U.S. techs rally, shrugging off H-P’s news
Market shrugs off H-P’s bad news Techs rally; blue chips also join in the party
NEW YORK (CBS.MW) — The market made an impressive comeback Thursday, with the major averages valiantly overcoming an early deficit as tech stocks swelled in the face of grim news from Hewlett-Packard. Both the Dow Industrials and Nasdaq gained respectable ground for the second straight session. “Investors like everything tech Thursday,” exclaimed Art Hogan, chief market analyst at Jefferies & Co. “The market is oversold and people are just looking for an excuse to buy. But we remain range-bound and have another week of earnings (that’ll keep us) guessing,” Hogan concluded. Within tech, all groups enjoyed smart gains — even the hardware group battled back after slumping under the weight of H-P’s steep decline. But the real stars that provided the Nasdaq its underpinning were the chip, networking, storage and fiber-optic sectors. The broad market also joined in the tech rally and decent upside was seen in natural gas, utility, oil, transportation and brokerage issues. And biotech shares rallied on the back of a surge in shares of Affymetrix following its quarterly results. Red spots were indeed hard to find on traders’ screens and only gold stocks ended with losses. Check latest market stats. The Dow Jones Industrial Average ($INDU) ascended 49.96 points, or 0.5 percent, to 10,455.63. The most solid gains came from American Express, Walt Disney, General Motors, Boeing and Intel. Leading the Dow’s list of losers were shares of Hewlett-Packard, Philip Morris, Microsoft and McDonald’s. “The market worked off the H-P news and (fought) off its lows. It’ll be another quarter at least but we’re getting close to the end of this downdraft,” remarked Scott Curtis, head of U.S. equity trading at Credit Lyonnais. The Nasdaq Composite ($COMPQ) climbed 38.64 points, or 1.9 percent, to 2,022.96 while the Nasdaq 100 Index ($NDX) rallied 45.53 points, or 2.8 percent, to 1,673.39. Market watchers said that investors may be looking to dip their toes in the market now that the earnings season is winding down. “Obviously techs, and specifically chips, are the reason we’re trading higher. Now that we’re nearly done with earnings, investors feel (more comfortable) bottom picking. They’re less at risk of being slammed with bad news contained in a company’s quarterly report,” said Peter Boockvar, equity strategist at Miller, Tabak & Co. Boockvar attributed the stellar gains in the chip sector Thursday to encouraging comments made by National Semiconductor at a Robertson Stephens tech conference in San Francisco. The Standard & Poor’s 500 Index ($SPX) jumped 1.0 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks rallied 1.7 percent. Volume came in at 1.22 billion on the NYSE and at 1.77 billion on the Nasdaq Stock Market. Market breadth was decidedly positive, with winners trouncing winners by 19 to 12 on the NYSE and by 21 to 15 on the Nasdaq. Read for post-market trading activity. Individual stock and sector action Chip stocks were the day’s most impressive gainers and the Philly Semiconductor Index ($SOX) climbed 6.3 percent, with all of its components up sharply. All of the SOX’s components ascended, with National Semi surging 12 percent, Linear Technology 14.1 percent, Altera 8.4 percent and Lattice Semi 8.2 percent. More bad news from PC and server giant Hewlett-Packard took its shares down 6.5 percent but the Goldman Sachs Hardware Index ($GHA) still managed a nifty, 2.4- percent gain. The Dow company (HWP) said it will slash 6,000 jobs as it looks to improve its cost structure. The workforce reduction is expected to save about $500 million annually. Additionally, H-P said it expects to report a decline in revenue of 14 to 16 percent year-over-year in its fiscal third quarter. First Call/Thomson Financial had been expecting a 6-percent revenue decline. The company blamed deteriorating global economic conditions and weakness in technology spending, especially in the consumer sector. Shares of the Dow stock dropped 6.5 percent. Among other PC stocks, Compaq (CPQ) rose 2.7 percent after posting late Wednesday a second-quarter profit of 4 cents a share, matching the First Call estimate. Looking to the third quarter, however, the PC maker said a challenging economic environment and difficult year-over-year comparisons will likely produce EPS of 7 to 9 cents a share vs. the current Wall Street estimate of 9 cents a share. And third-quarter revenue will be in a range of $8 billion to $8.4 billion compared with analyst expectations of $9.3 billion. UBS Warburg said in a research note that it would not disagree with the argument that Compaq offers investors great value at current price levels. “But we see no evidence of an improvement in demand and no signs of a change in Dell’s aggressive pricing. We are uncomfortable with all the PC hardware stocks in the short term,” analyst Don Young concluded. Storage