Marvell Technology Drops 11%

Elena
24 Aug, 2007
New York City

Wall Street opened near the flat line,reflecting a stronger-than-expected durable goods data and nervousness ahead of new home sales report. Tech stocks were weak in early trading, with Marvell Technology Group falling 11% after it offered a soft gross margin forecast. Other notable decliners were Research In Motion and Microsoft, losing 1.4% and 0.5%, respectively.

[R]09:45AM Wall Street opened little changed ahead of housing data.[/R]

Wall Street opened near the flat line, reflecting a stronger-than-expected durable goods data and nervousness ahead of new home sales report. However, market sentiment received a boost from a larger-than-expected increase in new home sales in July which helped ease recent worries about credit markets.

The Commerce Department said that sales of new home rose 2.8% in July to a seasonally adjusted annual rate of 870,000, stronger than the 820,000 annualized pace expected by economists. According to another Commerce Department report released earlier today, orders for durable goods surged 5.9% in July, by far above the expected 1.5% gain.

Home Depot ((HD)) shares rose 2% amid reports that the company may receive $1.2 billion less than anticipated for the sale of its wholesale distribution business to private equity firms.

Tech stocks were weak in early trading, with Marvell Technology Group ((MRVL)) falling 11% after it offered a soft gross margin forecast. Other notable decliners were Research In Motion ((RIMM)) and Microsoft ((MSFT)), losing 1.4% and 0.5%, respectively. Cisco Systems ((CSCO)) edged down 0.4%.

In the retail sector, Gap ((GPS)) rose 3.4% after it said its profit jumped 19% in Q2 on lower costs, closed stores and laid off workers. In the first hour of trading, the Dow Jones industrial average fell 7.31, or 0.06%, to 13,228.57. The Standard & Poor's 500 index slipped 0.83, or 0.06%, to 1,461.67. The Nasdaq composite index fell 5.08, or 0.20%, to 2,536.62.


[R]09:00AM U.S. stock futures advanced, lifted by strong durable goods orders in July.[/R]

U.S. stock futures were indicating a positive opening Friday, as stronger-than-expected durable goods orders helped offset concerns about slowing housing market. The Commerce Department said that July orders for durable goods surged 5.9% on higher demand for airplanes, vehicles, computers, machinery, steel. Investors were also expecting a report on new home sales for July which is likely to show they continued falling at an annual rate of 820,000 homes.

Among companies in focus, Marvell Technology Group ((MRVL)) slipped 7.5% before the opening bell after the chipmaker posted a quarterly net loss, due to higher spending on research and development. Brocade Communications ((BRCD)) fell 1.7% amid disappointing results.

In the retail sector, Gap ((GPS)) rose 3% after reporting a 19% profit increase on reduced costs and improved its annual earnings outlook. The retailer also announced an additional $1.5 billion stock buyback. Ann Taylor ((ANN)) added 3.5% in pre-open trade as a new marketing chief and a $300 million stock repurchase program offset a 27% drop in Q2 profit.

In deal-related news, Home Depot ((HD)) is reportedly likely to receive $1.2 billion less than its originally agreed $10.3 billion for its wholesale distribution arm. S&P 500 futures fell 1.30 points, roughly in line with fair value. Dow Jones industrial average futures slipped 4 points, and Nasdaq 100 futures fell 4 points. U.S. stock futures were indicating a positive opening Friday, as stronger-than-expected.


[R]8:30AM New York, 8:30PM Hong Kong – Asian markets weaken today, but rose sharply for the week.[/R]

The end of the week and subprime mess in the U.S. was on the mind of traders.

Across the region most markets closed lower except in India, China, and Indonesia. Australia led the region with a loss of 1.02% followed by 0.7% decline in Philippines, 0.5% losses in Korea and Taiwan. Japan fell 0.4%, Hong Kong dropped 0.2%, and Thailand decline 0.1%. India led the region with a gain of 1.8% followed by rise of 1.5% in Shanghai trading, and 1.2% in Indonesia.

For the week Hong Kong led the region after soaring 12% followed by rises of 9.7% in Shanghai, 9.4% rise in Korea, 7.4% in Australia, and 6.4% in Japan. The CSI 300 index in China, for the week soared 13%.

The new funds from retail investors keep pouring in the stock market, despite a rise in bank interest rate this week. CSI 300 index is now up whopping 155%, the best performer among all world indexes.

The Bank of China fell 6.6% in Hong Kong trading but gained 1% in Shanghai. Industrial & Commercial Bank increased 0.7% as the CSI index reached a record close for the fifth day in a row. Shanghai Pudong jumped 5.5% and China Merchants Bank soared 4% in the bank sector rally. Shanghai Composite index rose 1.5% to close at 5,107.67.

The Bank of China led Hong Kong trading with a turnover of HK$5.6 billion followed by China Life with HK$3.8 billion, and China Mobile with HK$3.5 billion.

The Bank of China reported that it has subprime exposure of $9.7 billion and has placed in reserve $132 million to cover losses in the investment. The bank raised, in largest IPO in the world, $11 billion in the year 2006. While the bank contends that the portfolio of securities in subprime loans is highly rated, traders expressed skepticism. The quality of ratings from bond market rating agencies have become a suspect and several investors are worried that many of the so call high quality securities may not accurately reflect underlying deteriorating assets.

In Sydney trading stocks fell on Friday but closed higher for the week. The ASX 200 closed 1.02% lower and jumped 7.4% for the week. Mining and commodities stocks led the decline after comments from two executives at mortgage lending companies in the U.S. The comments sparked worries that housing market worries may lead to recession in the U.S. and slow down the demand for commodities from Australia. BHP Billiton fell 2.9% to A$36.60 and Rio Tinto lost 2.1% to A$89.10. Insurance Australia Group lost 7% after reporting second half profit decline of 31% to A$207 million. PaperlinX, largest local paper company, fell 3.6% after reporting annual profit decline of 23% to A$80 million.