Chip-Gear Outlook Ratcheted Down

Chip investors' faith in a 2002 economic recovery has fueled a dramatic rally in shares of the companies that make semiconductor equipment. Now one analyst is urging a reality check.

Even given the market's strong performance since it bottomed, the rise in chip-gear stocks has been startling. Since Sept. 21, the S&P Semiconductor Equipment Index is up 51.3%, compared with a 17.5% gain in the S&P 500.

Some of the wind came out Tuesday when Timothy Arcuri, an analyst at Deutsche Banc Alex. Brown, released 2003 earnings estimates for the group that are on average 25% below the existing consensus. Arcuri cited what he said were unrealistic expectations for a rebound in capital spending. ...