Technology stocks had risen at midday Tuesday as Federal Reserve Chairman Alan Greenspan spoke of “downside risks” to the economy, spurring hopes for further interest-rate cuts.
The Nasdaq Composite Index was up 42.76 at 2,532.42 at midday, led by gainsin Cisco (Nasdaq: CSCO), JDS Uniphase (Nasdaq: JDSU), Oracle (Nasdaq: ORCL)and Sun Microsystems (Nasdaq: SUNW).
Despite a pessmistic outlook for the short term, the Fed chairman was upbeat in his assessmentof the economy.
“If the forces contributing to long-term productivity growthremain intact, the degree of retrenchment will presumably be limited,” Greenspan said.
“Prospects for high productivity growth should, with time, bolster bothconsumption and investment demand,” Greenspan added. “Before long in thisscenario, excess inventories would be run off to desired levels.”
Greenspan’s remarks provided hope for the battered technology sector, whichhas been hit hard by a slump in demand.
“Although prospective long-termreturns on new high-tech investment may change little, increased uncertaintycan induce a higher discount of those returns and, hence, a reducedwillingness to commit liquid resources to illiquid fixed investments,” the chairman said.
“Such a process presumably is now underway and arguably may take some timeto run its course,” Greenspan said. “It is not that underlying demandfor Internet, networking, and communications services has become less keen.”
Rather, he said, “some suppliers seem to have reacted late to acceleratingdemand, have overcompensated in response, and then have been forced toretrench — a not-unusual occurrence in business decision making.”
That trend has hurt many technology companies in recent months. On Tuesday,Internet consultant MarchFIRST (Nasdaq: MRCH) became one of the latest to show the symptoms, reporting a net loss of $37.09per share for the fourth quarter ended December 31st, and saying that it expects aloss for the first quarter as well.
MarchFIRST was down 91 cents at $1.59 in early-afternoon trading.
E-Commerce Bumps Up
Among e-commerce stocks Tuesday, business-to-business firm PurchasePro(Nasdaq: PPRO) gained $1.33 to $17.25 by midday after reportingstronger-than-expected quarterly earnings.
The E-Commerce TimesIndex of 10 prominent e-tailers was up 2.43 percent on the day, paced bygains in Travelocity (Nasdaq: TVLY), E*Trade (Nasdaq: EGRP) and eBay(Nasdaq: EBAY).
Buy.com (Nasdaq: BUYX) was up 12 cents at 69 cents, as the e-tailer said itschairman and its chief financial officer resigned, while Drugstore.com gained the stock gained 19 cents to reach $1.50, on the newsthat its rival PlanetRX was closing and referring customers to the company.