Investors with a sense of recent history experienced a twinge of deja vu in Wednesday’s market action.
Big-name technology stocks rallied handsomely. The Nasdaq 100 index, a proxy for large-capitalization tech stocks, gained more than 4 percent in heavy trading to its highest daily close since mid-June.
Big-name tech stocks have done well since mid-October, in an advance strikingly similar to an autumn rally last year.
But last year’s move, which represented a rebound from the Sept. 11 terrorist attacks, faded. Tech stocks resumed their decline in early 2002.
Last year, the tech rally began immediately after the post-Sept. 11 sell-off. The Nasdaq 100 index soared 57 percent through early January, double the pace of the broad market rally of that period.
This fall, the tech rally began after the market slump in early October. So far, the Nasdaq 100 has advanced 35 percent from its October low.
Again, the tech rally is running at double the pace of the broad market, with the Standard & Poor’s 500 index up 19 percent in the same period.
Are tech investors in for another New Year hangover?
Roger Ibbotson, professor of finance at Yale University and head of Chicago-based market-data service Ibbotson Associates, told me last month that volatile stocks, which include technology stocks, tend to lead a market rebound, as investors sense better times ahead.
Building on that evidence, Jack Ablin, chief investment officer in the personal investment management group of Harris Bank, said the recent tech rally is encouraging not only for the tech sector but for the broad market.
“Investors in growth-oriented tech stocks need to project further out to justify the case for owning their stocks,” he said. “So, if there’s a light at the end of the tunnel, we’re going to see it in those longer-duration stocks.”
Patricia Van Kampen, managing director for equities at Milwaukee-based Mason Street Advisors, a unit of Northwestern Mutual, is skeptical.
Stock-fund managers “are trying to find stocks that will outperform the market in the short term, so they’re going for aggressive growth stocks before year-end,” she said.
“This could be the case for a number of weeks yet. [But] many of these companies do not have a lot of great fundamentals.”
The chart of big-name tech stocks from a year ago supports Van Kampen’s theory of end-of-year window dressing by fund managers.
But Ablin said successful fund managers who’ve outperformed market benchmarks this year have no reason to make risky end-of year bets.
Wednesday’s action: Stocks advanced broadly in a rally led by technology shares.
The Dow Jones industrial average rose 148.23 points, or 1.7 percent, to 8623.01. International Business Machines led the Dow gainers. IBM shares gained $3.24, to $81.61.
After the close of regular New York Stock Exchange trading, shares of Hewlett-Packard, another Dow component, jumped. The company posted better-than-expected fiscal fourth-quarter results and expressed confidence about meeting the revenue target for its first fiscal quarter.
The broader Standard & Poor’s 500 index rose 17.41, or 1.9 percent, to 914.15; the Nasdaq composite index gained 44.84, or 3.3 percent, to 1419.35.
Among other big-name tech stocks on the Nasdaq most-active list, Cisco Systems rose 72 cents, to $14.38; Intel rose $1.00, to $19.15; Sun Microsystems added 4 cents, to $3.62; Oracle rose 37 cents, to $10.74; and Microsoft gained $1.76, to $56.62.
NYSE trading volume reached 1.50 billion shares. Nasdaq trading volume totaled 1.76 billion shares. Winners outnumbered losers by more than a 2-1 ratio among NYSE and Nasdaq stocks.
Local news: Zebra Technologies, Vernon Hills, crossed the $2 billion mark in its stock market capitalization. The maker of bar-coding systems hit a nearly three-year high in Wednesday’s session and closed up $2.96, to $64.80. The stock market value of the company has increased tenfold since it went public in 1991, a company spokeswoman said.
– Chicago-based auto parts-maker BorgWarner dropped $1.51, to $44.09. A Banc of America Securities analyst removed his “buy” rating on four auto parts suppliers.
