MARKET SNAPSHOT.......Chip stocks recover
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 12:32 PM ET Jul 6, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) -- An advance in the chip sector lent support to the Nasdaq Thursday while the Dow Industrials remained in a slump, weighed down by selling in the drug and financial sectors as well as uncertainty ahead Friday’s June employment report.
“We’re still looking for the possibility of a rate hike in August,” said Richard Babson, chairman and president of Babson-United. “Second-quarter gross domestic product growth needs to slow substantially in order to avoid one.”
Inside the tech arena, computer hardware issues slipped while chip and software stocks rebounded after taking a drubbing Wednesday. The broader market saw good buying interest in oil service, retail and utility issues while financial and biotech stocks backpedaled.
The Dow Jones Industrial Average shed 41 points, or 0.4 percent, to 10,442 at 12:16 p.m.
IBM (IBM: news, msgs) was again the Dow’s downside leader, shedding 3 7/8 to 101 1/8. Also lower were shares of Hewlett-Packard, J.P. Morgan, DuPont while Exxon Mobil, Home Depot and Intel climbed.
The Nasdaq Composite added 12 points, or 0.3 percent, to 3,876 while the Nasdaq 100 Index gained 40 points, or 1.1 percent, to 3,690.
The Standard & Poor's 500 Index edged up 0.1 percent while the Russell 2000 Index of small-capitalization stocks trimmed 0.3 percent.
Volume came in at 452 million on the NYSE and at 685 million on the Nasdaq Stock Market. Breadth was negative, with decliners beating advancers by 14 to 13 on the Nasdaq and by 20 to 15 on the NYSE .
Specific movers
Chip stocks gained ground following a mammoth sell-off on Wednesday, which saw the Philadelphia Semiconductor Index ($SOX: news, msgs) plunge 9.3 percent on the heels of a downgrade of the entire sector by Salomon Smith Barney. The SOX index added 2.7 percent Thursday.
Among the upside movers were Rambus (RMBS: news, msgs), up 1 1/2 to 101, and Intel (INTC: news, msgs), up 3 3/8 to 135. Advanced Micro Devices (AMD: news, msgs) also turned slightly higher while National Semiconductor (NSM: news, msgs), one of Wednesday’s big losers, fell 1 15/16 to 48.
In the meantime, Merrill Lynch came out with comments on the chip industry Thursday.
“The mid-cycle correction that we've been writing about for several months now seems to be upon us, as we move into a seasonally slow time of year and worries about more serious problems with the semiconductor cycle widen,” Merrill Lynch said.
Still, the brokerage said it’s hard to find evidence of a real end to the upturn in the industry that began in late 1998.
“Although we see little to support semiconductor stock prices during the next two months, we strongly believe that the sector will be hitting new highs before the end of the year. We would treat any weakness in the sector during the next two months as an opportunity to build positions at attractive prices,” Merrill said.
Further, the brokerage sees no evidence of inventory problems and their analysis of available wafer capacity for the year does not suggest any overcapacity problem.
Oil service stocks recovered, with the Philadelphia Oil Service Index ($OSX: news, msgs) up 3.1 percent following a 6.3 percent dive Wednesday while the CBOE Oil Index ($OIX: news, msgs) added 2.7 percent.
August crude lost 22 cents to $30.45 after dropping $1.83 Wednesday on news that Saudi Arabia will boost its daily output by 500,000 barrels-per-day. The Bridge CRB index lost 1.06 to 218.33.
Merrill Lynch came out with positive comments on the sector Thursday.
“Overall, we expect oil service companies to report June quarter earnings-per-share
in-line or slightly better than consensus expectations. In general, second-quarter EPS
will likely be only modestly above the first quarter, partly because of the Canadian
seasonal decline and partly because spending by major oils remained depressed,” the brokerage said.
Merrill believes oil service earnings will see strong sequential growth in the September quarter and feels confident that their current earnings estimates for 2001 will be beaten -- perhaps by more than 10 percent.
In the software arena, the CBOE Computer Software Index ($CWX: news, msgs) added 0.7 percent, erasing earlier losses. The sector was one of the biggest downside movers on Wednesday.
