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Price-earnings ratios measure the cost of a share relative to the company's profits. A lower price-earnings ratio suggests that stocks are undervalued, or that investors expect earnings to decrease. The recent strength of tech stocks is no surprise when you consider the licking they took during last year's market gyrations. Tech stocks tend to be more risky and rise faster as investors regain confidence in the economy. The Nasdaq also is benefiting from long-term economic currents that could carry tech stocks even higher. Many companies put off replacing worn-out technology during the recession and now are investing again. There's also a growing global market for technology, and big tech companies face less competition these days when they try to acquire smaller ones. Established companies like IBM and Oracle can be picky about buying only companies that will increase their earnings. The gains have some analysts on the lookout for another tech bubble, like the one that yanked the Nasdaq from 5,132 in February 2000 down to 1,792 in October 2001. "It's justifiable to worry about exuberance," said Sam Stovall, chief equity strategist at S&P Capital IQ. But he said he expects the broad market to rise another 3 to 10 percent in the next few months before hitting a ceiling and correcting downward. "It's momentum, combined with too many investors on the sidelines," Stovall said. "As the market blows past these benchmarks, these investors selectively throw in the towel" and buy stocks whose prices are rising. In corporate news: DreamWorks Animation SKG Inc. plunged 12.2 percent after the maker of "Kung Fu Panda" said its fourth-quarter profit fell 71 percent on weak DVD sales. News Corp. rose 0.3 percent after James Murdoch stepped down as executive chairman of News International, the British newspaper arm at the center of a phone-hacking scandal. James is the youngest son of 80-year-old CEO Rupert Murdoch. Staples Inc. dropped 8.4 percent after the office supply retailer said international sales weakened in the fourth quarter. The company's outlook for 2012 was far weaker than analysts had expected.
[Associated
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