Novellus Undone by Merrill Downgrade

Updated from 9:33 a.m. EDT

Novellus (NVLS Quote) said Monday morning that second-quarter earnings rose fivefold from a year ago, thanks to margin improvement leveraged to robust semiconductor-equipment demand that Wall Street worries is peaking. Management also forecast a robust financial outlook for the quarter under way, and sought to allay investor fears about what many fear is a looming slowdown in the chip industry.

But the stock was recently down $1.76 or 5.7% to $29.29, as the semiconductor equipment space was the subject of negative research Monday by Merrill Lynch. The brokerage firm downgraded Intel to neutral from buy and the semiconductor equipment space to neutral from overweight. Other stocks falling included Applied Materials, ASML and KLA-Tencor . The Philadelphia Stock Exchange Semiconductor Index was recently down 3.3%. ...