NEW YORK (CNNfn) - Bullish investors took control of the Dow industrials Thursday, pushing the blue chip index up more than 2 percent and snatching up financial and oil shares and the stock of IBM after Big Blue signed a big deal with Dell.
The Dow rallied 191.52 points, or 2.06 percent, to 9,467.40. Volume on the New York Stock Exchange reached 776 million shares, with advances leading declines 1,713 to 1,190.
Despite the IBM/Dell alliance, doubts about the technology sector's earnings growth prospects cooled off enthusiasm at the Nasdaq, leaving the Nasdaq Composite 27.69 points, or 1.22 percent, higher at 2,292.89, well below its strongest level for the day.
Gerold Klauer, vice chairman of Gerard Klauer Mattison, said Thursday's misfortunes in the technology sector are simply a reflection of investors' concern over near-term earnings gains, but the long-term outlook for the sector is good and investors should use the opportunity to selectively buy some big-name technology stocks. (517K WAV) or (517K AIFF)
The S&P 500 index rose 18.94 to 1,246.64, a gain of 1.54 percent.
Investors paid little attention to a tepid bond market and seemed to put their interest rate concerns on the back burner, a day before the key February employment report is to be released. The jobs survey is expected to provide a strong hint to the market as to whether the economy is overheating and inflation is beginning to creep up.
The bond market was mixed, kept in check by the weekly jobless claims report, which once again showed fewer people than expected filed for unemployment benefits last week. The report, seen as a precursor to Friday's February jobs data, wiped out the market's modest early gains, leaving the benchmark 30-year Treasury bond finishing unchanged in price for a yield of 5.69 percent.
The dollar, however, soared to a three-month high against the yen overnight and extended its gains in U.S. trading after Tokyo once again shrugged off the yen's recent decline. The greenback also climbed to a lifetime high against the 10-week-old euro overnight and remained strong in U.S. trading.
Tech excitement wanes
Rallying technology stocks helped lift the broader market in the morning, aided by news of a $16 billion technology deal between two of the industry's largest players, IBM (IBM) and Dell Computer (DELL).
But the deal provided only brief excitement for investors, who late in the day once again returned to their old concerns about earnings growth in the tech sector, especially after IBM said its deal with Dell would have no positive impact on profits this year.
Shares of both companies soared early in the day as investors learned Big Blue is to supply Dell with storage, microelectronics, networking and display technology for use in Dell-built computers. The seven-year deal, believed to be the largest of its kind in the high-tech industry, also includes broad patent cross-licensing between the two companies and collaboration on the development of new technology.
The gains shrank near the end of the trading session however, with IBM, a Dow component, closing 3-15/16 higher at 67-7/16. Dell, the most actively traded Nasdaq issue, trimmed its advance to 15/16, finishing at 81-7/8.
Some of Dell's and IBM's major competitors, which had shown signs of nervousness throughout the session, weakened further late in the day. Shares of Dow member Hewlett Packard (HWP) fell 1-3/8 to 67-7/16, Gateway (GTW) lost 1-13/16 to 67-5/16, and Compaq Computer (CPQ) closed 9/16 lower at 33-5/16.
Cisco Systems (CSCO) climbed 3-1/8 to 98-1/4, but Intel (INTC) made a U-turn, falling 1-5/16 to 113-3/8. Earlier, Gruntal & Co. upgraded Intel and fellow chip maker Micron Technology (MU) to "strong buy" from "buy." Minutes after the closing bell, Intel announced it was buying Level One Communications (LEVL) in a stock swap valued at $2.2 billion.
During regular trading hours, shares of Level One tumbled 5-1/4 to 27-1/8, or more than 16 percent, largely because of a downgrade by Adams Harkness to "accumulate" from "strong buy."
Microsoft (MSFT) climbed 2-5/8 to 152-1/4 after the company announced the launch of a new e-commerce venture called BizTalk and the acquisition of online comparison shopping service ComparaNet.
Elsewhere among high-tech stocks, shares of Web site management firm Verio (VRIO) surged 4, or more than 12 percent, to 67-13/16 on news the company had worked out an agreement to market its services through America Online (AOL).
And shares of Metronet Communications (METNF) soared 3-1/8 to 46-1/4 on news the company will join forces with AT&T Canada in a $7 billion merger. AT&T (T), a member of the Dow 30, will own 31 percent of the new AT&T Canada when the deal is completed.
Financials get attention
Helping back up the technology rally, financial stocks advanced strongly, despite fears of rising interest rates ahead of the February jobs report Friday.
Shares of Dow component American Express (AXP) rallied 5-3/16 to 113 after Salomon Smith Barney started coverage of the stock with a "buy" rating and a price target of $135 a share. Calling the stock "underappreciated," analyst William Ryan said he believes American Express faces a smaller interest-rate risk than many investors believe.
Fellow Dow member Citigroup (C) climbed 2-7/16 to 60-5/16 and J.P. Morgan (JPM), also one of the 30 Dow stocks, finished 1/2 higher at 112-15/16.
Oil stocks go slick
Shares of oil companies also enjoyed a second straight day of gains, helped largely by firming global oil prices and a series of positive comments about the oil drilling sector by Salomon Smith Barney.
Among the Dow components, Chevron (CHV) climbed 1-5/16 to 79-5/16 and Exxon (XON) rose 2-1/8 to 67-13/16.
Texaco (TX) gained 7/8 to 84-7/16.
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-- by staff writer Malina Poshtova Zang