BMC Software (BMCS: news, msgs) added 3/4 to 22 1/16 after falling 31 percent Wednesday on an earnings warning while Computer Associates (CA: news, msgs) edged up 3/8 to 29 13/16. On Wednesday, the stock lost a whopping 43 percent of its value after warning that it expects first-quarter results to miss Wall Street estimates.
Oracle (ORCL: news, msgs) rebounded 7/16 to 72 6/8 after dropping nearly 10 percent Wednesday.
Shares of retailers rose, lending some support to the broader market. The S&P Retail Index ($RLX: news, msgs) rose 1.2 percent even as retailers posted generally soggy same-store sales in June.
Gap Stores (GPS: news, msgs) added 2 5/16 to 32 3/16 despite a second-quarter warning that earnings will fall at least 3 cents short of the 26-cents-per-share Wall Street estimate. The good news is that Gap expects to meet Wall Street views for the third and fourth quarters. See related story.
Specific movers
Datastream Systems (DSTM: news, msgs) added 1/4 to 9 following a 24 percent tumble on Wednesday while Entrust Technologies (ENTU: news, msgs) added 3/8 to 37 after a 53 percent plunge during the previous session. Both companies warned of earnings shortfalls.
Qwest Communications (Q: news, msgs) lost 1 7/8 to 56 on the heels of a Bear Stearns downgrade of the stock to a “neutral” from a “buy” rating. On Wednesday, the stock gained ground following the completion of its US West acquisition.
In earnings news, Biomet (BMET: news, msgs) reported a fourth-quarter profit of 42 cents a share on a pre-split basis, beating the First Call estimate of 41 cents a share. The company made 35 cents per share in the year-ago period. A 3-for-2 stock split was also announced. The stock added 2 3/4 to 40 3/4. See full story.
Shares of Goldman Sachs (GS: news, msgs) fell 4 1/4 to 91 11/16 after the company announced late Wednesday it has filed a registration with the Securities and Exchange Commission for a secondary stock offering that will cover 40 million shares of common stock.
Safeway (SWY: news, msgs) added 2 3/8 to 48 after posting a second-quarter profit of 55 cents a share, beating the First Call estimate by 2 cents a share. The company made 46 cents in the year-ago quarter. See full story.
Marriott International (MAR: news, msgs) saw its shares rise 1 1/2 to 38 1/4 after posting stronger-than-expected second quarter earnings. The company made 50 cents per share, 2 pennies ahead of the First Call estimate, versus 42 cents per share, in the year-ago period. See full story.
Treasury focus
Treasury prices remained in the minus column as buyers took a backseat following four straight sessions of gains.
The 10-year Treasury note trimmed 9/32 to yield 6.025 percent while the 30-year bond lost 13/32 to yield 5.89 percent. See Bond Report.
Thursday saw the release of the weekly initial claims figures, which fell 12,000 to 296,000 -- a five-week low. And May factory orders jumped 4.1 percent compared to expectations for a 3.1 percent increase. See full story. View Economic Preview, economic calendar and forecasts and historical economic data.
In the currency arena, dollar/yen rose 0.3 percent to 107.26 while euro/dollar edged up 0.1 percent to 0.9528. See latest currency rates.
On Wednesday, Treasury Secretary Larry Summers said Wednesday that Japan and Europe need to continue their expansionary economic policies.
While global conditions are good overall, Summers said at a news briefing at the United Nations that there’s no room for complacency. See full story. The Treasury Secretary said achieving a more balanced pattern of global expansion, especially through the achievement of more rapid and solid growth in Japan, will be an “important topic” at the meeting of the Group of Seven finance ministers this weekend.
While Summers’ remarks lent support to the dollar, investors pondered economic data out of Japan.
May household spending fell 0.4 percent and was down 1.9 percent from the year-ago period. While the market is bracing for an end to the zero interest-rate policy when the Bank of Japan meets on July 17, Carl Weinberg of High Frequency Economics notes that the BOJ has said it needs to see consumer spending stop declining before it will raise interest rates.
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Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
