikes.
The Nasdaq composite (up 35.28 to 1931.35, Charts) gained 1.86 percent, the Standard & Poor's 500 (up 8.33 to 1095.45, Charts) index rose 0.77 percent and the Dow Jones industrial average (up 29.45 to 10019.47, Charts) added 0.3 percent.
The stock market had tumbled for three straight sessions, culminating in Monday's close at new lows for the year as investors worried that interest rates are set to rise as soon as June.
Rate fears haven't disappeared overnight, but seem to have been discounted by the market, said Tom Schrader, managing director of U.S. equity trading at Legg Mason. A bounce off the oversold conditions also added to the session's rally.
"Given the severity of the downturn, I would think we'll get a little more of a bounce over the next few weeks, but I wouldn't expect much beyond that," Schrader said. "I think it's going to be a long, hot summer."
Rates are at more than 40-year lows, and investors have known they can't stay at this level, but until recently, many were betting that they wouldn't budge until August, at the earliest. Hints from the Federal Reserve last week, combined with recent strong economic data -- notably last Friday's robust monthly payrolls report -- changed that perception.
Markets typically shun a rising rate environment on worries that higher borrowing costs would slow economic growth, hurt corporate profits and eventually, stock valuations.
After the close of trade, tech leader Cisco Systems (CSCO: up $0.63 to $22.25, Research, Estimates) reported earnings and revenue that rose from a year earlier and topped expectations, seen as a positive sign for a continued recovery in technology spending. The stock had rallied close to 3 percent during the session, and inched fractionally lower in after-hours trade.
(For a look at earnings due this week, click here.)
Economic reports are due Wednesday on import and export prices, the trade balance, and the Treasury budget, but none are usually stock market moving. Of greater interest to the market will be Thursday's reports on retail sales and producer prices.
What moved?
Chips and other technology issues enjoyed the biggest bounce on the session.
The Philadelphia Semiconductor (up 11.25 to 470.15, Charts) index, or the Sox, rallied 2.4 percent, which was significant, said Peter Green, market analyst at MKM Partners, as the semiconductor sector is often the leader of the Nasdaq, in either direction.
"The Sox, which had been positive on a relative basis during the last three sessions, is now accelerating, and the composite is leading, which is important," Green said.
A slew of other technology issues bounced as well, including Intel (INTC: up $1.22 to $27.77, Research, Estimates), up 4.6 percent, and Sun Microsystems (SUNW: up $0.11 to $3.75, Research, Estimates), up 3 percent.
Linktone (LTON: up $2.81 to $10.81, Research, Estimates), which provides games and other services to mobile phone providers, rose 35 percent in unusually active trade after reporting first-quarter results late Monday that rose from a year earlier. On Tuesday, Piper Jaffray and ThinkEquity Partners upgraded the stock.
On the Dow, Walt Disney (DIS: up $0.88 to $22.98, Research, Estimates) was the biggest gainer, adding more than 4 percent. Brokerage UBS upgraded the media behemoth to "buy" from "neutral," citing the stock's valuation, as well as expectations for strong earnings growth this year. The company is due to report its first quarter results Wednesday after the bell.
On the downside, shares of Electronic Data Systems (EDS: down $1.03 to $16.48, Research, Estimates) fell 5.9 percent after the company said late Monday it may need to cut its dividend by two-thirds or sell more than $1 billion in equity to raise capital, as a means of trying to hold a credit rating. In February, ratings agency Moody's threatened to cut the computer services company's debt rating to junk due to its weak earnings report and forecast.
Dow stock Altria (MO: down $1.49 to $53.40, Research, Estimates) lost 3 percent after the company cut its 2004 earnings outlook to include potential charges connected to a pact between its Philip Morris International Unit and the European Commission to settle a dispute over cigarette smuggling. Following the news, several analysts cut their earnings estimates on the company.
Market breadth was positive. On the New York Stock Exchange, where 1.52 billion shares traded, advancing issues outnumbered decliners by more than four to one. On the Nasdaq, gainers beat losers by more than three to two as 1.62 billion shares changed hands.
Treasury prices gained, with the 10-year note adding 10/32 of a point in price, pushing its yield down to 4.75 percent from 4.79 percent late Monday. The dollar inched lower versus the euro and fell more versus the yen.
Among commodities markets, NYMEX light sweet crude oil futures rose $1.13 to settle at $40.06 a barrel. COMEX gold fell $1.50 to settle at $377.20 an ounce.
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