It's not looking good for the chip sector.
Following some disastrous downgrades on some semiconductor names this morning, the
Nasdaq Composite Index was lately parked firmly in the red. The
Dow Jones Industrial Average zig-zagged from the green into the losing zone.
Semiconductor stocks were a mess after
Salomon Smith Barney
downgraded semiconductor-equipment makers
Salomon said it downgraded the stocks because of a continued deterioration in the market for general-purpose semiconductor chips. Lehman said that, while it expects both companies to report better-than-expected earnings per share from revenue growth, it predicts that revenue growth for the next two quarters is likely to slow noticeably as inventory levels rebalance.
Altera was lately down 27.7% to $29.56; Xilinx was lower by 27.2% to $57.63.
Other sector names were suffering, including
, down 10.4% to $32.13, and
, down 11% to $42.63.
Philadelphia Stock Exchange Semiconductor Index
, known as the SOX, was down 9.9% to 708.1. Bellwether
was slipping another 1.9% after a month of free fall during which its market capitalization was cut almost in half.
The analyst comments on semiconductors were hurting
, after the company announced plans to invest $5 billion to expand its chip-making business. Following the recent barrage of tech earnings warnings, the market has begun to fear that IBM might also report earnings below estimates, and possibly even pre-announce an earnings warning. IBM reports earnings on Oct.17. IBM was off 3.4% to $113.94.
On the Dow, strength in drug stocks
and diversified industrial
was outpacing weakness in IBM and financials like
Financials were weak ahead of the onset of earnings season for the sector. Reports on earnings from banking companies start coming out this week, but the bulk of this sector's earnings is set to hit the market next week.
After over a month of slogging lower through the nastiest earnings
preannouncement season in a
time, today kicks off
earnings season, with Internet bellwether
and telecom and semiconductor equipment firm
scheduled to report their earnings after the close today. Yahoo! was lately rising, while Motorola was sinking.
was one of the
NYSE's heroes after the European Union said it had approved the automaker's plans to buy diesel-engine manufacturer
"There's a reason why investors are going to hold tight and sit tight. They're not going to make any strong commitments, because you've got earnings from Motorola and Yahoo! after the close and a rise in oil prices," said Hugh Johnson, chief investment officer at
A few companies that warned of earnings warnings last night, such as
, were catching hell from investors. Central Parking was down 8.7% to $17.75, and Silicon Graphics was down 6.5% to $3.63.
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Brokerage stocks were seeing a third day of weakness after getting badly hit Friday by concerns of margin calls and chatter over rumored losses on junk-bond trading. Investors are worried that trading-related losses will hurt the revenues of the big brokerages.
wrote about one brokerage's
denial of the rumors as well as a
preview of financial services sector earnings. The
American Stock Exchange Broker/Dealer Index
was 1.4% lower to 593.5.
Banks and insurance companies were also weaker. The
Philadelphia Stock Exchange/KBW Index
was down 2.6% to 835.2 and the
S&P Insurance Index
was off 0.2% to 755.2.
Oil and gas stocks were once again flying on rising oil prices. The
American Stock Exchange Oil & Gas Index
was up 2.7% to 545.1, while the
American Stock Exchange Natural Gas Index
was 4% higher to 231.3.
Cold weather and escalating tensions pushed oil prices about 65 cents higher overnight. U.S. oil reserves are already at a 24-year low, and a number of refineries are reducing their capacity this month for maintenance.
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Bond prices were under pressure as oil was trading at a two-week high in response to Middle East strife and falling temperatures. Rising oil prices alarm bond investors because they threaten to lift the overall inflation rate. There are no major economic releases today.
Treasury Securities are also concerned about a possible onslaught of new corporate bonds, which compete with Treasuries for investor dollars.
are all expected to float multi-billion dollar bonds before the end of the year. The Unilever deal is expected by the end of next week. The timing of the rest is uncertain, but they are considered likely to come this month.
The benchmark 10-year
Treasury note lately was down 3/32 to 99 12/32, lifting its yield to 5.833
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