Markets Rally on Interest Rate Optimism and Apple's Shares Gain Ground

Tech stocks kicked into rally mode today, helped by encouraging economic data from last week. However, downgrades in the Internet and semiconductor sectors kept volume low and the gains moderate.

There is a consensus among investors that the Federal Reserve probably wonit raise rates later this month, because the economy is beginning to slow, causing the recent stock market rally. The Nasdaq is up 10% since last Wednesday. Of course, a slowing economy means that earnings are peaking for many sectors, including possibly the hot semiconductor sector. Many analysts expect stocks to continue trading sideways or within their range.

Meanwhile, there is no slowing of initial public offerings (IPOs.) Last week there were 28 IPOs, four or 14% of which "broke" or closed below their opening price -- thatis up from the 11% "breaking" rate for the year as a whole. Many IPOs are being delayed, including 8 from last week, while 6 IPOs scheduled for last week were pulled altogether. This week there are 37 IPOs scheduled. The high number of IPOs combined with recent outflows from mutual funds tends to provide too much supply for the demand in shares of tech stock equity.

Tomorrow Cisco (CSCO) reports earnings after the bell. The company is expected to beat earnings.

Apple climbed 9/16 or 1.19% to close at 47 15/16 on volume of 3.3 million shares.

The Nasdaq rallied 75 points (2.00%) to close just 7 points shy of the dayis high at 3862 on volume of 1.3 billion shares.

The Philadelphia Semiconductor Index (.SOX) was up 3.5% today, but is still down almost 24% since July 17th. US Bancorp Piper Jaffray downgraded the whole sector citing slowing PC growth next quarter and downgraded Advanced Micro Devices (AMD) to a neutral from a buy. Piper Jaffray also anticipates a flash memory over supply and decreased sales of mobile phone handsets.

The Goldman Sach Computer Hardware Index climbed by almost 3.0%, led by Sun Microsystems (SUN).

The Dow climbed 99 points (0.92%) to close at 10867 on volume of 854 million shares.

The S&P 500 gained 16.39 points (1.12%) to close at 11479.32.

In Apple related businesses: Akamai slid 11/16 to 76 11/16 After the Motley Fool offered a bullish analysis of the stock. Adobe climbed 5 5/16 to 122 1/16.

Earthlink climbed 13/16 to 11 3/4. The Internet service provider announced it was expanding its business-grade DSL service to 10 new cities from the current four.

Motorola gained 9/16 to 36 dollars. IBM climbed 7/16 to 116 5/16.

Appleis competitors: Dell gained 1 5/16 to 42 11/16 ahead of 3Q earnings announcement later this week. Gateway was lower by 2 1/4 to 59 3/4. Intel climbed 3/8 to 62 15/16. Hewlett Packard climbed 3 9/16 to 115 5/16.

Shares of Microsoft rose 7/8 to 70 dollars. (BNBN) announced it will deliver digital downloadable books in a deal with Microsoft.

Compaq gained a dollar to 30 bucks a share. CBS Market Watch reported:

"Analyst Andrew Neff at Bear Stearns says its a "good time to buy" the stock, as the "turnaround is beginning to gel." He says the company is currently in the second phase, or stabilization phase, of its turnaround. "There are enormous gains to be had before the growth phase, or the third phase, of the turnaround." He noted that Apple Computer, IBM and Gateway were also rebounding."

In economic news: The Wall Street Journal noted that Fridayis employment report, "showed a pronounced deceleration in private sector jobs, which many economists took as a sign of the long-awaited economic slowdown...While the data in the report arenit seasonally adjusted, the level of layoffs in July was 17% higher than in July 1999, the first time in 10 months that there was a year-to-year increase."

Meanwhile, this is another week of critical economic data. Perhaps, the most important is the strong 4.2% jump in Q2 productivity expected to be announced tomorrow morning, up from 2.4% in Q1. Productivity increases reduce inflation. Mr. Greenspan believes most of the recent productivity gains are sustainable. Strong productivity data gains could spur the market to rally again tomorrow.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our Apple Stock Watch Special Report.