A computer glitch at Moody's ( MCO) caused shares of the bond ratings company to plunge Wednesday and sent other financial stocks down as jittery investors began selling. Moody's experienced a problem that caused some complex European financial instruments to be doled out higher ratings than they should have been given, according to Reuters. The error was discovered in early 2007 and the products were downgraded, but the news was never disclosed. The stock collapsed into its largest one-day drop since being spun off from Dun & Bradstreet. It ended the day down $6.99, or 15.9%, at $36.91. Shares of Hewlett-Packard ( HPQ) were down $1.66, or 3.6%,to $44.80 despite the company reporting a 16% growth in its bottom lineduring the second quarter due to
strongperformance in international markets. Revenue during the quarterrose to $28.3 billion, from $25.5 billion a year ago, with 70% ofsales coming from overseas. H-P had preannounced its results last weekwhen it said it will acquire technology consulting company EDS ( EDS)for $13.9 billion. Washington Mutual ( WM) gave back 4.4% to $9.40 after Moody's downgraded the rating on its covered bonds. This acion follows the recent downgrades of the senior unsecured debt of Washington Mutual Bank. The concern from Moody's is the increased potential exposure of covered bond investors to the risk of a liquidation of the cover pool in a short time frame in the event of a default. Analog Devices ( ADI) lost $1.40, or 4%, to $33.52 afterthe chipmaker reported its second-quarter results. Net income for thesecond quarter rose to $133.1 million vs. $125.4 million a year ago.Revenue rose 8.7% to $649.3 million and EPS, excluding items, were 44cents. Analysts were expecting a profit of 41 cents a share on revenueof $627.2 million. The company reported a gross profit margin of 61%,down from 61.2% in the first quarter.
For the third quarter, AnalogDevices guided earnings of 43 cents to 45 cents a share on $650million to $665 million in revenue. Analysts are expecting a profit of43 cents a share on sales of $638.8 million. Westborough, Mass., information technology services company Virtusa ( VRTU) stumbled 12.8% to $10.45 after offering weak guidance. The firm predicted earnings between 70 cents and 79 cents a share for the fiscal year ending in March 2009. Analysts polled by Thomson Reuters are expecting EPS of 90 cents. Shares of U.S. Geothermal ( HTM), a Boise, Idaho, company that develops geothermal properties, soared 8.8% to $2.59. RBC Capital Markets initiated coverage of the stock with an outperform rating. U.S. Geothermal also announced a joint venture with Gerlach Green Energy to explore the Gerlach geothermal system located in northwestern Nevada.