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Today's Market: Intel Weighing Down Dow, Nasdaq Following Negative Solly Note

As the second week of earnings season gets underway, stocks little changed in midday action.

Proceed with caution. The yellow flag is out headed into the afternoon as a negative note about


(INTC) - Get Intel Corporation (INTC) Report

has rippled through both the

Dow Jones Industrial Average and the

Nasdaq Composite Index.

Salomon Smith Barney

cut its earnings estimates on the chipmaker in late-morning, sending the stock down 11.3% to $35.81, where it threw 27 points to the Dow's negative side. Solomon cut its yearly and quarterly earnings per share outlook on the company, while lowering its price target to $50 from $75.

The note caught the Dow, which was up more than 60 points earlier in the morning, by surprise and sent it well off session highs. Still, the Dow surfed into midday with a few positive vibes, man. Yep, the blue-chippers stayed pleasant while Street watchers figure out if Friday's gains have poured a concrete foundation or were nothing more than a paper floor.

Best in show:


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Total dogs: Intel,


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The Comp, on the other hand, experienced none of those good vibrations. No, it's been more like

Brian Wilson, flipping between highs and lows for the entire morning. Things haven't been so groovy, baby. The Comp has been more like the old, reclusive Wilson who was lost for most of the 1970s listening to some head doctor, than the current, ready-to-sing-in-public Wilson. The Comp was not far from session lows, off 40 to 3277.


S&P 500 was weaker, off 6 to 1368. The small guys in the

Russell 2000 rose 2 to 482.

Chips Ahoy!

So what should people make of this Intel warning?

Charles Boucher, semiconductor analyst with

Bear Stearns

, thinks that the Salomon call is nothing more than "manufactured negative news," and that over-focusing on PC sales as a driving factor in the chipmakers' fortunes is misleading.

"What you're getting is people believing that the PC market is a proxy for the chip market," he said. "And that's a misguided view."

Boucher cites the wireless and handheld industries as other markets that are increasingly replacing PCs as the place where semiconductors' wares end up. "They're taking a bigger role in driving demand."

Neither Salomon Smith Barney nor Bear Stearns do investment banking work for Intel.

All in all, Boucher said he remains positive on the sector, citing an earlier-than-usual, pre-Christmas price reduction in chips as a smart move, which could help increase demand ahead of the holidays. He also feels that the semis are in for some good news, with


(ALTR) - Get Altair Engineering Inc. Class A Report

reporting this evening. And Intel's earnings release, which happens tomorrow, shouldn't be shocking. "Intel will reaffirm what it has already said... that the third quarter was not a great quarter."

But are we at a bottom?

"I think last week was a bottom," he said. "And the semis will test the bottom on days like this. We've had some negative news from


(AAPL) - Get Apple Inc. (AAPL) Report



(DELL) - Get Dell Technologies Inc Class C Report

. Today we have some manufactured negative news."

Market Internals

It's like falling in love, you know? The market's taking small timid steps, trying not to scare off the rally by making any large displays of affection. Call it "playing things cool." NYSE breadth was slightly negative on rather moderate volume, while the Nasdaq's losers were also beating the winners.

New York Stock Exchange: 1,238 advancers, 1,406 decliners, 520 million shares. 22 new 52-week highs, 66 new lows.

Nasdaq Stock Market: 1,766 advancers, 1,866 decliners, 916 million shares. 29 new highs, 98 new lows.

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Sector Watch

Over the past 52 weeks, E-Commerce Index

has been terrible, over 100 points off its high of 136.3. Lately, the index has been scraping 52-week lows as many of its components continue to get punished by a market more interested in current earnings than projected ones. The e-tailers were recently up 1%.

That's nice, but don't think this is the beginning of a 52-week-pickup. The main supporter of the index rally, especially with

(AMZN) - Get, Inc. Report

off 10.3% to $25.50, is


, which gained 16.2% to $40.75, extending Friday's rally into this afternoon.

Biotechs and chemicals were nice, too. The

American Stock Exchange Biotechnology Index

rose 3.6%, while the

S&P Chemical Index

rose 2.9%.

Last Thursday, the

S&P Retail Index

, still reeling from the

Home Depot

(HD) - Get Home Depot, Inc. (HD) Report

debacle, hit 52-week lows and landed below 700. The last two trading sessions have been better for the retailers, though. At press time the S&P Retail Index was up 2.7%, led higher by


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and smaller guys like


(GPS) - Get Gap, Inc. (GPS) Report


Circuit City

(CC) - Get Chemours Co. Report


Bed Bath & Beyond

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Some losers: chipmakers in the

Philadelphia Stock Exchange Semiconductor Index

fell 4.8%, hurt by the late-morning downgrade of Intel by Solomon Smith Barney. The drillers in the

Philadelphia Stock Exchange Oil Service Index

fell 2.8%.

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Treasuries benefited at the end of last week as a result of the outbreak of violence in the Mid-East, which gave the bond market enhanced appeal as a safe haven. Today, the overseas currency and equity markets showed signs of greater stability and the bond market was mixed. The liquid 10- year note was unchanged, yielding 5.734%.

Further indications that oil price pressures may be falling came in a statement by the Saudi oil minister who suggested that if oil prices remain above $28 per barrel,


may increase output quotas.

With no major economic news scheduled today, it is unlikely that credit markets will show too much interest in pushing strongly in either direction and early indications of low trading volume would support this view.

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Tech and telecom stocks were mixed in Europe near midsession as investors waited for signs from the Nasdaq market.


FTSE 100

had broken away from the flatline into the green. It rose 76 to 6285.00, closing amid strength.


CAC 40

in Paris rose 24 to 6088, while the

Xetra Dax

in Frankfurt had plunged into the red, off 62 to 6599.

The euro continued lower, lately trading down to 0.8493.

The major

Asian equity markets ended solidly higher Monday, as technology shares were buoyed by the Nasdaq's strong action on Friday.


Nikkei 225

closed up 182.0, or 1.2%, at 15,512.3.

In Tokyo trading, the dollar traded fractionally down to 107.85 yen. The greenback was lately trading at 108.27 yen.

Elsewhere, South Korea's stock market surged more than 7% early on, before trimming those gains by the close. The


index ended up 25.5, or 4.9%, at 550.1. Hong Kong's

Hang Seng

index rose 292.9, or 2%, to finish the day at 14,973.4, reversing a similar percentage drop from Friday.

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