This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Short Circuit the Semis

Stocks in this article: SSG AA HMC TM TXN INTC

Editor's note: This piece originally ran earlier today on our newest Premium service, ETF Profits . Click here for a 14-day trial to this exciting product!

Earnings season is just beginning and it has taken a tumble already with Alcoa's (AA) revenue stream coming up a bit light. The higher cost of materials was cited as the reason for the shortfall. With commodity prices skyrocketing lately, AA won't be the only company that will have to contend with higher input costs.

Last week, the European Central Bank (ECB) hiked interest rates for the euro zone, joining the central banks from Australia, Brazil, China and India, which aggressively raised rates over the last year. The ECB's main concern has been that inflation may be starting to spiral out of control, which would raise concerns that the anemic global recovery could be derailed by higher costs.

We experienced similar conditions in the 1970s, when slow growth was accompanied by ever-rising costs. This period was known as the era of stagflation and it was defined by high unemployment, rising costs and a decreasing standard of living for many people.

In addition to the increasing costs for raw materials, the situation caused by the Japanese earthquake and subsequent tsunami has resulted in a supply disruption for many manufacturing companies. This problem has been well documented for the Japanese auto companies, Honda Motor (HMC) and Toyota Motor (TM).

Less understood, however, is the adverse effect for the semiconductor industry. Japan produces approximately 40% of the world's memory chips and accounts for at least 20% of the total global production of semiconductors. Texas Instruments (TXN) had a factory in Miho, Japan, that will most likely remain closed until June. This plant had generated 10% of the company's revenue in 2010.

Tech sector earnings will be watched over the next couple of weeks in light of the recent problems and tougher year-over-year comparisons to beat. The first quarter earnings bar is set pretty high for all companies.

The ProShares UltraShort Semiconductor Fund (SSG) corresponds to twice the daily inverse of the Dow Jones U.S. SemiconductorSM Index. While there are a total of 52 companies that make up the semiconductor index, Intel I (INTC), with a 30.7% weighting in the fund, and TXN, a 10.2% holding, are the dominant weightings for the fund's performance.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs