labels: investment - general
Blue-chip stocks rise, tech stocks fallnews
20 December 2001
Mumbai: Blue-chip stocks have risen this week, with the Dow closing above the key 10,000-level, but technology stocks sagged on news of profit woes from Motorola and Micron Technology, reports say.

Mobile phone giant Motorola warned of weaker sales and announced job cuts, while No 2 memory chipmaker Micron Technology issued a grim earnings report. Both showed tech companies still face an uphill battle to turn around business, and undermined the Nasdaq market.

Investors overcame their trepidation and extended a buying streak that started this week. They took comfort in a key gauge the Conference Boards US index of leading economic indicators that rose for a second straight month in November, pointing to an economic recovery in the first half of 2002.

"The leading indicators are saying the economy is going to recover and if they do reach an agreement on a stimulus package, all the better," says Hugh Johnson, chief investment officer at First Albany Corp. "It makes the case for a recovery which is already strong better."

US President George W Bush says he had worked out a plan with US lawmakers on an economic stimulus package. Senate Democratic leader Tom Daschle of South Dakota says differences remained, but the market is betting a deal will be struck, analysts say.

The Dow Jones industrial average gained 72.10 points, or 0.72 per cent, to 10,070.49, its first close above the psychologically-important level since 7 December. The broader Standard and Poors 500 Index rose 6.64 points, or 0.58 per cent, to 1,149.56. The technology-laced Nasdaq Composite Index slipped 21.87 points, or 1.09 per cent, to 1,982.89.

"Its this balance between worrying about corporate profits and, Lets look forward to an economic rebound," says John Forelli, portfolio manager at Independence Investment LLC. "Investors are fearful of selling stocks in the thought that in two weeks, theyll be wanting to buy them back."

Blue-chip stocks were supported by news that Citigroup, the No 1 US financial services firm, plans to sell up to 20 per cent of its Travelers Property Casualty unit to the public and spin off the rest to its stockholders by the end of 2002, in a move to ditch the slow-growing and volatile business. Citigroup gained $1.90 to $50. Weakness in technology shares was reflected in semiconductor issues, which retreated broadly under heavy volume. The Philadelphia Semiconductor Index tumbled by 5.20 per cent, to 537.61.

Micron finished the session down $1.61 at $30.20. It reported a bigger-than-expected loss and said sales fell 73 per cent as it continued to be hurt by plunging prices and a glut in capacity. Motorola, the worlds No 2 mobile phone-maker, became the latest telecom equipment firm to admit it has been hit by weak demand after it said it will cut another 9,400 jobs and that it sees lower revenues in 2002. Motorola fell 85 cents to $15.76.

An earnings warning from the worlds top aluminum producer, Alcoa Inc, weighed on the Dow early in the session after it warned earnings were likely to miss Wall Streets estimates due to unpaid bills and charges to restructure operations. Alcoa fell $2.28 to $35.38. The stock market has rallied since late September, but corporate earnings may suffer their worst drop of the year in the fourth quarter.

Companies in the S&P 500 posted a 21.6 per cent tumble in profits for the third quarter, marking the biggest drop in earnings since the last recession of 1991, according to Thomson Financial/First Call. Analysts are forecasting a 20.1-per cent decline in earnings in the fourth quarter, but the research firm believes that the number could widen to 22 per cent.

Solectron Corp, the worlds largest contract electronics manufacturer, saw its shares fall sharply for the second session down $1.29 at $10.81. On 19 December, the company reported a quarterly loss of $52.5 million, and said it saw sharp declines in its personal computer and telecommunications operations.

Calpine Corp was one of the most actively traded issues on the New York Stock Exchange. It rose 69 cents to $14.69, after it said it plans to sell $400 million of convertible debentures amid investor fears that independent power producers will be unable to access funding for their power plants.

Williams Cos, an energy trader and pipeline operator, rose after it said it would cut 2002 capital spending by 25 per cent in a move to strengthen its balance-sheet. It said it may cut earnings growth targets because of the slowing economy and other factors. It rose $2.60 to $24.70.

The stock of Dynegy Inc rose $3.08 to $23.98, after a federal judge handed the company an early victory in its fight to take a lucrative pipeline from its former merger partner, bankrupt Enron Corp, by allowing the lawsuit to be heard in a state court.

One other bright spot was network equipment-maker 3Com Corp, which posted a narrower-than-expected quarterly loss on 18 December and said it hopes to return to profitability by the fourth quarter. 3Coms shares gained 78 cents to $6.09. Oil stocks were helped by news from the US governments Energy Information Administration, which released figures showing a 1.1-per cent drop in fuel inventories.


 


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Blue-chip stocks rise, tech stocks fall