Big Blue Rises, But Not Much Else

IBM bucked a down market on Monday, rising 2% on a glowing cover story in Barron’s.

IBM could be a big beneficiary of an expected recovery in corporate computer spending next year, the article said, and Steven Milunovich of Merrill Lynch told Barron’s that Big Blue has been gaining market share in servers, even against Dell .

If anything should worry bulls here, it’s a lack of bearish voices and sentiment. Amid positive comments by Merrill Lynch and JP Morgan on chip stocks and SG Cowen on networking, one contrarian report stood out.

First Albany said investors should consider trimming exposure to chip and chip equipment stocks. The firm said investors should reduce exposure to handset components companies on rallies, and shift money to semiconductor capital equipment stocks on pullbacks, while lightening up on Applied Materials after its strong run-up. First Albany said handset inventories appear to be growing, and chip stocks in general would be very vulnerable to any negative fundamental news.

The report led to a 3% decline in chip stocks, and the broader market continued to get hit with profit taking amid worries about higher interest rates and slower growth.

Applied Materials and Dell lost 3% each ahead of their earnings reports on Wednesday and Thursday, respectively.

The Nasdaq fell 29 to 1941, the S&P 500 lost 6 to 1047, and the Dow declined 53 to 9756. Volume declined to 1.21 billion shares on the NYSE, and 1.76 billion on the Nasdaq. Decliners led 21-11 on the NYSE, and 21-10 on the Nasdaq. Downside volume was 72% on the NYSE, and 73% on the Nasdaq. New highs-new lows were 216-12 on the NYSE, and 289-18 on the Nasdaq.

After the close, beat estimates.

During the day, Adobe fell 3.6% on an acquisition and downgrade.

palmOne fell 4% on reports of weak PDA sales.

VerticalNet surged 29% on high volume, but no apparent news. The company reports results Thursday.

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