FINANCIAL MARKETS : Tech Shares Lead Market Higher

An afternoon surge in technology stocks lifted most market indexes Tuesday, but winners and losers overall ended almost evenly matched on Wall Street.

Meanwhile, bond yields continued to sink, helped by some weak economic data and by the Treasury’s announcement that it will scale back short-term borrowing because of political turmoil.

In the stock market, the Dow Jones industrial average added 11.56 points to 4,795.94, but the blue-chip Dow took a back seat to the action in the Nasdaq market.

The Nasdaq composite index, heavy with tech issues, soared 17.31 points, or 1.7%, to 1,035.44 in a dramatic afternoon rally.

Tech stocks began the day on a strong note, responding in part to healthy quarterly earnings reports issued late Monday by Sun Microsystems and Intel.

By late afternoon, a sudden turnaround in IBM shares--which had not participated in tech shares’ early gains--signaled broad buying in the entire group.

IBM’s quarterly earnings report, initially not well received by investors, was offset by bullish earnings gains reported by such tech companies as Cypress Semiconductor, Novellus Systems and Integrated Device Technology.

After the market closed, Microsoft also reported results that beat expectations.

Despite concerns about the sluggish U.S. economy, “earnings are working out just fine,� said Timothy Morris, investment strategist at Bessemer Trust in New York.

The flurry of strong earnings reports from tech firms may have caught some bearish traders by surprise. After the sharp drop in tech issues early last week, more traders may have “shorted� tech shares, selling borrowed shares in a bet on a further decline.

When the stocks began to rally briskly Tuesday, some shorts may have rushed to buy the shares to cover their bets, adding more fuel to the rally.

Still, the market overall wasn’t swept up in the tech mania. Winners and losers were tied 11 to 11 on the New York Stock Exchange. Trading volume was moderate.

Some analysts were disappointed that stocks drew little strength from another bond market rally.

A new survey from Johnson Redbook Service said major retailers say sales so far this month are lagging last month’s pace by 1.9%. Although other recent reports show the economy is in recovery mode from its spring slowdown, the evidence still suggests growth is weak enough to allow the Federal Reserve Board to cut short-term interest rates before year’s end, many experts say.

The yield on the 30-year Treasury bond, a barometer of long-term rate trends, dropped to a 20-month low of 6.28% from 6.30% on Monday.

And short-term T-bill yields eased after the Treasury said it will slash the size of its regular weekly auction next week by $7 billion because of concern about congressional failure to raise the debt ceiling.

Among Tuesday’s highlights:

* In the tech sector, IBM surged 2 7/8 to 96 7/8, Novellus jumped 7 to 62, Integrated Device rose 3 1/8 to 23 1/4, Cypress surged 3 3/4 to 36, Sun Microsystems leaped 9 1/4 to 67 7/8 and Intel rose 2 3/8 to 65 1/2.

Other tech winners included Compaq, up 3 to 51 3/8; Hewlett-Packard, up 3 7/8 to 90 1/4; Dell, up 5 1/2 to 89 3/4; Cabletron Systems, up 4 1/2 to 72 1/2; Micron Technology, up 5 1/2 to 72 1/2, and Microsoft, which gained 4 3/8 to 91 1/8 ahead of its earnings report, issued after the market closed.

* Outside the tech group, strong earnings reports pushed Eastman Kodak up 2 1/2 to 59 5/8, Wells Fargo up 6 5/8 to 213 5/8, GE up 1 1/8 to 64, B.F. Goodrich up 2 1/2 to 65 1/2 and Parker-Hannifin up 1 1/8 to 33 5/8.

* Stocks trading lower on quarterly earnings reports included Mattel, off 7/8 to 27 3/8; Cummins Engine, down 7/8 to 35 5/8, and Caterpillar, which lost 1 3/8 to 54 1/8.

In currency trading, the dollar slipped in New York to 1.4135 German marks from 1.4240 on Monday, and to 100.45 Japanese yen, down from 100.57.

In overseas stock markets, Tokyo’s 225-share Nikkei average ended down 99.84 points at 17,916.60. London’s FTSE-100 index ended up 4.9 points at 3,562.2.

In Mexico, the Bolsa index closed off 20.10 points at 2,305.19 on fresh worries about rising interest rates.

Market Roundup, D8