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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 gains in Cisco (Nasdaq: CSCO), JDS Uniphase (Nasdaq: JDSU), Oracle (Nasdaq: ORCL) (Nasdaq: ORCL) and Sun Microsystems (Nasdaq: SUNW).
Despite a pessmistic outlook for the short term, the Fed chairman was upbeat in his assessment of the economy.
"If the forces contributing to long-term productivity growth remain intact, the degree of retrenchment will presumably be limited," Greenspan said.
"Prospects for high productivity growth should, with time, bolster both consumption and investment demand," Greenspan added. "Before long in this scenario, excess inventories would be run off to desired levels."
Greenspan's remarks provided hope for the battered technology sector, which has been hit hard by a slump in demand.
"Although prospective long-term returns on new high-tech investment may change little, increased uncertainty can induce a higher discount of those returns and, hence, a reduced willingness to commit liquid resources to illiquid fixed investments," the chairman said.
"Such a process presumably is now underway and arguably may take some time to run its course," Greenspan said. "It is not that underlying demand for Internet, networking, and communications services has become less keen."
Rather, he said, "some suppliers seem to have reacted late to accelerating demand, have overcompensated in response, and then have been forced to retrench -- a not-unusual occurrence in business decision making."
MarchFIRST Falls
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 $37.09 per share for the fourth quarter ended December 31st, and saying that it expects a loss 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 reporting stronger-than-expected quarterly earnings.
The E-Commerce Times Index of 10 prominent e-tailers was up 2.43 percent on the day, paced by gains 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 its
chairman and its chief financial officer
resigned, while Drugstore.com gained
the stock gained 19 cents to reach $1.50, on the news
that its rival PlanetRX was
closing and referring customers to the company.
