Chips Lead The Way Higher

Stronger than expected chip sales and positive analyst comments about chip equipment stocks gave the market a much-needed boost on Monday.

The Semiconductor Industry Association said chip sales jumped 4% in August, the sixth straight monthly gain, led by demand in the consumer, computer and wireless sectors.

Prudential said channel checks indicate that sales at Novellus are in line with or better than expectations, and that the fourth quarter is shaping up to be even better.

And JP Morgan said chip equipment stocks are the most oversold they’ve been since the March lows, and that concerns about fourth-quarter orders are overblown.

Together, those comments settled some jittery nerves ahead of October’s earnings reports, and sent chip stocks to a 2% gain on the day. Intel and Novellus each gained 4%.

The broader market also got a boost from a report that personal spending remained strong in August, even as personal income grew less than expected.

The Nasdaq surged 32 to 1824, the S&P 500 climbed 9 to 1006, and the Dow rose 67 to 9380. Volume declined to 1.32 billion shares on the NYSE, and 1.68 billion on the Nasdaq. Advancers led 22-9 on the NYSE, and 19-12 on the Nasdaq. Upside volume was 72% on the NYSE, and 76% on the Nasdaq. New highs-new lows were 74-14 on the NYSE, and 102-10 on the Nasdaq.

After the close, Sun fell on a warning and $1 billion charge.

During the day, Nokia rose 4% on a positive Barron’s cover story.

Applied Micro gained 6.4% after buying IBM’s PowerPRS unit.

eResearch surged 7.5% after raising estimates.

VeriSign climbed 4.5% on a Department of Defense deal.

NVIDIA fell 5.4% on a Merrill Lynch Sell rating based on competitive weakness.

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