Merrill Call Whips Chips
Updated from 9:05 a.m. EDT
The swoon in semiconductors resumed Monday after Merrill Lynch issued negative research on both Intel (INTC) and the chip-equipment sector.
The brokerage downgraded Intel to neutral from buy one day before it reports earnings, citing uncertainty about technology demand and the stock's valuation relative to its peers. Demand has been a concern since last week's parade of software preannouncements, a series of warnings that led chip investors to sell down the Philadelphia Semiconductor Index 4.8% before it mostly recovered Friday.
The Semiconductor Holders Trust (SMH) was recently down 2.9%, while the SOX was off 3.1%."With questions about demand becoming tougher to answer, we're concerned about the impact that lower manufacturing utilization could have on Intel's gross margin in both the second and third quarters," Merrill wrote. "Intel came into the quarter with high inventory by historic standards, and may face pressure to bring inventory levels down in the third quarter." Merrill also undertook a "broader shift to a more negative stance on the semiconductor business," citing a new belief that industrywide demand is likely to peak at a lower rate and earlier than it previously believed. The brokerage lowered its rating on the semiconductor equipment space to neutral from overweight, a move that was pressuring Applied Materials (AMAT), KLA-Tencor (KLAC) and Novellus (NVLS), despite the latter's
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV