Semiconductor Stocks Under Pressure

Elena
12 Oct, 2005
New York City

The tech sector is a notable decliner in early going on Apple's disappointing outlook and Intel's downgrade. Various Fed officials are to speak during the day and market is nervous. Alan Greenspan said that the economy was weathering the climb in energy prices.

U.S. MARKET AVERAGES

U.S. stock markets opened below the flat level on disappointing quarterly revenue from Apple Computer Inc which raised concerns about corporate profits. Rising oil also caused disturbance and is likely to put off some investors from buying stocks. The major averages have recently moved up, benefiting from bargain hunting and upbeat news from a blue chip. The Nasdaq has been suffering from weakness in tech stocks, which added to investors' worries about the state of the economy. An analyst downgrade of Dow Jones industrial Intel Corp. added to the bearish take on tech.

On the economic news front, Alan Greenspan delivered a speech early Wednesday, but it did not prove enough to instill confidence in a stock market that's dropped sharply since the start of the fourth quarter. He pointed that due to a remarkable increase in the flexibility of the U.S. economy, it succeeded in recovering from shocks, such as stock market crashes, credit crunches, terrorism, and hurricanes and the steep rise in spot and futures prices for oil and natural gas.
The Fed Reserve Chairman did not comment specifically on interest rates increses, but his comments suggested that the strong U.S. economy could handle them.


The drug sector is the most notable gainer in the early going, climbing by 1.3%, boosted Pfizer ((PFE)), which is up 4% on news of a positive patent ruling by a British court. Gold stocks also post gains.

The computer hardware sector is declining in early trading, largely due to a 6% decline in Apple Computer Inc ((AAPL)). The disk drive sector is down by 1.3%, dragging the technology group down. Housing and airline stocks are showing modest weakness.

The Retail sector is down by 1.1% as stocks have weakened lately and are now among the day's worst performers. The biotech space is now showing a considerable decline, falling about 1.1% on the day.


MOVERS AND SHAKERS

Apple ((AAPL)) reported yesterday fiscal fourth-quarter profit that rose four times as a result of increasing sales of iPod music players and Macintosh PC's, but revenue was behind expectations. In the quarter ended September 24, Apple earned $430 million, or 50 cents a share, on $3.69 billion in sales, compared to a-year-earlier period, when it earned $106 million, or 13 cents a share, on sales of $2.35 billion. Apple dropped 3.6%.

Advanced Micro Devices ((AMD)) posted a higher-than-expected third-quarter profit, but the company’s stock dropped 4.5% due in part to concerns over valuation. Advanced Micro said that net income rose 73% to $76 million, or 18 cents a share, up from $44 million, or 12 cents, in the same period for 2004. Revenue rose 23% to $1.52 billion.

Motorcycle maker Harley-Davidson ((HDI)) exceeded analysts forecasts with almost 16% year-over-year increase in third-quarter profits. The company posted third-quarter earnings of $265 million, or 96 cents a share, up from $229 million, or 77 cents a share, in the same period for 2004. Revenue increased in the three months ended September 25 to $1.43 billion from $1.3 billion in 2004. The Milwaukee-based company’s stock added 5.7%.

Chip maker Intel ((INTC)) lost 1.6% after the company was downgraded at Prudential to “underweight” from “neutral”. The broker cited problems that may hurt revenue and margins. Prudential also cut its sector rating on chips to “unfavorable”.

Bed, Bath & Beyond ((BBBY)) was downgraded at CS First Boston to 'neutral' from 'outperform'. The company is expected to be active today.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks closed mostly down after the Nikkei fell off a four-year intraday high to close down 0.7%, reflecting consumer confidence decline in September and a decision of the Bank of Japan to leave monetary policy unchanged. Across the region, South Korea’s Kospi tumbled 2.2% on tech shares sell-off after LG Philips released lowered earnings outlook. Shares in Hong Hong dropped 2.2%, while in Australia gained 0.8%.

European markets lost ground at mid-day dealings due to mixed corporate news and advancing crude oil prices, which almost reached $64 a barrel. The German DAX 30 lost 0.6%, the French CAC 40 slipped 0.4%, and London’s FTSE 100 shed 0.3%.

