Friday, October 17, 1:00 PM EDT: Investors continue to actively sell
shares this afternoon, as a batch of technology earnings are providing the
inspiration. Sun Microsystems and Broadcom are under heavy selling pressure
after sharing their respective reports. Meanwhile, Internet issues are also
suffering on dour fourth-quarter forecasts from eBay and DoubleClick.
Disappointing news from MedImmune is also dragging that issue lower. Treasury
prices are jumping higher.
* The Nasdaq Composite Index is tumbling 28.28 to 1921.86, while the Dow
Jones Industrial Average is weakening 42.00 to 9749.72. The S&P 500
Index is dragging 7.36 to 1042.71. The 10-year Treasury note is adding
15/32, yielding 4.41%.
* Leading tech earnings, Sun Microsystems said that sales for its fiscal
first quarter fell 8% to $2.536 billion. Its net loss was $0.09 a
share, wider than the $0.04-a-share loss recorded a year earlier.
According to Thomson First Call, Wall Street was expecting the hardware
firm to post a loss of $0.08 a share, in a range of $0.07 to $0.10 a
share. Sun is currently weakening.
* Meanwhile, chipmaker AMD is rising, on word it posted a net loss of
$0.09 a share for the third quarter, much narrower than last year's
loss of $0.74 a share. Sales climbed sharply, hitting $954 million from
last year's $508.2 million. Wall Street was looking for a loss of $0.36
a share, on average. Looking ahead, AMD believes fourth-quarter sales
will increase. In response, DB Securities raised AMD's stock to a
"hold" from a "sell" recommendation. Turning to research, UBS lowered
its stance on Micron Technology to "neutral" from "buy," pressuring
that stock.
* Communications chip maker Broadcom is tumbling after it recorded a much
narrower third-quarter GAAP net loss from last year. On a pro forma
basis, the company earned $0.14 a share, surpassing forecasts for $0.12
to $0.13 a share. Sales climbed to $425.6 million, up 46.8% from a year
ago. Looking forward, Broadcom anticipates a 7% to 9% sequential rise
in fourth-quarter revenue, based on strength across its business units.
Still, Salomon Smith Barney downgraded that stock to "sell" from
"hold," on worries the firm's sales growth next year may be limited.
* Also, online auctioneer eBay posted a profit of $0.16 a share for the
third quarter, up from $0.11 a share last year, but hitting the lower
end of Wall Street forecasts for $0.17 to $0.19 a share. The mean
forecast was for $0.18 a share. Sales in the quarter jumped to
$530.9 million from $288.8 million. For the fourth quarter, eBay sees
earnings of $0.21 a share, excluding items, on sales as high as
$590 million. For 2004, earnings per share are seen reaching $0.98 on a
pro forma basis, below the mean analyst view of $1.05. Subsequently,
Pacific Growth cut eBay's rating to "underweight" from "equal weight."
That stock is slumping.
* Online advertising firm DoubleClick is plummeting, after it provided
third-quarter revenue and a fourth-quarter forecast that fell short of
analyst expectations.
* Out of the insurance space, XL Capital warned that its third-quarter
earnings will fall about 57% below analyst forecasts due to growing
losses in its North American reinsurance operations. The losses stem
from new claims in its 1997 to 2000 underwriting years. That stock is
plunging.
* Biotech shares are crumbling, after MedImmune acknowledged that Wal-
Mart Stores will not hold a national flu vaccination program this year
that would have offered customers MedImmune's FluMist vaccine. One the
report, US Bancorp cut its rating to "outperform" from "strong buy."
* Food retail issues are weighing heavily on the staple sector.
Supermarket chain Great Atlantic & Pacific Tea Co. posted a loss of
$2.17 a share, compared with last year's $3.76-a-share loss. Excluding
discounted operations, the company's loss was $1.62 a share, much wider
than the $0.73 to $1.02 a share loss Wall Street had been forecasting,
according to Thomson First Call.
* In deal news, Endo Pharmaceuticals Holdings offered to purchase Cima
Labs for $444 million in cash and stock, establishing a three-way
takeover battle with aaiPharma and Cephalon.
* On the economic front, housing starts climbed 3.4% in September to a
seasonally adjusted 1.888 million annual rate. August starts fell by a
revised 3.4%, previously estimated as declining by 3.8%. The Street
expected starts to advance to a 1.860 million rate in September.
Additionally, the University of Michigan consumer sentiment index
advanced to 89.4 in the preliminary October reading from 87.7 in
September. That outpaced expectations for an increase to 88.5.
-- Linda.Shea@thomson.com; Thomson Financial Corporate Group
This is Thomson Financial's Market Commentary, which is issued four times
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Close (5:00 p.m.). The information herein is believed to be true and
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the right to update our reports. For more information about Thomson Financial
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SOURCE Thomson Financial Corporate Group
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