High-Tech Rally Ahead?

The doom and gloom that filled forecasts for Nasdaq just weeks ago has given way to a much sunnier outlook for investors.

The Nasdaq at Thursday's close was up 31.9 percent from its low in May. In comparison, the Dow Jones industrial average has bounced back only 10.1 percent from its low in March.

Arthur Hogan, chief market analyst for Jefferies & Co. in Boston, says many investors were just waiting for the Federal Reserve to quit raising rates.

I believe the consensus is they're done for the year," Hogan said of the Fed. "That's been the overhang for the last six months. Now, we get to focus on corporate earnings. They look absolutely terrific."

Although both indices are heading higher, the Nasdaq pace is faster because the Dow has too many components that are adversely affected by a slowing economy.

"The Nasdaq is loaded with stocks that aren't adversely affected by a slow economy and can grow revenues when we slow the growth down,"Hogan told CBS Early Show Anchor Bryant Gumbel.

Over the last two months, Hogan said, the Nasdaq market made a 40 percent correction - what Hogan called a "healthy capitulation" and left some overvalued dot.com stocks in the dust. Some single issues, particularly n the Internet sector, have shown a correction of much more than 40 percent.

"I think we've really had an educational process, albeit an expensive one, that you can't just throw monies at companies just because they have a dot.com at the end of them," Hogan said.

Why does he believe a summer rally and not just a short-term blip is responsible for the gains of the last few weeks?

Hogan says a rally is long overdue.

"I think corporate fundamentals in the United States just line up terrifically well," he said."We've been ignoring that for several quarters. I think that, going forward, we can start to focus on the strength of the U.S. economy, the strength of corporate America."

The market so far Friday back Hogan up. Just before 11 a.m. Et, the Nasdaq was up another 20-plus points while the Dow had slipped almost 10 points.

CBS MarketWatch Correspondent Alexis Christoforous says that strong reports put investors in a buying mood.

The Nasdaq showed a gain of 75 points Thursday while the broader market continued to lag. The Dow industrials edged up just 5 to 10,788.

In Asia, Tokyo stocks caught tech fever, sending the Nikkei forward.

©2000, CBS Worldwide Inc., All Rights Reserved