Optimism on Tech Boosts Stocks
Optimism that the beleaguered technology sector was due for a recovery sent stocks modestly higher Monday despite a revenue warning from semiconductor company Broadcom.
Irvine-based Broadcom, which makes chips for television set-top boxes and other electronics, said high inventories resulted in delayed shipments. But investors were encouraged as it said future quarters looked brighter, sending shares up $2.30, or 9.4%, to $30.30.
“Tech acts like that. You couldn’t have said a good thing about tech last week, and now we’re seeing some buying,” said Bryan Piskorowski, market analyst at Wachovia Securities. “Overall, I think the market’s becoming comfortable with the economic slowdown over the summer. I think we see now that it’s not something pervasive or something that’s going to continue.”
Investors were also encouraged by a new report by J.P. Morgan Securities, which said disappointing earnings would not be a factor in the year’s overall results. The brokerage also raised its year-end target on the Standard & Poor’s 500 index to 1,200, from 1,150.
The Dow Jones industrial average gained 1.69 points, or 0.02%, to 10,314.76.
Other stock indicators were moderately higher. The Standard & Poor’s 500 index was up 1.90 points, or 0.2%, at 1,125.82, and the Nasdaq composite index rose 16.07 points, or 0.8%, to 1,910.38.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange and by about 3 to 2 on Nasdaq.
Investors preferred semiconductor companies and small-cap stocks, while bidding financials and blue-chip stocks lower for the session.
Many investors awaited better economic data later in the week, including readings on retail sales and the consumer price index today. The Federal Reserve’s Sept. 21 meeting on interest rates, at which the Fed probably will raise the benchmark rate a quarter percentage point to 1.75%, also kept some investors on the sidelines.
Broadcom said it now expected revenue for the quarter to come in flat or slightly higher than a year ago. The company said customers of its set-top box chips had asked for shipping delays because of excess inventory, but added that it still expected growth in future quarters.
“I think people believe that we’re at the lows for tech right now. They want to be optimistic. That’s why you’re seeing techs respond so well, even on the bad news,” said Michael Palazzi, managing director of equity trading at SG Cowen Securities. “And in semiconductors, you always get a nice bounce in late September and October. It just seems to be happening early this year.”
In other market highlights:
* Crude oil rose in New York as the approach of Hurricane Ivan disrupted production and tanker shipments in the Gulf of Mexico, where a quarter of U.S. oil and natural gas is pumped. A barrel of crude settled at $43.87, up $1.06 in New York trading.
Among major oil stocks, ChevronTexaco of San Ramon, Calif., rose 92 cents to $50.94 and Los Angeles-based Occidental Petroleum climbed 88 cents, to $53.48. Valero Energy increased $2.38 to $71.07.
* U.S. Treasury yields slumped, with some traders awaiting the retail sales and consumer price index reports -- the results of which could potentially mean a slower pace of official interest rate hikes. The yield on the benchmark 10-year note dipped to 4.14%, down from 4.19% on Friday.
* Struggling airline US Airways Group tumbled 44 cents, or 30%, to $1.02 after it filed for bankruptcy protection, as expected. The nation’s seventh-largest airline will continue operations as it attempts to sort out its finances.
* Sony gained 53 cents, to $35.82, after agreeing in principle to acquire Metro-Goldwyn-Mayer. The deal was disclosed after Time Warner said it would drop its bid for MGM. Time Warner shares fell 6 cents, to $16.45. MGM rose 44 cents, to $11.55.
* Tribune, owner of the Los Angeles Times, fell $1.35, to $40, after an analyst downgraded the stock to “in-line” from “outperform.” The stock is trading near a two-year low. E.W. Scripps lost 23 cents, to $51.22, after saying it was still assessing hurricane damage at newspapers and a television station in Florida, and may be forced to take one-time charges.
* Campbell Soup dropped 70 cents to $25.50, after fourth-quarter profit fell because of lower sales.
