By Mike Tarsala, CBS.MarketWatch.com
NEW YORK (CBS.MW) -- Tech stocks closed in positive territory Monday after investors spent much of the morning fretting over cautious comments by Cisco Systems chief John Chambers.
The Nasdaq Composite rose 56.68 points, or 2 percent, to 2,837.98 while the Nasdaq 100 moved up an even healthier 2.4 percent. The Pacific Stock Exchange Technology Index /zigman2/quotes/210598455/delayed PSE +0.18% gained 1.9 percent.
In the wake of Chambers' cautionary statements and a wide-held belief that a heftier half-point interest rate cut is already factored into the price of tech shares, some analysts were hard-pressed to come up with a solid reason why stocks made gains.
Indeed, some said investors may be ignoring recession threats.
"There hasn't been a lot of fundamental news," said Jim Grefenstette, portfolio manager with Federated Investors, who oversees about $2.4 billion in fund assets. "For reasons that are inexplicable, the market looks willing to look past this chasm of death that awaits us over the next couple of quarters," he said.
Chambers, speaking at the World Economic Forum in Davos, Switzerland, said Cisco /zigman2/quotes/209509471/composite CSCO +0.80% is being squeezed this quarter by the growing number of telecom customers that are cutting back on the budgets for Cisco's networking equipment.
Following Chambers' remarks, Lehman Bros. cut its price and earnings targets on Cisco's stock. Cisco shares closed at $37.19, down 3 percent.
Chip stocks helped to boost the market, although some communications chip companies proved sluggish. Cisco chip suppliers PMC Sierra , Vitesse Semiconductor , and Sanmina Corp. /zigman2/quotes/207312436/composite SANM +0.74% all lost some ground.
Leading chip company Intel /zigman2/quotes/203649727/composite INTC +0.69% helped to turn the market around in the second half of trading, rising 3 percent to close at $37.06. Texas Instruments /zigman2/quotes/202237907/composite TXN -0.47% , shares helped with a 6 percent gain to $43.95, while Motorola , shares helped with a 2 percent gain.
Computer hardware was the strongest sector, as investors embraced shares of Dell /zigman2/quotes/203822527/composite DELL 0.00% and Compaq Computer , up 7 percent and 5 percent, respectively. Hewlett-Packard, which is expected to post earnings Feb. 1, gained 9 percent to $37.53.
Internet stocks also rose, as the Goldman Internet Index shot up 3.8 percent, as Yahoo gained more than $2 to $39.88 while EBay /zigman2/quotes/204653455/composite EBAY +1.64% and America Online also posted sgains.
Ariba shares trailed off 4 percent after the procurement software maker agreed to buy competitor Agile Software for $2.6 billion. Ariba will pay about a 26 percent premium for the company. The acquisition is expected to be completed in the third quarter of Ariba's fiscal year. Shares lost $1.53 to $38.38, while Agile shares rose $7.56, or 18 percent, to $50.38.