ENERGY, METALS, CURRENCIES

Oil prices hover near $64 a barrel on IEA’s global demand outlook and winter supply concerns. Light sweet crude for November delivery gained 64 cents to trade at $63.99 a barrel on the Nymex. Heating oil rose nearly a cent to $2.0262 a gallon. Gasoline prices inched up to $1.8378. Natural gas advanced 7 cents to $13.592 per 1,000 cubic feet. London Brent added 46 cents to $60.54.

In European trading gold prices climbed on higher energy costs which increased the appeal for the precious metal, seen as a hedge against the inflation. In London gold December contract traded at the recommended price of $477.75 per troy ounce, up from $476.05. In Hong Kong gold fell 30 cents to $478.25. Silver opened at $7.82, down from $7.85.

In European trading the U.S. dollar traded mixed against its major counterparts. The euro was quoted at $1.1990, down from $1.9993. The dollar changed hands at 114.49 yen, up from 114.42. The British pound was trading at $1.7459, up from $1.7457.

EARNINGS NEWS

Host Marriott ((HMT)), full-service hotel properties holding company, reported Q3 funds from operations advanced to 19 cents a share, up from 6 cents a share in the year-ago period, as revenue rose 7.7% and comparable hotel revenue per available room went up 8%, topping analysts’ forecasts of 17 cents a share. The company added that insurance coverage should be enough to cover all of the property damage to the New Orleans Marriott and the near-term loss of business.

Regis Corp. ((RGS)), hair-care service provider, reported Q1 sales rose 15%, with same-store sales up 0.9%. The impact from hurricanes cut down revenue for the period by $2.1 million.

Virginia Commerce Bancorp Inc. ((CBI)), commercial banking services provider, posted Q3 net income of 35 cents a share, up from 26 cents in the same period last year, beating analyst estimate of 32 cents a share.The company also stated that net interest income were $14.5 million, up almost 34% from the year-ago period.

Media General Inc, media company, posted Q3 earnings of 41 cents a share, down from 66 cents a share a year-earlier on lower operating income from its Publishing and Broadcast divisions. Revenue advanced 1.5% over the same period last year. The company topped analyst estimate by a penny.

Media General Inc ((MEG)), media company, posted Q3 earnings of 41 cents a share, down from 66 cents a share a year-earlier on lower operating income from its Publishing and Broadcast divisions. Revenue advanced 1.5% over the same period last year. The company topped analyst estimate by a penny.

Lindsay Manufacturing Co ((LNN)), irrigation systems manufacturer, reported Q4 net profit of 3 cents per share, breakeven with last year’s in the same quarter despite 14% revenue decline, missing analysts’ forecasts of 5 cents per share.

Harley-Davidson Inc. ((HDI)) motorcycle producer, posted Q3 net income of 96 cents a share up from 77 cents in the year-earlier period on revenue growth as U.S. retail motorcycle sales rose 12%, beating analysts’ forecasts of 90 cents a share.

Apollo Group Inc. ((APOL)), for-profit education company, reported that Q4 net income advanced to $106.2 million from $15.7 million in the year-ago period. Apart from stock-based compensation charges in both years, income would have been 65 cents a share, up from 52 cents, in same time last year on revenue growth, matching on that basis analyst estimate.

MGIC Investment ((MTG)), provider of private mortgage insurance, posted Q3 net income of $1.55 a share, up vs. $1.36 a share in the year-earlier period, beating analysts’ expectations of $1.51 a share.

Fastenal Co. ((FAST)), industrial and construction supplies distributor, posted Q3 net income of 61 cents a share, up from 46 cents a share in the same period last year on 23% sales growth, beating analyst estimate of 57 cents a share.

M&T Bank Corporation ((MTB)), commercial and retail banking services provider, reported Q3 net profit of $1.64 per share, up 5% from $1.56 in the year-earlier period, missing analysts’ forecasts of $1.70 a share. Q3 results reflect a $29 million non-cash charge related to preferred stock issuances of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.