NEW YORK (CNNfn) - Concerns that valuations in the technology sector have by far outpaced revenue growth continued to weigh heavily on the Nasdaq in late trading Wednesday, while the Dow kept bouncing in and out of negative territory, as investors pitted gains in the bond market against the tech stocks' weakness.
Shortly before 3 p.m. ET the technology-heavy Nasdaq Composite was down 50.00 points, or 2.1 percent, at 2,263.87.
The Dow Jones industrial average was off 22.92 points at 9,274.11. Declines beat advances 1,766 to 1,205 as trading volume on the New York Stock Exchange stood at 547 million shares.
The S&P 500 index fell 8.77 points to 1,233.10. (Click here for a look at today's CNNfn market movers)
Strong but disappointing results from technology heavyweights Dell Computer and Hewlett Packard, reported late Tuesday, helped keep selling pressure on most of the big high-tech names, while bargain hunters helped reduce the losses in the broader market.
"We're seeing a divergence in the equity markets and a divergence in the tech stocks," said Scott Jones, stock analyst at Jefferies & Co. "Dell is weighing on hardware stocks."
Despite the Dow's relative show of strength, some analysts warned this was mostly due to technical factors and signaled no real upturn in bullish sentiment.
"We're seeing an oversold bounce rather than a change in sentiment or perception on the part of portfolio managers," cautioned James Volk, co-director of institutional trading at D.A. Davidson & Co. "The market ran too far too fast last Thursday and sold off a bit Friday on news out of Japan."
First Albany Chief Investment Officer Hugh Johnson agreed, saying that "the market is trading without conviction," with "investors sitting on the fence."
However, lower bond yields had turned some of those fence-sitters into bulls, he said. Helped by declining stocks, the benchmark 30-year Treasury bond recovered from an early-morning slump to rise 1/2 of a point in price for a yield of 5.31 percent.
The dollar eased against the euro but remained strong against the Japanese yen, following its soaring gains Tuesday to keep the pressure on the 119-yen barrier.
Dell keeps techs depressed
In stocks, the technology sell-off that began Tuesday night in the shares of Dell Computer (DELL) entered its second day as investors showed their disappointment with the company's slowing fourth-quarter revenue growth.
Although Dell reported earnings in line with expectations, and its revenue jumped 38 percent from the same quarter a year earlier, the sales numbers came sharply below expectations and 38 percent was well below the 52 percent revenue growth the company averaged in the previous three quarters.
Taking the news as a signal that the company's days of rocket-speed growth may be coming to an end, investors brought Dell's stock down 7-7/16 to 81-5/16, making it the most active issue on the Nasdaq. Dell had fallen as low as 75-1/2 in after-hours trading Tuesday.
The company also announced a 2-for-1 stock split, its seventh in as many years.
Fellow high-tech blue-chip Hewlett Packard (HWP), which Tuesday reported earnings that beat expectations but meager revenue growth in the fiscal first quarter, also saw its stock skid. The Dow component lost 2-15/16 to 67-9/16.
Investors were far more generous with the stock of chip-equipment maker Applied Materials (AMAT), the third major high-tech to deliver its latest results Tuesday night. Although the company's operating profit of 11 cents a share was sharply below the 52 cents a share earned in the same quarter a year earlier, it was almost double the 6 cents Wall Street expected. As a result, Applied Materials' shares shot 1-7/16 higher to 69-5/16.
Other big-name techs mostly lower. Dow member IBM (IBM) was unchanged at 172-1/2, but Microsoft (MSFT) lost 6-7/16 to 149-13/16 and Cisco Systems (CSCO) shed 3-1/8 to 95-15/16. Sun Microsystems (SUNW) fell 6-1/16 to 94-3/8.
Dell competitor Gateway (GTW) was flat at 68 but rival Compaq (CPQ) was down 1-5/16 to 41-1/2. Intel (INTC) eased 7/16 to 125-15/16. The stock had risen earlier in the day as Applied Materials' surprisingly strong earnings led some investors to believe the semiconductor industry could be on the way to a steady recovery.
In the day's other news, shares of medical-equipment maker Medtronic (MDT) tumbled 5-3/8 to 75-5/8 after the company said sales at its newly-acquired Arterial Vascular Engineering unit fell below expectations in the fiscal third quarter.