Shares of technology issues climbed for the second consecutive day Wednesday, rebounding from the recent drubbing they suffered.
Computer and software stocks soared from the opening bell, taking their cue from the bellwether issues. Compaq Computer Corp. rose $6 for the day, benefiting from an upgrade from SoundView Financial Group, which raised its recommendation on the stock to "buy" from "hold." The only other significant news affecting Compaq was its announcement earlier in the day of a strategic alliance with the Cheyenne division of Computer Associates International Inc. to supply enterprise-level storage management solutions.
Among other high-tech leaders participating in the rally was Microsoft Corp., which got routed on Monday along with most other companies in the sector. But Wednesday was a different story as the company gained 2.75 points. IBM gained 6.875, while Intel Corp. rose 5.75 following a ratings upgrade from Hambrecht & Quist, which upped its fourth-quarter earnings estimate for the chip manufacturer to $1.86 per share from $1.74.
Jeff Miller, managing director of the Provident Investment Council in Pasadena, Calif., said the snap back in the overall sector suggested the strength behind this year's high-tech rally is not yet spent.
"Was what we saw this week a technical rebound or was the recent weakness a technical sell-off? I like to think that the weakness was a technical sell-off," Miller said. "The fundamentals remain strong, and I haven't seen anything to make me change my opinion."
However, with many tech stocks reaching all-time highs and carrying nosebleed-level P/E ratios, Miller said investors are fingering hair triggers just in case of unexpected news.
"Increasingly, the market is going to get more selective next year," Miller said. "We have seen huge runs in large cap companies, and the price strength has simply outpaced the fundamentals of the companies. The smartest thing now, as we get to the end of the year, is not to fight the tape. But by the same token, don't plan on it continuing into 1997."