Computer short-circuits NASDAQ's recent gains

Technology stocks advanced again Friday, handing the NASDAQ composite index a five-session winning streak, as the market extended its celebration of Microsoft's appeals court win in its antitrust fight with the government.

But computer problems late Friday cut short the trading of NASDAQ stocks. The NASDAQ Stock Market, which said trading was cut off due to an error by a Worldcom Inc technician, tried to extend trading by an hour to 5pm, but was unable to restore operations. The problems delayed the compilation of major market indexes.

On the last day of a dismal quarter, one that was marred by more than 600 profit warnings, analysts said the market is beginning to look ahead. With six interest rate cuts this year -- the latest delivered Wednesday -- investors believe business could indeed turn around in the second half of 2001.

"We are seeing signs that the economy is stabilizing, and that is great news. And what we are seeing vis-a-vis Microsoft is that the current [presidential] administration is pro business, and that's good," said Arthur Hogan, chief market analyst at Jefferies & Co. "That combination of news is going to spark a summer rally."

The NASDAQ composite rose 35.08, or 1.6 percent, to 2,160.54, having traded higher every day this week. For the week, the NASDAQ gained 125.70, an increase of 6.2 percent.

The Dow Jones industrial average fell 63.81, or 0.6 percent, to 10,502.40, hurt mostly by fears that the merger General Electric and Honeywell is dead. But the Dow lost 102.19, or 1.0 percent, for the week.

The Standard & Poor's 500 index on Friday slipped 1.82 to 1,224.38. It ended the week essentially unchanged, off 0.97, or 0.1 percent.

The week-long tech rally owed itself to an improving outlook for the economy, analysts said. The fact that blue chips traded lower Friday was also encouraging, because it could be a sign that investors were favoring battered tech shares over relatively safer stocks such as pharmaceuticals and financial companies.

Among the safer stocks to lose ground on Friday were Merck, down US$1.09 at US$63.91, and JP Morgan Chase, which fell US$0.53 to US$44.47.

"People are looking around for bargains, and that's where they are, because [technology] is where most of the decimation took place," said Larry Wachtel, market analyst at Prudential Securities.

Technology stocks also continued to benefit by association with Microsoft, which itself rose US$0.26 to US$73. A federal appeals court on Thursday reversed a lower court ruling ordering the breakup of the company. Microsoft, a Dow industrial, slipped US$0.93 to US$71.81.

Tech advancers included PMC-Sierra, which rose US$1.92 to US$31.07, and Dow stock Hewlett-Packard, up US$1.35 at US$28.60.

Much of the Dow's loss was could be attributed to Honeywell, its biggest loser. Honeywell tumbled US$3.30 to US$34.90 after proposing to reduce the price of GE's takeover offer by more than US$1 billion and to sell off units worth US$2.1 billion to win the necessary approval from the European Union.

GE's CEO Jack Welch rejected the proposal, saying it makes no sense for shareholders and that it still falls short of what EU regulators are seeking. GE, also a Dow industrial, eked out a small gain, up US$0.13 to US$49.

The second quarter was especially rocky, marked by a big April-May rally and subsequent sell-off as hundreds of companies issued profit warnings. Still, the major indexes each posted sizeable quarterly gains.