FYI | Oct 04 2007
By Rudi Filapek-Vandyck
Computer chips took centre stage on Wall Street last night as analysts at Morgan Stanley issued a report with the term “correction” in it and the message was not lost in an overall shaky environment. Technology stocks have been amongst the best performers recently but last night the party was over.
The Philadelphia Stock Exchange Semiconductor Sector Index, which is comprised of 19 semiconductor stocks, was down 2.4% to fall back to the level it was at before a recent two-week rally.
The correction referred to by Morgan Stanley had little to do with global growth or share price valuation with the analysts talking up the possibility of an “inventory correction” for computer chips, advising clients should sell shares of Intel Corp and Advanced Micro Devices, the world’s two biggest manufacturers of pc chips, otherwise known as computer processors.
Morgan Stanley said a global supply glut may trigger a price war and shares of Intel declined the most in a month. Elsewhere Micron Technology posted its steepest drop in a year after the largest US memory-chip maker reported a third straight quarterly loss.
Meanwhile the fall out from the sub-prime mortgages crisis is leading to job losses at financial institutions. One of the worst hit sub-prime victims, Bear Stearns, announced yesterday it would restructure its mortgages businesses and shed 310 jobs. Bear Stearns is the second-biggest underwriter of US mortgage-backed securities.
Another Wall Street powerhouse, Merrill Lynch & Co, said it had fired the global chief of its fixed- income division, Osman Semerci, and one of his top two US deputies, Dale Lattanzio, after incurring losses in credit markets.
More bad news was delivered by oil company ConocoPhillips, the third-biggest of its kind in the US, with the company announcing refining margins narrowed last quarter. Energy stocks fell one percent as a group.
At the closing bell the Standard & Poor’s 500 Index had lost 7.04, or 0.5%, to 1,539.59, the Dow Jones Industrial Average had lost 79.26, or 0.6%, to 13,968.05 and the Nasdaq Composite Index had lost 17.68, or 0.6%, to 2,729.43.
Economic data further added to the overall negative sentiment with the released ADP Employer Services report suggesting hiring still lags behind the first half of 2007. The market is now anxiously awaiting the government’s October 5 jobs report.
(Greg Peel will be back on Monday)
