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Warnings, downgrades
concern tech investors
NEW YORK >> An analyst downgrade of the semiconductor sector sent technology shares lower yesterday, but the overall stock market ended mixed as large-caps benefited from a late-day rally.
Merrill Lynch cut its rating on the entire sector from "overweight" to "underweight," citing lower-than-expected demand for both personal computers and corporate hardware. The firm also downgraded Intel Corp. a day before it was due to release its earnings.
While some analysts still expect a strong second quarter, investors were concerned by the continuing stream of earnings warnings and analyst downgrades. However, most of the bearish news was confined to the technology sector, and earnings from banking companies brought large-cap stocks higher.
Yet the news was sufficiently muddled to cause concern on the part of veteran market watchers.
"The market isn't really responding to good earnings," said Todd Leone, managing director of equity trading at SG Cowen Securities. "Expectations have been lowered, so I suppose there's a chance we can see a little bit of a rally as earnings season moves forward, but I really don't know what to expect."
The Dow Jones industrial average gained 25, or 0.2 percent, to 10,238.22 after drifting in negative territory most of the day. The Dow finished higher for the second straight session.
Broader stock indicators were mixed. The technology-focused Nasdaq composite index fell 9.41, or 0.5 percent, to 1,936.92, while the Standard & Poor's 500 index was up 1.54, or 0.1 percent, to 1,114.35. The Nasdaq has shed 5.4 percent of its value this month, but the S&P 500 edged back into positive territory for the year.
Trading was light in advance of major earnings reports later in the week, including announcements from Intel, Apple Computer Inc., Johnson & Johnson Co. and Bank of America.
"Right now, there's not a lot of impetus for anybody to do anything out there," said Keith Keenan, vice president of institutional trading at Wall Street Access. "The tech stocks are getting hit hard, and if you see an Intel or IBM come out with a warning or lower earnings, then you could see significant downside. But until then, it's wait and see."
The downgrades in semiconductors weighed on the entire technology sector. Intel slipped 33 cents to $26.24, while Novellus Systems, a microprocessor equipment provider, fell $1.33 to $29.72 despite beating Wall Street estimates by 3 cents per share.
Bond prices finished yesterday slightly higher, with trading remaining quiet in the absence of fresh economic news. The price of the benchmark 10-year Treasury note rose 18 point and its yield fell to 4.45 percent from 4.46 percent late Friday.
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