Markets: News  

Tech stocks rise again, led by chips

SAN FRANCISCO (MarketWatch) -- Tech stocks kept up their winning streak on Tuesday, as gains in the semiconductor sector stood out after Goldman Sachs issued several upgrades.

Tech benchmarks outpaced gains in the broader market, where the S&P 500 index picked up nearly 1% in midday trading. The Nasdaq Composite Index (COMP) rose almost 26 points, or nearly 1% to close at 3,015, while the Morgan Stanley High Tech 35 Index (MSH) rose 1.3%.

Chips saw the strongest gains, with the Philadelphia Semiconductor Index (SOX) climbing 2%, with sector leader Intel Corp. (INTC) gaining almost 1%, to close at $26.50. Goldman Sachs lifted its rating on the group to "attractive" from neutral, and predicted "40% upside" for the stocks it rates as a buy.

"We believe that supply is healthy, Street estimates have been reduced by the 5-10% that we suggested was needed in our 2Q preview that we published July 1st, and stocks are pricing in weaker demand," the brokerage wrote in its report.

Goldman also upgraded Freescale Semiconductor Ltd. (FSL) , Applied Materials Inc. (AMAT) and LSI Corp. (LSI) among individual stocks. Freescale's shares rallied more than 8%, while Applied Materials added more than 5% and LSI's shares climbed almost 4%.

Flextronics International Ltd. (FLEX) shares rose 6.3% after another Goldman analyst upgraded the contract electronics manufacturer to a buy rating. Rival Sanmina-SCI Corp. (SANM) were at their breakeven level after the broker cut its rating on the company to sell.

In other ratings moves, NetApp Inc. (NTAP) shares rose more than 4%, to $33.45, as UBS analyst Steve Milunovich initiated coverage on the storage-technology company with a buy rating and $45-a-share target price. In a research note, Milunovich called NetApp "the most-focused storage vendor" and said the company's approach to unified storage has helped NetApp gain market share in recent years.

"Keys to [NetApp's] success will include leveraging its new clustering capability into larger clouds, delivering product innovation and its marketing reach," Milunovich said.

Milunovich also kicked off coverage of Dell Inc. (DELL) with a neutral rating and rated Hewlett-Packard Co. (HPQ) as a sell. Dell shares were up almost 3%, while H-P rose 1.4% to close at $18.96.

"We expect the stock to continue underperforming until investors are convinced H-P is not in secular decline," Milunovich wote.

A standout decliner Tuesday was Leap Wireless International Inc. (LEAP) as the pre-paid mobile-phone carrier's stock fell more than 18% to close at $4.49.

Late Monday, the company reported second-quarter results that fell short of analysts' forecasts. Analysts at Robert W. Baird and Hudson Square Research cut their ratings on Leap's shares, pushing the stock hit an all-time low. Read The Ratings Game on Leap's troubles.