US stocks: Tech stocks lead rise

NEW YORK - US technology stocks eked out small gains on Tuesday in light trading after broker upgrades helped the sector while a Fed official's comments about possible rate increases pushed the Dow lower.

Advanced Micro Devices Inc. climbed and XM Satellite Radio Holdings Inc. surged after analysts at Bear Stearns raised their ratings on the stocks.

Meanwhile, Chicago Fed President Michael Moskow said the pause in the central bank's string of rate increases earlier this month was "constructive," but more rate hikes could still be needed to cut inflation.

The comments helped push down American International Group Inc., one of the world's largest insurers and a company sensitive to interest rates. AIG was the biggest negative influence on the Dow and helped limit the S&P 500's gain.

Trading volume was below average on both the New York Stock Exchange and on Nasdaq, increasing volatility in stock prices, analysts said.

"The upgrade brought back some buying in tech stocks, but low volumes bring high volatility and it's hard to justify aggressive buying in such conditions," said Neil Massa, a senior trader at John Hancock Funds in Boston.

The Dow Jones industrial average was down 5.21 points, or 0.05 per cent, to end at 11,339.84. The Standard & Poor's 500 Index was up 1.30 points, or 0.10 per cent, to finish at 1,298.82. The Nasdaq Composite Index was up 2.27 points, or 0.11 per cent, to close at 2,150.02.

AMD shares rose 6.3 per cent, or US$1.48, to US$24.88 on the New York Stock Exchange, while XM's stock jumped 20.3 per cent, or US$2.28, to US$13.52 on the Nasdaq.

A senior AMD executive said the chip maker hopes to increase its share of the global server market as competition with rival Intel Corp. heats up.

The surge in XM's stock pulled up the shares of rival Sirius Satellite Radio , which gained 3.6 per cent, or 14 cents, to US$4.03.

Interest-rate concerns increased in the early afternoon and the Dow trimmed its earlier gains, then turned negative following Moskow's comments.

"The risk of inflation remaining too high is greater than the risk of growth being too low," said Moskow, who will become a voting member of the Fed's policy-setting committee next year.

The Fed left rates unchanged on Aug. 8 after 17 consecutive increases since late June 2004. But economists are uncertain if the Fed is done with tightening.

"It's still an open debate between inflation and a slowing economy and (the Fed) didn't give anybody any certainty that they were done," said Alexander Paris, economist and market analyst for Barrington Research in Chicago.

Speaking at a separate event, Atlanta Federal Reserve Bank President Jack Guynn said he was comfortable that US interest-rate policy is currently properly calibrated.

AIG shares slid 1 per cent, or 64 cents, to US$63.11.

US crude oil for September delivery expired on Tuesday with a small gain. The September contract rose 18 cents to settle at US$72.63 a barrel on the New York Mercantile Exchange, while the more actively traded October crude oil contract fell 20 cents to end at US$73.10.

Iran, the world's fourth-biggest oil exporter, responded to a package of incentives to halt its uranium enrichment programme by saying it is ready for "serious" talks to defuse its standoff with the West.

Luxury home builder Toll Brothers Inc. reported quarterly profit fell, but the earnings and its outlook topped Wall Street expectations. Its stock rose 1.7 per cent, or 43 cents, to US$25.20 on the NYSE.

Volume on the NYSE was light, with about 1.22 billion shares changing hands, well below last year's daily average of 1.61 billion shares. On Nasdaq, about 1.60 billion shares traded, also below last year's daily average of 1.80 billion.

Advancers outnumbered decliners by a ratio of about 7 to 5 on the NYSE, while on Nasdaq, about eight stocks rose for every six that fell.

- REUTERS