INTC--Blue Chips Up, Tech Stocks Try to Rebound
By Haitham Haddadin
NEW YORK (Reuters) - U.S. blue chips rose in midday trading on Wednesday while technology issues attempted a rebound after an earlier mauling amid jitters over corporate profit growth.
The Dow Jones industrial average (^DJI - news) was up 109 points, or 1.0 percent, at 10,828.87, as funds again flocked to defensive brick-and-mortar stocks from the high-techs.
Among key rising Dow components were manufacturing giant Minnesota Mining & Manufacturing (NYSE:MMM - news), chemical firms like DuPont Co. (NYSE:DD - news) and retailers Wal-Mart Stores (NYSE:WMT - news) and Home Depot Inc. (NYSE:HD - news). But capping the advance were losses in energy and financials.
Meanwhile, the technology-laced Nasdaq Composite Index (^IXIC - news) was up 37 points, or 1.1 percent, at 3,493.07. It had declined by over 2 percent in early trade, led lower by key components like software powerhouse Oracle Corp. (NasdaqNM:ORCL - news) It was Nasdaq's third attempt to rebound.
``We had another 12 negative pre-announcements overnight... It's very unnerving,'' said Larry Wachtel of Prudential Securities, referring to a new batch of companies, many in the high-tech sector, coming clean on disappointing results.
Earlier reversals failed to take it convincingly above water, and analysts warned rallies prompted by bargain-hunting on stocks deemed attractive after the recent mauling could be short-lived until solid corporate earnings reports emerge.
``If there is an attempt to rally, the question is can it go the distance? In the last couple of weeks any kind of firmness has given way to selling on strength,'' added Wachtel.
``With these valuations for stocks like Oracle Corp and B2B (business to business) companies there can't be any slippage. You are priced to perfection.''
Meanwhile, the broader Standard & Poor's 500 Index (^SPX - news) was up 4.09 points, or 0.29 percent, at 1,430.55.
Oracle Corp. -- Nasdaq's most actively traded share -- fell as much as 11 percent adding to similar losses Tuesday. It fell $6-11/16 to $62-13/16 after Merrill Lynch said on Wednesday it believes the current valuation on Oracle will cap significant material upside moves in the near term.
``We believe the stock's sell-off yesterday was prompted by a general sell-off in the software sector, prompted by increasing scrutiny of valuations,'' Merrill Lynch analyst Chris Shilakes said in a note to clients.
``In our opinion, Oracle is not immune to the general deterioration in market psychology,'' added Shilakes, who kept his intermediate-term accumulate and long-term buy rating on Oracle.
Part of Tuesday's sell-off was pegged to speculation that computer giant International Business Machines Corp.'s (NYSE:IBM - news) third-quarter earnings will disappoint. The market has also been hit by warnings of lagging earnings or sales from high-tech leaders including Intel Corp. (NasdaqNM:INTC - news) and Apple Computer Inc. (NasdaqNM:AAPL - news).
Merrill Lynch and Sanford Bernstein said Wednesday he maintained outperform ratings on IBM, and its shares rebounded from an early slump. Intel rose $1-7/8 to $42-3/16, also helping the Dow, as semiconductors generally rose, while Apple was up 5/8 to $22-15/16.
Other Nasdaq key components rose including telecom company Qualcom Inc (NasdaqNM:QCOM - news), up $3-3/8 at $75-7/8 and Internet giant Yahoo Inc (NasdaqNM:YHOO - news), which climbed $2-3/16 to $86-3/16. But the market breadth was negative with 23 shares falling for every 13 that rose.
Knight Trading Group Inc (NasdaqNM:NITE - news) was down $4-13/16 at $27-3/8, but off its session lows. The stock market-maker said early on Wednesday that it will post third-quarter profits below forecasts because of a weaker, less volatile Nasdaq stock market and the costs of building its global operations.
Interlinq Software Corp. (NasdaqNM:INLQ - news) said late on Tuesday it sees a first-quarter loss on lower-than-anticipated sales. It fell more than 13 percent, off 1/2 at $3-1/4 on Nasdaq.
A third warning came from cardiovascular device maker Guidant Corp. (NYSE:GDT - news), which said Tuesday afternoon it expected lower third quarter revenues. Its shares fell nearly 19 percent on the Big Board, off 13-1/16 to $55-7/8.
The market's recent jitters were also pegged partly to the U.S. Federal Reserve's warning on Tuesday that a tight labor market and high energy prices still threaten to spark inflation, which dashed hopes its campaign of rate hikes has ended. The Fed left the rate unchanged on Tuesday as it was widely expected to, ahead of the November U.S. presidential elections.
The Fed warning put the heat on the shares of financial companies, including Dow components J.P. Morgan (NYSE:JPM - news), down $2-5/8 at $164-5/8, and Citigroup (NYSE:C - news), off $1-13/16 at $54-15/16. Energy shares were also lower, with Dow component Exxon Mobil Corp (NYSE:XOM - news) falling $1-7/8 to $88-15/16, as oil prices retreated following a buildup in U.S. crude oil stockpiles. The S&P International Oil Index (^SPOIL - news) tracking Big Oil firms tumbled 1.89 percent.
The shares of Firstar Corp (NYSE:FSR - news) were actively traded on the New York Stock Exchange (news - web sites), off $3-1/8 at $19-1/8, after it said on Wednesday it will buy U.S. Bancorp (NYSE:USB - news), the 10th-largest U.S. bank holding company, in a stock deal valued at about $18 billion. US Bancorp rose 1/2 to $23-11/16. |
