Stock Market Update
Tue, 07 Nov 2000, 1:26pm EST
U.S. Communications-Chip Stocks Fall, Led by PMC-Sierra; Cisco, Nasdaq
Up
By Josh P. Hamilton
New York, Nov. 7 (Bloomberg) -- U.S. communications-chip stocks fell, led by
PMC-Sierra Inc., after Cisco Systems Inc. reported rising inventories.
Trading on the New York Stock Exchange was almost a third slower than a week
ago, as investors deferred making new bets until after today's U.S. presidential
election.
Cisco rallied as investors bet sales growth won't slow anytime soon and sparked a
rebound in the Nasdaq Composite Index. Cisco shares had plunged 40 percent
from their high in April leading up to yesterday's profit report.
``It's a great opportunity to buy'' Cisco and PMC-Sierra, said Frederick Sears,
manager of the Investors Capital Twenty Fund, which counts Cisco among its top
four holdings. ``You've got to go with high growth-rate companies if you want to
make money.''
The Nasdaq, down as much as 1.6 percent, rose 13.38, or 0.4 percent, to 3429.59,
led by Cisco, Microsoft Corp. and Qualcomm Inc. The Standard & Poor's 500
Index gained 2.75, or 0.2 percent, to 1434.94. The Dow Jones Industrial Average
was little changed, up 5.31 to 10,982.52.
Seven stocks fell for every six that rose on the NYSE. Some 413 million shares
traded on the Big Board by noon New York time, down 30 percent from a week
ago.
``We're in the middle of an election that's too close to call, and the markets
absolutely hate uncertainty,'' Sears said.
Cisco, the biggest maker of computer-networking equipment, rose $1.94 to
$57.06. After exchanges closed yesterday, the company reported fiscal first-quarter
sales and profit before items that topped forecasts.
PMC-Sierra, Applied Micro Drop
Makers of chips and components used in Cisco's equipment, including PMC-Sierra
and Applied Micro Circuits, fell on concern Cisco might reduce its inventory of
their products next year as orders from providers of phone and Internet service
providers slow.
PMC-Sierra declined $22.81 to $131, and Applied Micro dropped $7.63 to $68.75.
As investors sold communications-chip stocks, they bought shares of other
computer-related and telecommunications companies, some of which already have
fallen this year and sell for lower price-earnings multiples.
Microsoft, which sells for 37 times this year's expected profit, rose $2.13 to $71.63.
Dell Computer Corp., which is priced at 36 times earnings and reports quarterly
profit after the market closes Thursday, gained $1.44 to $32.94. Microsoft and Dell
have fallen 39 percent and 36 percent this year, respectively.
Qualcomm gained $2.75 to $73.31. The stock sells for 57 times earnings, and has
fallen by more than half this year.
PMC sells for 126 times earnings while Applied Micro is priced at 128 times,
indicating investors expected much faster growth from those companies than from
Microsoft, Dell and Qualcomm. |
