Stocks Mixed on Tech Downgrade

Technology shares were broadly lower Monday after brokerage Merrill Lynch downgraded the semiconductor sector, but the market overall was mixed as investors awaited this week’s flurry of quarterly earnings reports.

Although many analysts still expect strong second-quarter results, stocks have struggled since July 1 amid earnings warnings from the tech sector and some weaker-than-expected economic data.

The tech-dominated Nasdaq composite index fell 9.41 points, or 0.5%, to 1,936.92 on Monday, though it closed above its intraday low of 1,921.

The Dow Jones industrial average ended with a gain of 25 points, or 0.2%, to 10,238.22 after trading in negative territory for most of the session.

The broader Standard & Poor’s 500 index inched up 1.54 points, or 0.1%, to 1,114.35.

Winners outnumbered losers by about 5 to 4 on the New York Stock Exchange, but losers dominated on Nasdaq.

So far this month, Nasdaq is down 5.4%, the Dow is off 1.9% and the S&P; 500 has fallen 2.3% as some investors have turned cautious about the economy.

Trading volume has been light, however, suggesting that many investors are staying on the sidelines. Most of the earnings warnings from the tech sector have been from small and mid-size companies.

“Right now, there’s not a lot of impetus for anybody to do anything out there,” said Keith Keenan, an institutional trader at Wall Street Access.

That could change if some big-name companies’ quarterly profit reports are disappointing, he said. Among the firms that plan to issue results this week are chip giant Intel -- which is expected to report today -- Apple Computer and IBM.

Merrill Lynch set a poor backdrop for Intel’s results by lowering its rating on the entire chip-stock sector from “overweight” to “underweight,” citing weaker-than-expected demand for both personal computers and corporate hardware.

The brokerage firm downgraded Intel to “neutral” from “buy.” The stock fell 33 cents to $26.24 and traded as low as $25.68. It is down 18% this year.

Of 35 stocks in a Morgan Stanley index of major tech shares, 23 declined Monday as the index lost 0.8%. IBM bucked the downtrend, gaining $1.06 to $84.95.

Among Monday’s highlights:

* In the chip sector, Cypress Semiconductor lost 53 cents to $11.29, Broadcom slid 58 cents to $38.73 and Texas Instruments was off 46 cents to $22.34.

* Novellus Systems, which makes chip-production equipment, fell $1.33 to $29.72 even though it said second-quarter earnings beat Wall Street estimates by 3 cents a share. The company also reported lower-than-expected bookings of new orders.

Rival Teradyne dropped $1.01 to $19.75. Another chip-equipment maker, Applied Materials, was off 48 cents to $18.18.

* General Electric helped buoy the Dow. The stock rose 43 cents to $32.60. The company on Friday reported better-than-expected quarterly earnings and said the economy was the “best we’ve seen in years.”

Other big-name stocks gaining ground included Caterpillar, up $1.15 to $78.23; Eli Lilly, up $1.12 to $68.12; and Procter & Gamble, up 16 cents to $54.88.

* NCR, the world’s largest maker of automated teller machines, jumped $4.79, or 10%, to $51.81 for the S&P; 500’s biggest increase. Excluding a gain, second-quarter profit was more than 35 cents a share, compared with the average 18 cents that analysts polled by Thomson First Call expected.

* The banking sector had a strong showing in its first earnings reports of the quarter. Atlanta-based SunTrust Banks beat expectations by 3 cents a share on gains in its investment, mortgage and wealth management businesses. SunTrust gained $1.62 to $66.00. M&T; Bank of Buffalo, N.Y., surged $3.70 to $91.60 after it too beat Wall Street expectations.

Other financial stocks rising sharply included Cathay General, up $1.48 to $65.43; Downey Financial, up $1.74 to $52.66; and Comerica, up $1.09 to $54.26.

* The yield on the benchmark 10-year Treasury note eased to 4.45%, its lowest level in two months, from 4.46% on Friday. The bond market largely brushed aside two regional manufacturing reports showing upticks in factory output in Chicago and Kansas.

* Oil fell 46 cents to $39.50 a barrel in New York. Higher OPEC supplies have helped bring prices down from 21-year highs above $42 in recent weeks.

* The dollar traded close to a two-week low against the yen after Japanese Prime Minister Junichiro Koizumi, who has presided over the longest economic expansion in seven years, won enough seats in Sunday elections to retain power.