Market Update: Markets Remain Underwater on Busy Earnings Day - TheStreet

After an initial pop into the green, the major indices lost their snap and crackle and slipped southward. They were lately accelerating into the red. Breadth was looking pretty ugly by midmorning, while new 52-week lows were being hit all over the place.

Blame it on the chip sector, again. News that semiconductor testing equipment manufacturer

Teradyne

(TER) - Get Report

expects softness in fourth quarter sales and lower-than-expected earnings further exacerbated concern over slowing demand in the chip sector. And that fear is spreading to the rest of tech.

Analysts were already sending out negative vibes on the sector before Teradyne spoke this morning. Both

Morgan Stanley Dean Witter

and

PaineWebber

downgraded chipmaker

Micron Technology

(MU) - Get Report

, and UBS Warburg lowered its expectations for prices on commodity chips, or

DRAM.

Intel is making an effort to lower its chip prices, which some fear could bring about a price war with rival

Advanced Micro Devices

(AMD) - Get Report

. Prices for other chips could then topple in sympathy.

Teradyne fell to a new 52-week low, losing 26.9% to $25.19. And the chip sector, which was the culprit for yesterday's meager selling on the

Nasdaq Composite Index, was taking it badly. The

Philadelphia Stock Exchange Semiconductor Index

was lately down 8.2%. Only

Intel

(INTC) - Get Report

was holding steady, up 0.2%. The company reports earnings tonight, but the bad news has already been discounted. Intel warned it would miss estimates last week and the company has already lost half its value since early September.

America Online

(AOL)

, meanwhile, was socking it to the Internet sector. The company was hitting a new 52-week low, hurt by a research comment that said its revenue weakness is coming from contract business. America Online was 13% lower, while

TheStreet.com Internet Sector

index was down 4.4% and

TheStreet.com E-Commerce Index

was also off 4.4%.

Microsoft

(MSFT) - Get Report

was having a rare bright day, though it wasn't doing much to trim losses on the Dow.

Goldman Sachs

said the company's shares may be due for a relief rally -- particularly if the company's results show some ramping in corporate-PC demand. Shares were up 1.4% .

Elsewhere on the Dow,

Citigroup

(C) - Get Report

was falling despite reporting strong earnings this morning. Citigroup also saw its 2000 and 2001 EPS raised by

UBS Warburg

. But, lo and behold, the company's shares were falling 1.9%.

And on the happy side of tech, electronic-commerce software maker

BroadVision

(BVSN) - Get Report

was pretty popular with investors this morning after it was announced that it will be admitted to that exclusive corporate club, the

S&P 500. BroadVision will replace brokerage

PaineWebber Group

( PWJ) in the S&P 500 Index on Monday. BroadVision was the most active stock on the Nasdaq this morning, and was lately trading 11.8% higher to $26.63.

A few tech stocks were hitting new 52-week highs, including fiber-optics company

Ciena

(CIEN) - Get Report

and handheld-computer maker

Handspring

( HAND). Ciena was up 1.2% to $136.75 and Handspring was up 3.9% to $80.56.

Ciena was up after UBS Warburg raised its 12-month price target to a whopping $175 from $108.

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Sector Watch

Despite news of the cease-fire agreement, oil prices had rebounded -- lately up 8 cents to $33. Concern that continued violence in the region might threaten supply to the U.S., where reserves are already critically low, have pushed prices ever higher over the last two weeks.

That's good news for energy companies, and the

American Stock Exchange Oil & Gas Index

was up 0.7%.

TheStreet.com Internet Sector

index began to drop again after seeing some gains Monday, lately down 4.4%. Losses were led by Yahoo! and AOL, both of which were hitting new 52-week lows.

Biotechnology stocks continued higher following three days of rallying this morning, with the

Nasdaq Biotechnology Index

1.2% higher.

Defensive stocks like the drugs and tobaccos were getting some attention as investors looked for safe havens. The

American Stock Exchange Pharmaceutical Index

was up 1.1%, and the

American Stock Exchange Tobacco Index

was also 1.1% higher.

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Bonds/Economy

Mideast concerns continue to dominate trading in bond markets. The bond market has largely ignored the latest U.S.

industrial production

(

definition |

chart |

source

) data and prices are flat to modestly lower. Industrial output for September rose 0.2% after a revised 0.4% gain in August, further evidence that the economy is slowing in line with the "soft landing" theory. The index's quarterly figures support a soft-landing theory even more. In the third quarter, output rose at only a 2.8% annual rate. In the prior period the annual rate of growth was a strong 8.2%.Following the data, the 10-year note was off by 2/32 at 100 2/32, yielding 5.74%. The 30-year bond was unchanged at 106 7/32, yielding 5.81%.

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