- The Washington Times - Tuesday, January 11, 2005

NEW YORK (AP) — Stocks sagged yesterday as a disappointing sales forecast from Advanced Micro Devices Inc. sparked pessimism about semiconductor issues, putting buyers on the run.

The prospect of flagging revenue and profits in the chip sector hit investors after a weak start to the fourth-quarter earnings season. Less-than-stellar results from Alcoa Inc. and Genentech Inc. — the first two major companies to report — inspired little conviction.

“There’s a sense that nobody wants to buy right now. It’s earnings week, the numbers have been choppy at best … I think people are just waiting to see how things shape up,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “I’m not seeing a lot of selling; it’s more a case where people have their wallets on their hip. There’s no urgency.”

The Dow Jones industrial average fell 64.81, or 0.61 percent, to 10,556.22, its lowest close since Dec. 10.

Broader stock indicators also slumped to fresh lows for the new year. The Standard & Poor’s 500 index was down 7.26, or 0.61 percent, at 1,182.99, a five-week low. The Nasdaq Composite Index dropped 17.42, or 0.83 percent, to 2,079.62, its worst finish since Nov. 19.

Despite the losses, analysts weren’t overly alarmed by the day’s trading, or the fact that the major indexes are all down for the year — traditionally a negative indicator for Wall Street. Market fundamentals remain strong, and there have been enough exceptions to January’s “early warning” system that it’s reasonable to question its accuracy, said Richard A. Dickson, senior market strategist at Lowry’s Reports Inc. in North Palm Beach, Fla.

“I think the jury is still out as far as which way this thing is going to go. We think the correction has further to run; how far, I have no idea,” Mr. Dickson said. “But once this correction runs its course, we think then the market runs higher again. We’re positive for the market on the year.”

The fact that investors apparently have factored so much bad news into stocks so early in the earnings season may work in the market’s favor, Mr. Dickson added. “There seems to me to be mostly room for surprise to the upside.”

That didn’t seem to be the case yesterday, as Advanced Micro Devices (AMD) sank 26.2 percent, or $5.27, to $14.86, following the chip-maker’s warning that its fourth-quarter operating income would be “down significantly” from the third quarter. Several investment firms, including Lehman Brothers and Piper Jaffray, cut their ratings after the company issued its forecast late Monday.

The news weighed on other stocks, with AMD rival and Dow component Intel Corp.’s shedding 34 cents to $22.54. Intel gained nearly 3 percent in after-hours trading after it reported earnings and revenue that beat Wall Street expectations. Thanks to robust holiday sales, the company earned $2.12 billion, or 33 cents per share, on revenue of $9.6 billion. Analysts had expected earnings of 31 cents on sales of $9.4 billion.

Also on the Dow, leading aluminum producer Alcoa declined 82 cents to $29.65 after missing Wall Street profit forecasts by 2 cents per share. The company blamed higher commodity prices and the weak dollar for an 8 percent drop in net income.

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