Wall Street Beat: Tech fuels rally, then tapers off

Positive news from bellwether IT vendors and Internet companies boosted the Nasdaq Composite Index to its highest point in four years this week, as technology investors were hit with a stream of financial reports and market surveys.

Following a surprisingly strong report from IBM on Monday, as well as record earnings from Apple Computer  and Advanced Micro Devices  last week, the Nasdaq index (ticker symbol: COMPX) closed Wednesday at 2188.57, its highest level since June 2001. The Nasdaq index, weighted heavily with tech stocks, is seen as an indicator of confidence in IT.

Not all market-related news this week was positive, however. The Nasdaq index slumped by 9.97 points to close at 2178.60 Thursday, in a drop some analysts attributed partly to news of more terrorist-linked explosions in London early in the day, and partly to moves on the part of traders to sell shares and cash in on the market rally. Some leading tech companies, in addition, reported mixed results.

Helping to set the stage for the week, a trend toward notebook purchasing coupled with a drop in PC prices sparked a welcome surprise in reports about the global computer market: On Monday, IDC said second-quarter PC shipments grew 16.6 percent, while Gartner Inc. estimated growth to be 14.8 percent. Analysts warned the uptick will not last, but both reports were at least several points above forecasts made as recently as May.

On Thursday, Microsoft tipped its hat to sales of Windows-based notebooks and servers as it reported, after the market closed, that profit for the quarter ending in June came to $0.34 per share, up from $0.25 per share a year earlier. (Some of that boost was due to one-time tax benefits.) There were some shadows cast in the report, however. The company's revenue figure came in at $10.16 billion, though analysts polled by Thomson First Call had expected $10.17 billion. One potentially worrying sign was that the company said it expects earnings per share for the third quarter to be $0.29 to 0.31, whereas analysts had the figure pegged to $0.34. Company shares (MSFT) closed at $26.44, up by $0.25, but started to slip in after-market trading as news of the company's third-quarter guidance came out.

Meanwhile, Google  on Thursday said its torrid growth continued in the second quarter with earnings per share of $1.19, compared to $0.30 one year earlier. In advance of the announcement, which came after the market closed, traders boosted company shares (GOOG) by $1.68, to close at $313.68, their highest point yet. Google has now outstripped media giant Time Warner  in terms of market capitalization, and despite its sky-high share price, no analysts polled by First Call recommend a sell of the stock: six advise a "strong buy," 19 counsel a "buy" and eight say to "hold." However, Google's earnings came up short of analyst expectations, pegged by First Call at $1.20, and shares started to slip in after-hours trading.

Another e-commerce stalwart, eBay, on Wednesday polished its star, which had been tarnished during the last several quarters during a string of disappointing reports. For the second quarter it bested expectations for both revenue and profit. The company reported revenue of $1.09 billion, above the consensus expectation of $1.04 billion from analysts polled by First Call. Excluding one-time charges, eBay said earnings per share were $0.22, beating expectations of $0.18. The good news, topped by strong international business, helped boost eBay shares (EBAY) , which Thursday rose by $1.54 to close at $42.09.