NEW YORK -- U.S. stocks rose yesterday as technology shares rallied, sending the Nasdaq composite index to its second record high this week, after Applied Materials Inc. and Hewlett-Packard Co. posted better-than-expected earnings.
Applied Materials announced last night that demand for computer chips helped it to more than double its earnings last quarter. The company's shares, among the most actively traded on U.S. exchanges, surged $14.50, to $118.25. And Hewlett-Packard's shares soared $4.50, to $82.375, after the computer maker reported earnings rose 66 percent last quarter.
"Techs will remain the leaders of the stock market for the time being, because the performances are there with these good earnings," said Robert Freedman, chief investment officer at John Hancock Mutual Funds in Boston.
The Dow Jones industrial average slipped lower, closing down 1.76 at 4,639.08. Declines in consumer-product and exporter shares blunted gains among economically sensitive stocks.
The gains by technology stocks, though, lifted the Nasdaq composite index to its 40th record high this year. The technology-laden index jumped 13.38 to 1,025.75, surpassing the latest high of 1,012.44 set on Monday. Yesterday's point advance was the largest since July 25.
And in the broader market, the Standard & Poor's 500 index rose 1.40, to 559.97. Oil, beverage and drug shares declined, while shares of computer chip, computer and retail issues advanced.
Some 1,389 shares rose while 899 declined on the New York Stock Exchange.
The Russell 2000 index of small companies also set another all-time high, rising 1.68 to reach 302.35. The American Stock Exchange market value index was up 1.95, to 526.47, and the Wilshire 5000 added 24.61 to reach 5,568.55.
Some 390.52 million shares changed hands on the New York Stock Exchange, the first time trading has surpassed the six-month daily average of 340.93 million since Aug. 4.
Surprisingly good earnings at semiconductor-equipment maker Applied Materials and computer company Hewlett-Packard rekindled optimism the technology group's profits will sprint to new highs even though the economy slowed last quarter.
Expectations that Dell Computer Corp. will report second-quarter earnings about doubled from last year caused the computer company's shares to add $1.125, to reach $73.
And the enthusiasm for Internet products set off by the initial public offering of Internet software maker Netscape Communications Corp. continued. Sun Microsystems Inc., which analysts said sells the most computers used to deliver information through the Internet, jumped $3.375, to $57.25. Netscape rose $1 to $55.625.
Shares of VLSI Technology Inc. rose 14.3 percent to $34 after the company said it will increase its semiconductor wafer production capacity by 50 percent in 1996.
Intel Corp. climbed $1.25, to $66.75, and Micron Technology Inc. shares advanced $2.625, to $72.25.
Cisco Systems Inc. shares rose $3.375, to $62.125. Tomorrow, the maker of equipment that links groups of computers together will report earnings results for its fiscal fourth quarter ended July 31.
Compaq Computer Corp. bucked the trend. After it cut prices on its commercial and desktop computers, the Houston-based company saw its shares close down 50 cents, at $53.625, after falling as much as $2.125 earlier.
Besides technology stocks, shares of companies that do best during an economic expansion gained after a report showing BTC that starts of new housing construction jumped a larger-than-expected 6.7 percent confirmed for some the economy is rebounding from last quarter's slowdown.
At the same time, investors sold shares of consumer-product companies like Coca-Cola Co. that have more consistent earnings and are a safe haven when the economy slows.