Dismal Tech Stocks

123jump.com Staff
12 Oct, 2005
New York City

For the third day in a row, falling tech stocks dragged broader averages down. Investors, who had bid up stocks of Apple and Advanced Micro before the earnings release, had to settle for a loss of 4.5% and 12%respectively. Apple released video iPod after the close and announced a deal with ABC Televison. Refco stocks drop another 22%.

U.S. MARKET AVERAGES

Tech stocks took it on the chin.

Tech barometer Nasdaq declined by 1% and settled at three-month low after third day of sell-off. The tech stock decline was started in the morning with the disappointing revenue from Apple and weak forecast for the current quarter. It did not matter that Apple had its best year ever and now that the music business form app 40% of the Apple’s business. Apple ((AAPL)) stock fell 4%.

Advanced Micro Devices ((AMD)) also disappointed traders and stock fell 13% for the day. Despite revenue growth of 44% and earnings growth of 73% and declaring earnings of 18 cents and beating the average estimate of 8 cents per share. Prudential downgraded Intel on news of Advanced Micro gaining market share in the chip industry.

The morning weakness in the tech sector spread to the broader market in the afternoon as oil rose above $64 per barrel. For the rest of the session market waited for the news on trade deficit, jobless claims and weekly petroleum report on Thursday. Market watchers expect record August trade deficit of at least $59 billion and initial claims of jobless to surpass 350,000 for the prior week.

With four stocks falling for every stock rising on New York Stock Exchange, market had a decidedly downward bias and at close generated total trading volume of 2.2 billion shares. On Nasdaq for every stock rising three stocks fell and led trading volume to 1.8 billion shares.

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 3.4%.

Advanced Micro Devices ((AMD)) posted a higher-than-expected third-quarter profit, but the company’s stock dropped 11.8% 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 1.3%.

Chip maker Intel ((INTC)) dropped 2.2% 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 down 2.2%.

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 fell across the region on mixed corporate news and crude oil prices, keeping above $63 a barrel. The German DAX 30 lost 0.3%, the French CAC 40 slipped 0.1%, and London’s FTSE 100 shed 0.3%. The euro slightly advanced against the dollar to trade at $1.2027.

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 70 cents to trade at $64.30 a barrel on the Nymex.

In European trading gold prices declined from recent highs. In London gold December contract closed at $475.60 per troy ounce, down from $476.05. In Hong Kong gold fell 30 cents to $478.25. Silver closed at $7.83, down from $7.85.

In European trading the U.S. dollar lost ground against its major counterparts after a 17-month high against the yen. The dollar’s decline came ahead of U.S. trade figures Thursday and after Fed Reserve Chairman’s speech. The euro was quoted at $1.2024, up from $1.9993. The dollar changed hands at 114.40 yen, down from 114.42. The British pound was trading at $1.7518, 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.