Chip Sector Weak Today — Here’s Why

June 11, 2003
Brice Wightman

Stocks
rallied today, with the Dow up in triple digits; Â the
semiconductors were the weak spot after Morgan Stanley downgraded the sector. Texas Instruments
(
TXN |
Quote |
Chart |
News |
PowerRating)

warned that SARS is having a negative impact
on business. An SEC investigation into Freddie Mac’s accounting practices didn’t
help either. The Dow did briefly break the 9,100 level thanks to Merrill’s
positive comments on IBM
(
IBM |
Quote |
Chart |
News |
PowerRating). Bonds closed slightly lower, and in a
shooting star formation. The government opened a criminal investigation into
Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating). The Fed, in its Beige Book, said the post-war recovery
has been muted.

Weak today were
Semiconductors
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), -0.59%, the only losing sector.

The 10-year U.S. Note
was -035 at 120 070.

The dollar was -0.60 at
93.02.

Gold was +3.50 at
356.20.

Crude Oil was -0.21 at
32.15.

Volume was
1,495,071,000
on the NYSE, and 1,918,204,000 on the Nasdaq.

Market breadth was positive,
with NYSE advancing issues over declining issues by a ratio of 2.59, and up
volume over down volume by a 3.20 ratio. Nasdaq declining issues over advancing
issues at 1.45, and up volume over down volume is at a 1.81 ratio.

Top Dow stocks were:

Stocks in the news:

AT&T
(
T |
Quote |
Chart |
News |
PowerRating) rose after the company’s chairman, David Dorman, said that he expects a dramatic
reduction in company debt. Dorman told investors at AT & T’s annual meeting that
he expects the company to have below $10 billion in debt vs. $12 billion at the
end of its first quarter. Dorman also noted that the company would “set the
standard” in customer service.

Eli Lilly
(
LLY |
Quote |
Chart |
News |
PowerRating) said that it expects second-quarter results to
come in at the high end of estimates. The company is expecting results to come
in between 59 to 61 cents a shares. Lilly also reaffirmed full-year results of
$2.50 to $2.60 a share of fiscal 2003.

Guitar Center
(
GTRC |
Quote |
Chart |
News |
PowerRating)
was higher after it announced
that it would sell $90 million in 4% convertible notes due 2013. The notes would
convert to common shares at $34.58 a share. The company plans to use the
proceeds to pay down debt and redeem its higher-yielding 11% senior notes.

Freddie Mac
(
FRE |
Quote |
Chart |
News |
PowerRating)
fell after the District of Virginia announced it is starting a criminal
investigation into the company.

WebEx communications
(
WEBX |
Quote |
Chart |
News |
PowerRating)

jumped after the company announced
that Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating) would incorporate its corporate meeting center with its
instant messaging system.

Semiconductor equipment
manufacturer Cymer
(
CYMI |
Quote |
Chart |
News |
PowerRating) is off by 5%, but off earlier lows. The
company warned that second-quarter estimates would fall short of expectations
due to weak demand. The company now expects revenues for the second quarter to
come in between $58 and $61 million compared to previous forecast of $67.3
million. Cymer also expects profit margins to be 13% to 17% compared to prior
forecast of 17% to 22%.

Texas Instruments
(
TXN |
Quote |
Chart |
News |
PowerRating)

cut its
second-quarter targets and announced job cuts due to weakness attributed to SARS.
The company now sees results of 6 cents a share compared to previous estimates
of 8 cents a share. Texas also will cut 250 jobs from its Japanese operations.
The company is the third this week to warn due to SARS. TXN closed at 18.86,
down 1.53.

vincentm@tradingmarkets.com

Chip Sector Weak Today — Here’s Why

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