Intel's Optimism, Fed Cut, Fuel Chip Stock Surge
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NEW YORK (Reuters) - Semiconductor stocks on Wednesday rocketed from the depths of the technology downturn following an optimistic report from No. 1 computer chip maker Intel Corp. (NasdaqNM:INTC - news) and the Federal Reserve (news - web sites)'s surprise interest rate cut.
Despite slumping first-quarter profits, Intel's comments that its microprocessor business has stabilized suggested to some industry watchers that the plague afflicting most technology companies this year may be coming to an end.
``In our microprocessor business, given what we saw happening in March gives us a lot more comfort that we'll have a pretty normal second quarter and a seasonally strong second half of the year,'' Intel Chief Financial Officer Andy Bryant told Reuters.
The top executive of personal computer and printer maker Hewlett-Packard Co. (NYSE:HWP - news) also chimed in with some optimistic comments.
``We're clearly talking about the second quarter being a bottom,'' Carly Fiorina, H-P chairwoman and chief executive, said in a conference call after lowering its projections for second-quarter earnings.
The Fed cut short-term interest rates another half percentage point to spur the flagging economy. It was the fourth such move since the beginning of the year. The latest action brought the federal funds rate overnight bank lending rate down to 4.5 percent and the more symbolic discount rate on Fed loans to banks to 4.0 percent.
Intel's stock jumped $5.24, or more than 20 percent, to close at $31.28 on the Nasdaq, while its chief competitor, Advanced Micro Devices Inc. (NYSE:AMD - news) rose $4.85, or 21 percent, to end at $27.85.
The Philadelphia Stock Exchange semiconductor index (^SOXX - news) surged 15 percent higher to 640.94, still well off its 52-week high of 1280.84 but 40 percent higher than its year low of 453.85.
Specialty chip makers rallied as well, with Altera Corp. (NasdaqNM:ALTR - news) up $2.48, or about 9.5 percent, to $28.63, and Xilinx Inc.(NasdaqNM:XLNX - news) up $5.19, or 12.46 percent, to $46.02.
Shares of Texas Instruments Inc. (NYSE:TXN - news), the world's No. 1 maker of chips for mobile phones, rose $2.14, or 6.3 percent, to $36.14. The Dallas-based company said on Tuesday it would cut 6 percent of its work force due to the slump in global demand for communications products.
Chip-equipment makers surged as well after Intel reiterated its plans to spend a hefty $7.5 billion on capital equipment this year.
Top equipment maker Applied Materials Inc. (NasdaqNM:AMAT - news) rose $5.44, or 11.43 percent, to $53.03, while KLA-Tencor Corp. (NasdaqNM:KLAC - news), which report quarterly earnings after the market close that topped previously lowered projections, rose 10 percent, or $4.35, to $47.08.
European blue chips rose to two-month highs on Wednesday following the comments from Intel and the move by the Fed. |
