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Netflix, Micron lead tech rally

SAN FRANCISCO (MarketWatch) -- Tech stocks rallied Tuesday in an abbreviated trading session ahead of the July 4 holiday, with gains in Netflix and Micron leading the way.

Most stocks in the sector made solid gains as the Nasdaq Composite Index (COMP) added 25 points, or 0.8%, to close at 2,976. The Morgan Stanley High Tech Index (MSH) was up 1.1%, while Philadelphia Semiconductor Index (SOX) picked up 1.4%.

Leading the way was Micron Technology(MU) , which was up 5.2%, closing at $6.89 amid optimism about its expected gains from its acquisition of Elpida Memory. In a note to clients, Bernstein Research analyst Mark Newman noted the expected advantages for both Micron and the broader memory chip industry. Read full story on Micron acquisition.

"Micron's now confirmed acquisition of Elpida will reduce competition and likely result in less supply and better economics for all survivors," he wrote. "This transaction will solidly move Micron ahead of Hynix to become the number two memory maker, second only to Samsung."

Netflix (NFLX) shares rose 6.2% to close at $72.04 on positive comments from a Citigroup analyst, who maintained his buy rating and $130 price target on the stock.

In a note to clients, Citi's Mark Mahaney cited the broker's latest consumer survey showing that customer satisfaction scores have stabilized since March, with improved churn rates. He noted that the scores still remain well below their levels before the "Apocoflix" from last summer, when the company jacked up subscription rates and aborted a controversial plan to separate its DVD business.

"The Netflix pricing, product, and communication missteps clearly negatively impacted its customer satisfaction levels," Mahaney wrote. "But there is reason to believe that the largest part of the impact is behind us."

Also in the spotlight were shares of Activision Blizzard Inc. (ATVI) which were up 4.3%, closing at $12.46 after the videogame publisher unveiled a deal to bring its best-selling "Call of Duty" franchise to the Chinese market as an online, free-to-play game. Read full story on Activision.

Shares of Microsoft Corp. (MSFT) made a fractional gain, closing at $30.76, following a drop earlier a day after announcing that it will take a $6.2 billion accounting charge in connection with its acquisition of online advertising firm aQuantive back in 2007. The write-down represented the bulk of the acquisition price.

"In our opinion, Monday's announcement is relatively inconsequential, though it does open up some old wounds," wrote John DiFucci of J.P. Morgan in a note to clients.

Shares of Groupon Inc. (GRPN) tumbled 7.6% to close at $8.79 after the company's executive chairman and co-founder, Eric Lefkofsky wrote in a blog post that he planned to focus more time on his venture capital firm called Lightbank.

Lefkofsky did not say anything about stepping down from his role at the daily deals firm, but he noted that several hires made by CEO Andrew Mason over the past 18 months "allowed me to focus on what I do best," referring to his work as a venture capitalist.

Gains also came from Advanced Micro Devices(AMD) , Dell Inc.(DELL) and Facebook Inc. (FB) But other stocks were in the red, including Zynga Inc.(ZNGA) and Marvell Technology. (MRVL)