By
The Associated Press
NEW YORK - While a welcome assessment of the nation's economic health sent blue chip stocks rising yesterday, investors again punished technology issues for their bleak earnings prospects.
A late earnings warning from computer maker Gateway sent tech prices diving even further in after-hours trading. That decline was expected to continue today, repeating a pattern that has become familiar in recent months as a series of high-profile and premium-priced computer and Internet companies announced disheartening results.
The Dow Jones industrial average rose 121.53 to 10,629.11, but the Nasdaq composite index fell 28.05 to 2,706.93. The Nasdaq's decline gave it yet another new low for this year.
The broader Standard & Poor's 500 index advanced 5.82 to 1,341.91.
Gateway's bad news could bring a long-awaited bottom to the Nasdaq, one analyst said.
"Technology stocks are still likely to head lower. We saw irrational exuberance in these tech stocks at their peaks, but we're getting to more rational levels and we are getting a little too oversold," said Chris Dickerson, market analyst for Global Market Strategists in Gainesville, Ga. "We're looking for capitulation and Gateway could give us that capitulation."
The tech selling, Dickerson said, likely won't spread to blue chips, which analysts have likened to a refuge for downtrodden investors.
Despite the decline in tech stocks, investors traded with cautious optimism on new evidence that the nation's economic growth is slowing, analysts said. The Commerce Department said yesterday the gross domestic product grew at an annual rate of 2.4 percent last summer, the slowest rate in four years and a steep decline from the rocketing 5.6 percent registered in the second quarter.
Wall Street considered the report good news because the slowdown could be an incentive for the Federal Reserve to declare at its Dec. 19 meeting that inflation is less of a risk to the economy. That could be a precursor of lower interest rates.
"We're still feeling quite bullish on the market. The Fed likely will go to a more neutral bias, which is what today's GDP figure pointed to," said Eugene G. Mintz, financial markets analyst at Brown Brothers Harriman & Co.
While other recent reports have pointed to a slowing economy, investors have been waiting for a significant drop in the GDP, because it carries more weight with the Fed, analysts said.
The possibility of lower interest rates, Mintz said, would help mitigate some of the damage on Wall Street expected from fourth-quarter earnings disappointments.
''Earnings are going to be mainly weaker than people expected,'' he said, but added that history has shown that ''lower interest rates will overpower disappointing earnings.''
Investors have been selling since September because of lackluster results and worries about inflation, and have been focusing on pricey tech issues that aren't producing the same stellar profits as they did last year.
The technology sector, already punished for its dismal performance, tumbled further after Gateway's profit warning.
Gateway fell 40 cents in extended trading after plunging $10.70, or 34.5 percent, to $20.30 in the regular session. Dell Computer lost another $2.45 in extended dealings after ending the regular session down 63 cents at $21.81.
Microsoft, which fell $1.94 to close at $65.06 in regular trading, gave up $2.06 in after-hours dealings.
Throughout yesterday, investors continued their migration to Old Economy stocks, because their earnings are seen as more predictable.
