MARKET SNAPSHOT
Tech sellers in charge
Dow just a touch weaker
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 11:36 AM ET Aug 3, 2000 NewsWatch
Latest headlines
NEW YORK (CBS.MW) - Tech stocks, led by the chip sector, took another hit Thursday, pushing the Nasdaq deep in the red for the third straight session. But the Dow's losses remained limited thanks to buying interest in some of its financial, consumer and retail components.
Earnings jitters have paralyzed tech investors in recent weeks, keeping them away from a group they fear will see soggier revenue growth as the economy slows going forward. Observers say valuations in the group, while more reasonable compared to those seen in March -- just before tech stocks took a hit -- are still lofty.
Putting additional pressure on the tech sector Thursday was an earnings warning from Kulicke & Soffa Industries late Wednesday, which unleashed a wave of selling in the chip equipment sector. But the Nasdaq came well off session lows around mid-morning, managing to erase over half of the losses suffered out of the gate.
In the broader market, bank stocks were a bright spot, as were the paper and utility sectors. Losing altitude were retail, biotech and brokerage shares.
The Dow Jones Industrial Average fell 23 points, or 0.2 percent, to 10,664 at 11:29 a.m.
The index's tech components were among the biggest losers, with Hewlett-Packard, Intel and IBM leading the pack. Gainers included Wal-Mart, General Electric, McDonald's and Philip Morris.
The Nasdaq Composite tumbled 62 points, or 1.7 percent, to 3,595 while the Nasdaq 100 Index shaved 71 points, or 2.0 percent, to 3,419.
The Standard & Poor's 500 Index slipped 0.4 percent while the Russell 2000 Index of small-capitalization stocks dropped 1.5 percent.
Elsewhere, volume came in at 409 million on the NYSE and at 720 million on the Nasdaq Stock Market. Market breadth was extremely negative, with losers pouncing on winners by 15 to 10 on the NYSE and by 25 to 10 on the Nasdaq.
Sector movers
Kulicke & Soffa Industries (KLIC: news, msgs) plunged 8 1/18, or 37 percent, to 14. Late Wednesday, the supplier of semiconductor assembly equipment announced some customer order deferrals for its ball bonders due to space constraints and wafer shortages affecting its customers. The company said the delay may impact financial performance in the current quarter and in the first fiscal quarter of 2001. Kulicke & Soffa also reported a third-quarter profit of $1.35 a share vs. the First Call estimate of $1.06 a share. Other equipment markets posting ugly losses included KLA-Tencor (KLAC: news, msgs), down 17 percent, or 8 11/16 to 42 1/16, and Teradyne (TER: news, msgs), off 19.1 percent, or 11 3/8 to 47 13/16.
Shares of Motorola (MOT: news, msgs) dropped 2 5/8, or about 7 percent, to 34. Lehman Brothers said Motorola lowered its handset guidance in a conference call with some of its suppliers. Lehman believes this to be confirmation that Motorola may produce 80 to 85 million handsets in 2000 compared to earlier projections of up to 100 million. Lehman's estimate stood at 83 million. While this supplier guidance is in line with Motorola's targets of 25 to 30 percent handset sales growth in the second-half of 2000 and Lehman's own estimates, the brokerage expects additional pressure on the handset component group. Among other stocks in the wireless telecom group, Nokia (NOK: news, msgs) shed 3 3/4 to 38 1/8 while Ericsson (ERICY: news, msgs) lost 1 1/8 to 17.
The Philadelphia Semiconductor Index ($SOX: news, msgs), of which Motorola is a component, fell a heady 6.6 percent. Intel (INTC: news, msgs) fell 1 5/8 to 61 11/16 while Advanced Micro Devices (AMD: news, msgs) lost 1 13/16 to 60 11/16. On a positive note, the Semiconductor Industry Association reported that worldwide sales of semis reached a record high of $16.6 billion in June 2000, up 48.1 percent from $11.2 billion in June 1999.
"June's numbers exceeded our expectations and affirm our forecast for a strong 2000," said SIA president George Scalise. "These record-high numbers reflect the growth in the Internet infrastructure and wireless communications markets."
Commenting on the SIA numbers, PaineWebber said it believes the chip industry is still in a relatively early phase of the current cycle and that there remain excellent investment opportunities in many of the semis. And Donaldson, Lufkin & Jenrette said strong sales momentum in the semis gives it greater comfort that industry growth has not yet slowed. "Given the concerns about slowing cellular end market demand, we believe the key for the second half is visibility on PC sales," DLJ said in a note.
Among other tech behemoths talking a hit, Cisco Systems (CSCO: news, msgs) shed 1 3/4 to 59 3/16 while the Amex Networking Index ($NWX: news, msgs) dropped 4.2 percent. In a research note, Merrill Lynch said it expects strong growth from Cisco's access and other segments -- including optics -- as the networking giant continues to expand its presence in the service provider markets. Merrill predicts fourth-quarter earnings-per-share of 15 cents when the company reveals its quarterly results next week. That's in line with the First Call estimate.
Capping mild gains in the retail sector Thursday was Gap's earnings warning, which hit the market late Wednesday. Gap expects earnings-per-share to come in 2 to 3 cents short of the First Call estimate of 23 cents a share in the second quarter due to weak July sales. Read the full story. Shares (GPS: news, msgs) tumbled 7 7/8 below its NYSE close to 30 1/16. The S&P Retail Index ($RLX: news, msgs) added 0.7 percent.
Same-store sales for retailers are trickling in Thursday. Among them, Dow-component Wal-Mart (WMT: news, msgs) said sales for the four week period ended July 28 climbed 23.5 percent from the same period last year. The stock rose 2 1/8 to 56 3/16.
In earnings news, Viacom (VIA: news, msgs) checked in with a second-quarter profit from operations of 1 cent a share compared to the First Call estimate of a loss of 5 cents a share, which excludes a charge related to the CBS acquisition. Viacom had a profit of 8 cents a share in the year-ago quarter. Read full story. The stock added 1 3/16 to 70 9/16.
Treasury focus
The 30-year Treasury is regaining its composure after Wednesday's bruising sell-off.
The 10-year Treasury note was up 10/32 to yield 5.935 and the 30-year bond was up 6/32 to yield 5.745 percent. The government market is catching a bid on the equity market's weakness. See Bond Report.
A couple of second-tier economic releases are on tap for Thursday as investors prepare for Friday's kingpin -- the July employment report, which will be key in formulating the Fed's interest-rate decision on Aug. 22.
Weekly initial claims added 2,000 to 276,000 while June factory orders climbed 5.5 percent, less than estimates for a 6.1 percent jump. View Economic Preview, economic calendar and forecasts and historical economic data.
The dollar dropped to two-week lows against the yen, falling for a fourth straight session. Dollar/yen last changed hands at 108.35, down 0.5 percent from the previous close, while euro/dollar lost 1.0 percent to 0.9045.
Both the European Central Bank and the Bank of England left key short-term rates unchanged at their policy-setting meetings Thursday.
In the commodity arena, September crude rose 54 cents to $28.80 while the Bridge CRB index slipped 0.51 to 220.02. On Wednesday, crude rose 47 cents after the American Petroleum Institute said late Tuesday that crude stocks fell a whopping 9 million barrels in the latest week.
Julie Rannazzisi is markets editor for CBS.MarketWatch.com. |
