MARKET SNAPSHOT
Chip, software stocks drop
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 10:32 AM ET Jul 5, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Shares backpedaled Wednesday, led by weakness in the technology sector, which came under pressure following negative analyst comments on semiconductor stocks.
Further, another batch of negative earnings pre-announcements hit the technology arena, giving investors another reason to sell.
Within the market, chip and software stocks led on the downside. The broader market saw hefty declines in oil service shares due to a dive in oil prices Wednesday. Also lower were shares of brokerage stocks while paper, biotech , airline and transportation issues rose.
The Dow Jones Industrial Average lost 24 points, or 0.2 percent, to 10,534 at 10:30 a.m.
Downside movers included Caterpillar, Exxon Mobil, Intel and IBM while DuPont, 3M and Philip Morris rose.
Caterpillar shares fell 7/8 to 35 1/8. Goldman downgraded the stock (CAT: news, msgs) to a “market outperformer” and removed the stock from its recommended for purchase list. The brokerage also lowered its 2000 earnings-per-share estimate to $3.20 from $3.55 and 2001 estimates to $3.65 from $4.20. The Dow-component lost 1 9/16 to 34 7/16.
The Nasdaq Composite fell 65 points, or 1.6 percent, to 3,926 while the Nasdaq 100 Index dropped 71 points, or 1.9 percent, to 3,733.
The Standard & Poor's 500 Index trimmed 0.7 percent while the Russell 2000 Index of small-capitalization stocks slumped 0.7 percent.
Volume stood at 236 million on the NYSE and at 313 million on the Nasdaq Stock Market. Breadth was soggy, with decliners pouncing on advancers by 12 to 10 on the NYSE and by 18 to 12 on the Nasdaq.
Sector movers
Semiconductor stocks took a hit as Salomon Smith Barney downgraded the sector to an “outperform” rating from a “neutral” due to what the brokerage believes are “slowly reversing industry fundamentals.” Though a slowdown in the group could take six to nine months, Salomon said it sees “first-mover” evidence of a trend reversal in decelerating industry unit shipments as well as price declines. The sector is likely to see peak capital spending growth rates this year, the brokerage continued.
Salomon lowered its rating on four semis: Texas Instruments (TXN: news, msgs), off 4 to 65, Advanced Micro Devices (AMD: news, msgs), down 7 1/2 to 76 3/4, National Semiconductor (NSM: news, msgs), off 6 5/8 to 51 1/2, and Silicon Storage (SSTI: news, msgs), off 9 7/8 to 89 1/8. The Philadelphia Semiconductor Index ($SOX: news, msgs) fell 5 percent.
Other losers in the semi arena included Intel, off 3 9/16 to 133 5/16, and Rambus, off 4 11/16 to 105.
The computer software arena also faltered badly due to earnings warnings from Computer Associates and BMC Software. The CBOE Computer Software Index ($CWX: news, msgs) fell 6.1 percent.
Computer Associates (CA: news, msgs) plunged 22, or 43 percent, to 29 1/8 after warning on Tuesday that it expects its first-quarter results to miss Wall Street estimates. It sees contracts in the range of $1.25 to $1.3 billion compared to the $1.22 billion registered in the first quarter last year due to weak European sales and softness in its mainframe business. The First Call estimate for Computer Associates’ first-quarter earnings-per-share stands at 55 cents. Read full story. Goldman Scahs lowered the company to a “market performer” rating from a “market outperformer.” See Rating Revisions.
BMC Software (BMCS: news, msgs) warned that its first-quarter earnings are expected to come in at 18 to 21 cents a share with revenues seen at $365 to $375 million. The company made 42 cents a share in the year-ago period. First Call expects earnings per share of 46 cents in the first quarter. Shares tumbled 4 3/8, or around 13 percent, to 26 5/8.
Datastream Systems (DSTM: news, msgs) announced it expects a second-quarter pro forma net loss of 25 to 30 cents a share. First Call predicts a loss of 9 cents a share for the quarter. Datastream expects total revenues to range between $22.5 and $23.5 million in the quarter. The stock dropped 2 5/8, or about 24 percent, to 8 7/8.
Treasury focus
Treasury prices climbed across the board, aided by weakness in the equity arena.
The 10-year Treasury note put on 11/32 to yield 5.95 percent while the 30-year bond added 15/32 to yield 5.85 percent, adding to Monday’s gains. See Bond Report.
In economic news, Wednesday will see the release of May leading economic indicators, expected to edge down 0.1 percent. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency market, dollar/yen added 0.7 percent to 106.87 while euro/dollar gained 0.3 percent to 0.9547. See latest currency rates.
On Tuesday, Japan released its quarterly Tankan survey of business conditions, which came in at positive 3 from the previous quarter’s negative 9. It was the first positive reading since September 1997. See full story. But the report also showed that business conditions remained much worse for small companies and non-manufacturers. Japan is expected to put an end to its zero interest-rate policy, with many predicting that a move could come as soon as July 17.
In the commodity arena, August crude plunged $2.00 to $30.50 following news late Monday that Saudi Arabia will boost its daily output by 500,000 barrels-per-day effective immediately. The Bridge CRB index lost 2.21 to 221.72.
PaineWebber analyst Chris Stavros sees the Saudi move as more of a threat rather than an indication that the country is ready to take immediate and unilateral action to raise its output.
“In our opinion, the Saudis are clearly trying to talk down the oil price that is backed up by their considerable spare production capacity. However, while we initially see this as a threat, it should not be taken lightly,” Stavros said.
“Even absent any additional increase in Saudi oil production, we see oil prices falling into the mid-$20’s by Labor Day or shortly thereafter. If additional Saudi or OPEC barrels are made available to the market, oil prices could fall even more rapidly and to a greater extent than we anticipate,” PaineWebber concluded.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
