Worries About Intel’s Earnings Trip Market
Intel--again!
Wall Street tumbled in a late sell-off Wednesday on fresh worries about the computer chip titan’s earnings.
The Dow Jones industrial average ended down 87.44 points, or 1%, at 8,803.80, its seventh loss in nine sessions.
The Nasdaq composite index, heavily weighted with Intel and other key tech stocks, sank 19.48 points, or 1.1%, to 1,742.31.
Intel turned what had been a lackluster session into a down one. The stock plunged $3.31 to a 52-week low of $65.94 after analyst Robert Chaplinsky at brokerage Hambrecht & Quist trimmed his current-quarter earnings estimate to 65 cents a share from 69 cents.
“We’ve seen a slowdown in Europe, and we continue to see PC manufacturers cutting inventory levels,” Chaplinsky said in an interview with Bloomberg News. “With this kind of environment, it’s going to be difficult for component suppliers like Intel to achieve their unit sales.”
There also was speculation that Intel would itself issue a warning about current-quarter results. But after the market closed, the company said it has no plans to warn of a shortfall.
That helped lift the shares somewhat in after-hours trading.
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Intel, a Wall Street bellwether in recent years, stunned the market in the first quarter by warning of lower-than-expected sales and earnings. On Monday, its shares led a broad market decline after the company said it would delay its next-generation microprocessor.
The entire tech sector has been under pressure as Asia’s economic disaster cuts demand for tech equipment in that part of the world and as U.S. consumers demand ever cheaper PCs.
“There is a valuation reevaluation underway in technology as the price of components continues to plummet with no more business in Asia and with the traditional summer slowdown ahead,” said Scott Bleier, chief investment strategist at Prime Charter Ltd.
As for the broad market, “I don’t think the correction is over until the Dow hits 8,600,” he said.
On Wednesday losers outnumbered winners by 2,269 to 1,771 on Nasdaq and by 1,588 to 1,417 on the New York Stock Exchange.
The Standard & Poor’s 500 index dropped 1% to 1,082.73. It now is down 4.2% from its recent peak. The Nasdaq index is down 9.1% from its peak.
Battered Asian markets were mixed Wednesday, setting a better tone for Wall Street’s opening. The Hong Kong market rebounded 2.6%, South Korea gained 2.6% and Taiwan was up 1%.
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Also, Russian stocks gained 8% as the troubled government’s treasury bill auction attracted the strongest demand in months on expectations that foreign lenders will grant Russia a bailout loan.
Russia also floated a five-year, $1.25-billion Eurobond issue, yielding about 12%.
In currency trading, the dollar weakened as foreign turmoil ebbed. Meanwhile, in U.S. bond trading, yields ended slightly lower as traders awaited Friday’s government report on May employment, which could provide strong clues about the economy’s pace.
Among Wednesday’s highlights:
* Losers in the tech sector included IBM, down $1.69 to $113.88; Microsoft, down $1.19 to $84.31; Dell, off $2.38 to $80.25; Computer Associates, down $1.81 to $51.19; and Ingram Micro, off $4 to $39.38.
Also, disk drive maker Komag plunged $1.19 to $8 after warning of a current-quarter loss.
* Some drug stocks were hit by profit-taking. Bristol Myers lost $2.38 to $106.63, Merck fell $2.06 to $112.56 and Pfizer eased 50 cents to $102.88.
Also in the health-care sector, Tenet slumped $2.94 to $31. Brokerage BT Alex. Brown trimmed earnings estimates on concerns about Medicare changes. Troubled Cohr fell $1.25 to $4.63 despite naming a new chief executive.
* On the plus side, some telecom equipment stocks gained on news of the Ciena-Tellabs merger deal. DSC Communications rose 88 cents to $19.69, Nokia gained 94 cents to $64 and PairGain Technologies rebounded $1.38 to $14.50. But Newbridge Networks plunged $4.63 to $25.38 even though its quarterly earnings met estimates.
* Airline shares also were strong, with US Airways up $1.13 to $70.94 and Delta up $3.81 to $116.69.
Market Roundup, D8
