Want to see a market hungry for some good news? Take a look at what the Nasdaq did on Tuesday. The tech-heavy index climbed by 63.01 points or 3.6 per cent on heavy volume - and all because a couple of companies said they looked into their crystal ball and saw a few rays of sunshine in the not-too-distant future. That was all it took for the buyers to start gobbling up everything they could get their hands on.
According to most market watchers, the big catalysts for the Nasdaq were first-quarter results from chip and equipment makers Texas Instruments and Novellus Systems, released late on Monday. And what did they do that was so great? Well, Texas Instruments had a narrower than expected loss of $38-million (U.S.) or 2 cents a share, compared with the profit of $230-million or 13 cents it had in the same quarter of last year.
It's true that Texas Instruments managed to turn in a loss that was smaller than the one it had in the fourth quarter - $116-million or 7 cents a share - and it made 1 cent a share on an operating basis in the latest quarter. But that hardly seems like anything to cheer about, considering its revenues rose by a miniscule $41-million or 2 per cent over the previous quarter. Any increase is worth celebrating, it seems.
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TI said that its backlog of orders grew by 20 per cent to $1.9-billion, boosting its key "book-to-bill" ratio. The company also said it expects revenue to grow by 10 per cent in the second quarter, and that it sees improvement in profit margins. Those two comments were enough to get hearts beating about the prospects for the chip sector in general, combined with what were seen as similarly positive results from Novellus.
Novellus, also a chip maker, said that its revenue for the first quarter fell by 63 per cent compared with the same quarter the previous year, and its shipments fell to $147-million from $162-million in the fourth quarter. It had a loss of $3.3-million or 2 cents a share, compared with a profit of $82-million or 55 cents a share in the same quarter of last year. But all of that was ignored by investors, who chose to focus on the fact that Novellus said its order book was starting to fatten up.
In other words, less than stellar results - and no real sign of better performance to come, apart from more orders and a really good feeling about the future. And that was enough to push chip maker and key Dow benchmark Intel up by more than 3.5 per cent, boosting its market value by about $6.5-billion or so. That helped push the Dow up, and also lit a fire under the rest of the tech sector. Dozens of stocks climbed by 5 per cent or more, including many that had nothing to do with chip-making.
Applied Digital, a small company which specializes in integrating computer and telephone networks, climbed by 26 per cent on almost 10 times its normal daily trading volume - but plenty of larger players also got a boost for no apparent reason. Broadcom rose by more than 8 per cent, Sun Microsystems climbed by more than 6 per cent, as did software makers Oracle and Siebel Systems, while Dell Computer rose by over 5 per cent.
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Some other market-watchers pointed to results from Sprint Corp. as a catalyst for the Nasdaq. And what did the telecom company say? Well, it made a profit of $140-million on its combined long-distance and wireless operations, which was better than a loss of $76-million in the same quarter last year. And the profit at its core telecom group rose to a better-than-expected 32 cents a share. Of course, revenue also fell by 8 per cent, and revenue in the voice and data unit of that core group was also down.
Still, the results were enough to push Sprint's stock up by 18 per cent, and they also helped boost telecom players such as WorldCom - which rose by more than 15 per cent - and network-equipment makers JDS Uniphase and Juniper Networks; even Nortel Networks rose by over 8 per cent. Wireless telecom player Nextel saw its stock jump by 25 per cent, even though the telecom company's debt is hovering close to "junk" status amid concerns that it can't generate enough cash flow to fund its growth.
And that's all it takes for a market rally, apparently. Who said irrational exuberance was dead?
E-mail Mathew Ingram at mingram@globeandmail.com
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