Skid Continues for Tech

Prudential cut Intel to underweight from neutral and lowered its price target by $11 to $21 a share. The move was part of a larger call on semiconductors, a sector Prudential now views as unfavorable after a flurry of supplier warnings. Prudential said Intel could see revenue deceleration and suffer from heightened competition.

That competition is coming from Advanced Micro(AMD), which reported a 73% jump in earnings Tuesday to $76 million, or 18 cents a share. Revenue rose 23% to $1.52 billion. Analysts wanted 8 cents a share on sales of $1.38 billion.

AMD estimated sequential microprocessor sales growth of 7% to 13% in the fourth quarter, a performance that would represent nearly 50% growth from a year earlier. Still, the stock, which sports a multiple of about 30 times next year's expected earnings, finished down $3, or 12.5%, to $21.

Intel shed 18 cents, or 0.8%, to close at $23.24. The losses in both AMD and Intel sent the Philadelphia Semiconductor Sector Index down 0.4%.

Paul Mendelsohn, chief investment strategist with Windham Financial, said that "technology stocks have been one of the bright spots of the market recently, as portfolio managers have been buying these issues, on expectations that falling oil prices might lift the sector. With weakness and rotation out of banking and financial stocks, a loss of technology leadership at this juncture could spell a lot of trouble for U.S. equities."

Oil continued a nearly $2 rally on Tuesday. Concerns about the winter heating season and continued supply disruptions in the Gulf Coast sent November crude up 59 cents to close at $64.12 a barrel in Nymex floor trading. Gasoline futures were unchanged at $1.83 a gallon. The Energy Department's weekly supply report will be released Thursday, delayed one day because of the Columbus Day holiday.