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Tech Stocks Strut Their Stuff

The Nasdaq surged on Wednesday, buoyed by a positive note on the chip sector from Salomon Smith Barney, which sparked buying interest in the technology group.

There was also good news on the international front as China agreed release 24 Navy spy plane crewmembers being held on Hainan Island following a midair collision almost two weeks ago.

In early trading, the Dow Jones Industrial Average lost 5.21 points to 10,097.53. The Nasdaq Composite surged 84.57 points to 1,936.60.

Salomon's Jonathan Joseph upped the potential of the semiconductor sector to an "outperform" from "neutral." The analyst based his decision on "anecdotal order and shipment data that is so bad it cannot continue for long and sector data that suggests a fundamental bottom is only months away."

Joseph said he believes the Philly Semiconductor Index has downside risk to 400 but upside potential to 700. Joseph upgraded Intel, Micron Technology, Texas Instruments, Applied Micro Circuits, Altera and Xilinx to a "buy" from "outperform."

Motorola , which reported after the close Tuesday a wider-than-expected loss and its first red ink in over 15 years, rose 20 cents. Motorola posted a loss from operations of 9 cents a share in its first quarter vs. expectations for a 7-cent loss. Motorola said chip orders in the Americas and Europe were down very significantly but up slightly in Japan.

Other Chip stocks headed north on the heels of the Smith Barney note, with Intel up $2.23 and Micron up $2.35.

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Wall Street enjoyed a banner day on Tuesday. The Dow Jones industrial average closed above the 10,000 mark and the Nasdaq posted a strong gain as hopes grew that stock markets had found bottom and begun the climb back up.

The Dow put on 257.59 points to end the day 10,102.74 after rising as much as 310 points in intraday trading. The Nasdaq Composite closed up 106.32 to 1,852.03, while the Standard & Poor's 500 was higher by 30.79, to 1,168.38.

With the exception of gold, every sector participated in the rally, with gains particularly heady in the Internet, chip, software, utility, biotech and financial segments.

"The bear market is still in force. This rally is a good and an important sign that maybe we're starting to bottom, but there's no evidence we've bottomed yet," said Bob Streed, portfolio manager of Northern Select Equity Fund.

Spearheading the Dow's gains were shares of Alcoa, Citigroup, 3M, Intel, Hewlett-Packard and J.P. Morgan Chase. Among the few downside movers were shares of Merck, United Technologies and Procter & Gamble.

Advances among the Nasdaq's big-cap tech names were particularly astounding: Cisco Systems rallied 10 percent, Sun Micro 13 percent, JDS Uniphase 19 percent and Qualcomm 11 percent.

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