Salomon Torpedoes Semis
A downgrade of the semiconductor sector by Salomon Smith Barney cast a shadow
over the market Wednesday, sending the chip group into a freefall. By the end of
trading, the Nasdaq had lost 3.2% while the wounded chip sector surrendered
9.2%. The Dow and S&P 500 lost 0.7% and 1.6%, respectively.
Volume was moderate, with 1.3 billion shares trading on the Nasdaq and 1.0
billion shares trading on the NYSE. Traders commented that the mid-week holiday
would likely keep volume on the lighter side through the remainder of the week.
Earnings warnings from Computer Associates
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also raised anxiety levels in the tech arena. Computer Associates fell 21 3/4 to
29 3/8 while BMC Software sank 14 3/16 to 21 5/16.
The index of leading economic indicators posted a 0.1% decrease for June,
which was in line with Street expectations. The general consensus emerging is
that the effects of a year’s worth of interest rate hikes are starting to kick
in as more and more evidence suggests a cooling economy.
“As for the
Fed, I have a sense they are done. If they could write the script, they would
finish off with a bang with the 50 basis point hike they did in May. That was
like an exclamation point saying they are serious about inflation. It was like
the finishing touch,” said Paul Rabbitt, President, RabbittAnalytics.com.
According to preliminary numbers, the Dow lost 77.07 to 10,483.60, the Nasdaq
slid 128.69 to 3863.24, and the S&P 500 dropped 23.70 to 1445.62.
Top sectors included biotechnology
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up 3.5%, transportation
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up 1.4%.
On the downside were oil services
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down 6.2%, and semiconductors
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The biggest losers in the semiconductor index were National Semiconductor
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down 14%, KLA-Tencor
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Altera
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One tech standout was networking storage company and recent IPO
StorageNetworks
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selloff.
Also strong were the genome-related biotechs, with big gains from Human
Genome Sciences
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up 9 5/16 to 95 1/16, and Amgen
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Among Dow winners were 3M
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up 3.6%, and AT&T
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3.8%, GE
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Despite the weakness in semis and software, some analysts did remain upbeat
about the market’s prospects.
“The best thing occurring in technology land is
that Nasdaq is above its upward sloping 50- and 200-day moving averages, and
the number of new highs is expanding, albeit slowly,” said John Roque, Vice President, Arnhold and
S. Bleischroeder, Inc.
“Since 1996, an upward turn
in the 50-day moving average has been a good sign for Nasdaq,” he added.
Looking ahead, the June employment numbers are due out Friday at 8:30 AM ET.
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