Sun Sets on Tech Rally
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The Nasdaq paced a strong stock market rally Thursday with a gain of nearly 3%, but Sun Microsystems provided fresh evidence of the headwinds facing technology companies after the close.
Sun (NASDAQ: JAVA) shares fell 15% in after-hours trading after the company reported a breakeven quarter and a slight year-over-year sales decline to $3.266 billion; Wall Street analysts had expected a healthy profit and 3% sales growth.
"The U.S. economy presented Sun with significant challenges in the third quarter, masking our progress in developing nations and economies across the world," CEO Jonathan Schwartz said in a statement.
Sun also said it will cut as much as another 2,500 jobs.
Sun's results underscored the dilemma facing investors: stocks have risen significantly in recent weeks on hopes of an economic turnaround, but so far economic data suggest that the downturn has merely stabilized. The debate will be renewed on Friday, when the government issues its monthly jobs report; analysts believe the economy lost another 75,000 jobs in April.
A day after losing ground on uncertainty over the Fed's latest interest rate policy statement, stocks rocketed on better than expected personal income and spending data and a rising dollar and falling commodities.
The chip sector notched a 4% gain, with Intel (NASDAQ: INTC), AMD (NYSE: AMD) and Applied Materials (NASDAQ: AMAT) up 4.5% each on a Semiconductor Industry Association report that said sales rose 3.4% sequentially in March.
Microsoft (NASDAQ: MSFT) rose 3% and Yahoo (NASDAQ: YHOO) fell 2% after a Microsoft board meeting failed to bring a higher offer for Yahoo.
Cisco (NASDAQ: CSCO), Oracle (NASDAQ: ORCL) and Research in Motion (NASDAQ: RIMM) gained more than 4% each.
Symantec (NASDAQ: SYMC), Comcast (NASDAQ: CMCSA), Amkor (NASDAQ: AMKR), PC Connection (NASDAQ: PCCC), Comsys (NASDAQ: CITP) and O2 Micro (NASDAQ: OIIM) all surged on their quarterly results.
JDS Uniphase (NASDAQ: JDSU) fell 16% on a disappointing outlook, and Network Equipment (NYSE: NWK) and Micros Systems (NASDAQ: MCRS) were other earnings decliners.
NetManage (NASDAQ: NETM) soared 67% on a buyout offer from Micro Focus.
The Nasdaq soared 68 to 2480, the S&P surged 24 to 1409, and the Dow rose 189 to 13,010. Volume declined to 4.45 billion shares on the NYSE, but rose to 2.36 billion on the Nasdaq. Advancers led by a 23-10 margin on the NYSE, and 19-9 on the Nasdaq. Upside volume was 76% on the NYSE, and 81% on the Nasdaq. New highs-new lows were 72-77 on the NYSE, and 68-87 on the Nasdaq.