stocks rebounded furiously after taking a hit on Wednesday. QLogic, which fell almost 16 percent Wednesday, flew 10.5 percent while EMC climbed 6.1 percent and Emulex rallied 10.3 percent. Software stocks mirrored advances in the broader tech sector, adding to Wednesday’s smashing gains. Oracle climbed 0.8 percent, Siebel Systems 3.4 percent and PeopleSoft 9.2 percent following a 12 percent rally Wednesday. One holdout was Microsoft (MSFT), which held its analyst meeting Thursday and fell 1.3 percent. SG Cowen said the primary issue for the software kingpin is the tradeoff between higher growth and lower margins from new products. The firm maintains a “neutral” rating on the stock, pointing to a high valuation and a lack of earnings acceleration in 2002 as factors that will limit the upside. Broadband and fiber-optic issues were standouts Thursday, with Corning leading the pack. The stock (GLW) rallied 13 percent after posting late Wednesday a profit from operations of 29 cents a share in the second quarter vs. the 18 cents that had been expected by First Call. The company said its results surpassed expectations thanks to good pricing on optical fiber and cable as well as strong demand internationally. Warburg cut 2002 EPS estimates on Corning to reflect a deteriorating outlook for fiber in terms of volumes, pricing, and product mix in 2002. Checking stocks in Corning’s peer group, Ciena gained 6.8 percent, Sycamore Networks 10.6 percent and JDS Uniphase 7.7 percent. JDS (JDSU) posted after the close a fiscal fourth-quarter loss from operations of 36 cents a share. The results missed the expected 3-cent profit by a mile. JDS also announced it would slash up to 16,000 jobs. Among individual movers, WorldCom (WCOM) put on nearly 9 percent In the phone sector after indicating that, despite sharply lower profits, it’s still on track to meet prior estimates for full-year growth. Gains in the biotech group were fueled by a better-than-expected quarterly report from Affymetrix, pushing the Amex Biotech Index ($BTK) up a lofty 4.2 percent. The company (AFFX) posted late Wednesday a second-quarter loss from operations of 8 cents a share vs. the 13-cent loss expected by First call/Thomson Financial. Shares surged 31.4 percent and got upgrades from both CS First Boston and J.P. Morgan. And Celera Genomics (CRA) climbed 5.7 percent after posting a fiscal fourth-quarter loss from operations of 56 cents a share, two cents narrower compared to Wall Street’s projections. Viacom (VIA) surged 7.7 percent after posting a second-quarter profit of a penny a share, one cent ahead of expectations. Retail stocks regained their footing late in the session, with Kmart (KM) up 3.5 percent, underpinned by an upgrade from UBS Warburg to a “hold” from a “reduce.” The firm said the move was prompted by a recent visit with management that increased confidence in its near-term earnings outlook. Fellow discounter Wal-Mart rose 0.7 percent. Read for the latest earnings news. Treasury focus The government bond sector gained traction even as stocks rallied. Investors took heart in the morning’s tame inflation news. The 10-year Treasury note was up 11/32 to yield ($TNX) 5.14 percent while the 30-year government bond added 1/4 to yield ($TYX) 5.58 percent. The second-quarter employment cost index rose 0.9 percent vs. the expected 1.0 percent increase. Wages and salaries rose 1 percent in the second quarter and benefits costs also climbed 1 percent compared to a 1.3 percent increase in the first three months of the year. June durable goods orders fell 2 percent vs. expectations for a 0.9 percent decline. Excluding transportation, orders lost 1.5 percent and excluding defense orders, the number dropped 1.7 percent. Finally, weekly initial claims tumbled 51,000 to 366,000 – the largest drop since March. . “It is tempting to argue that these numbers strongly support our contention that the economy is turning and that the rate of layoffs is slowing, but the more likely explanation for this drop is that it reflects the end of the auto sector retooling shutdowns. That said, we do think the underlying trend in claims is now flat, though it is still high enough to ensure the unemployment rate keeps rising for some time yet,” commented Ian Shepherdson, chief U.S. economist at High Frequency Economics. On tap Friday: the advance reading of the second-quarter gross domestic product, seen registering a 0.8 percent gain, June new homes sales, expected to come in at 924,000, and the Michigan Consumer Sentiment Index. and economic calendar and forecasts. In the currency segment, dollar/yen edged up 0.1 percent to 123.67 while euro/dollar slipped 0.3 percent to 0.8773. Julie Rannazzisi is markets editor for CBS.MarketWatch.com in New York. |
size=2>For late-breaking market news you can’t afford to miss, go to href=”https://cbs.marketwatch.com/” TARGET=”newbrowser”>CBS.Marketwatch.com. |
© 1997-2001 MarketWatch.com, Inc. All rights reserved. Disclaimer. |