Microsoft, Intel Lead Tech Stock Rally

Tech stocks posted solid gains Monday despite an industry report detailing falling chip sales.

The Semiconductor Industry Association reported that chip sales plunged 22% in December, but with fourth-quarter earnings reports largely out of the way, investors viewed the report as old news and snapped up shares of chipmakers like Intel (NASDAQ: INTC), Texas Instruments (NYSE: TXN) and Nvidia (NASDAQ: NVDA).

Applied Materials (NASDAQ: AMAT) rose slightly despite saying it will modestly miss estimates when it reports its quarterly results next week.

Under the circumstances, AMAT’s guidance was seen as good news. Also boosting tech stocks was optimism that a massive government stimulus plan will benefit the sector and that valuations are cheap.

Microsoft (NASDAQ: MSFT) gained more than 4%, and Sun (NASDAQ: JAVA), Yahoo (NASDAQ: YHOO) and Amazon (NASDAQ: AMZN) also posted solid gains. It was one year ago that Microsoft made its failed play for Yahoo.

ADC Telecom (NASDAQ: ADCT) plunged 36% after slashing guidance.

The big news for the tech sector this week will be Cisco’s (NASDAQ: CSCO) earnings report due out Wednesday night, while the government’s monthly jobs report on Friday will also be big news for traders.

Blue chip stocks slumped Monday despite a better than expected manufacturing report, as worries about the fate of the stimulus package and a new bank bailout plan weighed on the market.

After the close, SanDisk (NASDAQ: SNDK) slumped on its results.

The Nasdaq rose 18 to 1494, the S&P 500 lost a fraction to 825, and the Dow fell 64 to 7936. Volume declined to 5.77 billion shares on the NYSE, and 2.03 billion on the Nasdaq. Decliners led by a 21-16 margin on the NYSE, while gainers led 14-12 on the Nasdaq. Upside volume was 41% on the NYSE, and 63% on the Nasdaq. New highs-new lows were 9-193 on the NYSE, and 8-164 on the Nasdaq.

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