NEW YORK (CNN/Money) -
Intel's sales warnings pummeled the Nasdaq Friday, sparking fears that the chip leader's concerns indicate a broader industry slowdown.
The Dow industrials managed smaller losses, as investors eyed a mostly in-line monthly jobs report.
The Nasdaq composite (down 28.95 to 1,844.48, Charts) fell 1.5 percent and also closed lower for the week, breaking a two-week winning streak. For the five-day period, it lost 0.9 percent.
Chips were hit hardest by the Intel announcement, pushing the Philadelphia Semiconductor (down 19.76 to 357.84, Charts) index, or the SOX, down 5.2 percent. In addition to Intel, other smaller names in the sector also issued profit warnings.
The Dow Jones industrial average (down 30.08 to 10,260.20, Charts) lost 0.3 percent and the Standard & Poor's 500 (down 4.68 to 1,113.63, Charts) lost 0.4 percent.
For the week, the Dow gained 0.6 percent and the S&P 500 gained 0.5 percent. For both indexes, it was the fourth week of gains in a row.
Treasury bond prices fell in response to the jobs report, as investors bet it meant the Fed would still raise rates later this month. The 10-year note yield rose to 4.29 percent from 4.21 percent late Thursday. Treasury prices and yields move in the opposite directions.
In currency trading, the dollar rallied versus the euro and yen.
Trading volume was anemic, ahead of the three-day holiday weekend. Financial markets are closed Monday in observance of Labor Day.
Intel decks techs
Intel (INTC: down $1.58 to $20.05, Research, Estimates) cuts its third-quarter sales forecast late Thursday and warned that gross margins, a key measure of profitability, would fall below earlier estimates. (For a detailed look at Intel's midquarter update, click here.)
"We had an HP warning, that hurt us, now Intel," said Ram Kolluri, chief investment officer at GlobalValue Investors. "Everybody's 'fessing up, saying their earnings will be short for the year."
Intel stock tumbled 7.3 percent Friday, as did a variety of tech issues, with investors taking the news as confirmation that the demand for chip products has diminished.
"The techs have been beaten up for the past few months because the so-called tech spending recovery has not met expectations," Kolluri added.
Kolluri noted that after rallying sharply in 2003, chips have been hit hard this year and are now the worst performing group in the S&P 500 year-to-date. "And unfortunately, this group probably has more digestion ahead of it," he added.
Jobs report nearly as expected
Outside of the tech sector, the broader market took some comfort from a jobs report that mostly met estimates.
Employers added 144,000 jobs to their payrolls last month, versus an upwardly revised 73,000 the previous month, according to a government report released early Friday. Economists were expecting 150,000 jobs, on average. June's numbers were also revised upward.
The unemployment rate, generated by a separate survey, fell to 5.4 from 5.5 percent last month. Economists thought it wouldn't budge.
"The payroll number was generally in line," said Paul H. Levine, president of Lifetime Financial Strategy, "but unfortunately, what's not often talked about is how many people are dropped from the survey because they are so discouraged that they stop looking for work."
"Corporations remain wary. Many of the jobs that are being created don't pay as well as the ones that were lost," he added. "It's just not a robust, job-producing market."
Other analysts argued that the growth in payrolls, paired with the upward revisions for June and July, provided some encouragement for market participants.
"The employment news this morning provided some support for the market, counterbalancing the news out of Intel," said Sarat Sethi, a portfolio manager at Douglas C. Lane & Associates.
"I think seeing the revisions, seeing that job growth is recovering, gives investors some confidence that the recent economic soft spot was just a soft spot," he added.
Also released: the August read on the services sector of the economy from the Institute for Supply Management. Released around 30 minutes after the start of trading, the index fell to 58.2 in August from 64.8 in July, short of expectations for a fall to 62.2.
Chips dip on Intel
Among movers, most of the biggest chipmakers and chip gear makers fell, in response to Intel.
Texas Instruments (TXN: down $0.96 to $19.17, Research, Estimates) lost nearly 5 percent and Advanced Micro Devices (AMD: down $0.77 to $10.90, Research, Estimates) lost 6.6 percent.
Smaller chip gear makers Altera (ALTR: down $1.25 to $17.81, Research, Estimates) and Cypress Semiconductor (CY: down $0.86 to $8.85, Research, Estimates) also cut their current-quarter forecasts and their stocks fell accordingly.
Xilinx (XLNX: down $1.66 to $25.59, Research, Estimates) lost over 6 percent, in tune with the sector and in response to a downgrade from A.G. Edwards.
Other tech names outside the semiconductor sector fell too, including Hewlett-Packard (HPQ: down $0.31 to $17.70, Research, Estimates), Cisco Systems (CSCO: down $0.55 to $18.75, Research, Estimates) and Microsoft (MSFT: down $0.50 to $27.12, Research, Estimates).
Shares of Electronics for Imaging (EFII: down $4.38 to $16.22, Research, Estimates), which makes printing technology, fell 22 percent after warning that its third-quarter sales and earnings would miss expectations due to poor sales in its print controller business.
On the upside, shares of staffing firm Manpower (MAN: up $1.75 to $45.20, Research, Estimates) rose 4 percent in response to the jobs report and an upgrade from Smith Barney Citigroup. The rest of the staffing and job search sector was mixed.
Additionally, some oil stocks rose, with the Philadelphia Oil Services (Charts) index rising 1.6 percent.
Volume has been very light for the last two weeks, as is typical in late August, when many people go on vacation. However, that has been exacerbated this week due to the Republican National Convention in New York City, which concluded Thursday night with President Bush accepting his party's nomination.
On the New York Stock Exchange, losers beat winners by more than nine to seven as just under 922 million shares changed hands, making it the third lightest session of the year.
On the Nasdaq, decliners topped advancers nearly two to one as 1.24 billion shares traded. It was one of the 10 lightest Nasdaq sessions of the year.
COMEX gold fell $5.50 to settle at $402.50 an ounce, falling with other dollar-traded commodities.
Light crude oil for October delivery turned weaker after see-sawing all morning, settling at $43.93 a barrel on the New York Mercantile Exchange, a decline of 13 cents.
|
