The Nasdaq enjoyed huge gains yesterday while blue chips soared to their fifth-highest single-day jump, finishing 32 percent higher than its 52-week low of April 4.
The gains came as the blue-chips posted their fifth-biggest point rise ever – but the indices rose for different reasons.
While blue chips rose across the board yesterday, market sources said those were predicated on the latest cut in borrowing rates by the Fed’s Alan Greenspan.
But the easy money the Fed has made available isn’t expected to dig techs out of their earnings recession too soon.
“Are companies going to spend with these lower rates, given the fact that they have all new stuff?” said Luke Mazur, chief investment officer for Highmark Capital Management Inc., regarding firms huge technology layouts last year.
Michael Davey, tech analyst with Investec Ernst & Co agrees.
“Just because the money is available doesn’t mean they are going to buy,” Davey said.
Tech stocks can’t dig out until inventories are reduced.
And that only happens when companies buy their products, says Highmark’s Mazur.
However, Mazur also notes that the tech cycle is pretty short – maybe two or three years – so he sees a more likely stabilization for techs no sooner than 2002.
“It was a nice rally,” Mazur said, “but we have more work to do.”