US Stocks Mixed; Investors React To Dow Member Earnings

NEW YORK (Dow Jones)--Investors' mixed reactions to a number of earnings reports are putting pressure on the Dow Jones Industrial Average at the same time Intel and Microsoft earnings have helped the Nasdaq.

Volume has been a problem for the market in recent days, with many investors staying away until they see evidence of more positive prospects for the economy and corporate earnings. That's been causing some choppiness among equities and has put a cap on gains.

"The problem is we need to get a new catalyst to get people back from the sidelines," said Art Hogan, chief market strategist at Jefferies & Co. "Whether it's a successful completion of the first-quarter reporting season or a string of really strong economic data, the market needs something."

Among tech blue chips, at least, investors are experiencing some encouragement from the latest earnings reports although guidance remains mixed. Microsoft reported third-quarter earnings of 26 cents a share, two cents higher than analysts expectations after the closing bell Tuesday. The stock has climbed 93 cents, or 3.8%, to 25.54 even though tit reduced its fiscal fourth-quarter earnings estimates to 23 cents or 24 cents a share. Analysts had expected earnings of 24 cents a share.

Intel is also providing some relief for the tech sector. The chip maker posted first-quarter profit of 14 cents a share, 2 cents better than what analysts expected. Revenue for the quarter was $6.75 billion, beating the $6.7 billion analyst projection. Intel gave a wide target for second-quarter revenue, forecasting between $6.4 billion and $7 billion. Wall Street expects $6.62 billion. The stock has climbed 1.11, or 6.5%, to 18.24.

The Dow Jones Industrial Average is off 15 points to 8389, the Nasdaq Composite Index has gained 23 to 1414 and the Standard & Poor's 500 Index is up 3 to 894.

The Russell 200 Index of small stocks has climbed 1.57, or 0.41%, to 381.17 and the Standard & Poor's SmallCap 600 Index has added less than a point to 191.88.

J.P. Morgan is up 49 cents, or 1.8%, to 27.36 after the company reported first-quarter earnings of 69 cents a share, sharply higher than Wall Street estimates of 51 cents a share. But the stocks gains have been capped by the company's chief financial officer's guarded optimism for the rest of the year.

Coca-Cola, however, is putting some pressure on the Dow. The company reported first-quarter earnings of 34 cents a share, in line with analysts' expectations but volume growth was only 4%. The stock has fallen 2.33, or 5.5%, to 40.20.

Altria is also under water, weighing on blue chips, even as the company reported first-quarter earnings of $1.07 a share, one cent better than expectations. But Altria said that its first-quarter results were overshadowed by developments in a class-action lawsuit against Philip Morris USA, the company's domestic cigarette unit. The stock is off 65 cents, or 2%, to 31.80.

Also on the Dow, Caterpillar has inched up 47 cents, or 0.9%, to 52.82 after the company reported first-quarter earnings of 37 cents a share, handily beating forecasts of 25 cents a share.

While Dow earnings are certainly attracting the most attention, investors also have some economic data to sift through. March housing starts surged 8.3% to a seasonally adjusted annual rate of 1.780 million. A separate report showed consumer prices rose 0.3% in March, following a 0.6% increase in February. Economists surveyed by Dow Jones Newswires had forecast an increase of 0.4%.

Volume on the New York Stock Exchange is 343 million shares, with up volume ahead of down, 215 million to 124 million. Advancers outpace decliners, 1,715 to 1,127.

Volume on the Nasdaq is 273 million shares, with up volume ahead of down, 234 million to 40 million. Decliners outpace advancers, 1,360 to 1,031.

-By Shaheen Pasha, Dow Jones Newswires; 201-938-2312; shaheen.pasha@dowjones.com .

Chip Stock Rally May Be Short-Lived Amid Earnings Worries

By Donna Fuscaldo of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Following upbeat earnings reports from chip bellwethers Intel Corp. (INTC) and Texas Instruments Inc. (TXN) investors bid up shares of most things semiconductor Wednesday, even sending the Philadelphia Semiconductor index up nearly 4%.

But the rally, which recently sent Intel's stock up 6.4%, to $18.22, and Texas Instruments stock up 10.4%, to $19.01, may be short-lived.

While it's true both Intel and Texas Instruments beat analysts expectations for the first quarter, industry watchers caution that business at most chip companies isn't rebounding just yet.

"If you listen to what the companies are saying, yes, things are better but visibility continues to be low," said Eric Ross, an analyst at New York-based research firm Investec. "Everyone said we haven't seen the switch turned on yet."

Indeed, chip companies have been cautious about what they are willing to say about the remainder of the year, given geopolitical events and the sluggish economy.

Intel did forecast a revenue range for the second quarter that has the midpoint better than past second quarters, and Texas Instruments said it expects sales in the June-ending quarter to climb 8% from last year, topping analysts forecasts. Those outlooks, coupled with strong first-quarter results, have fueled optimism that the semiconductor sector is finally on the mend, resulting in Wednesday's rally. "The reason the Philadelphia Semiconductor Index is where it is today is that people believe or at least trying to believe business is going to do better in the second half and continue to do better through 2004," said Joseph Osha, an analyst at Merrill Lynch & Co. "The question is: is the business on the mend, and the answer is, we don't know and nothing we heard yesterday answers that question in a convincing way." While the sector is notorious for its volatility, with huge swings both up and down, analysts generally expect the stocks to be trading within a range, at least until later this quarter or possibly this year. They say Wednesday's stock prices likely mark the high point for semiconductor stocks for some time to come.

"What I expect to happen is (semiconductors) will have a good day today, maybe a good day tomorrow, and then we're going to see a return to the range they've been trading in for a while," said Merrill's Osha.

He said a better inflection point will be later in the year, when chip companies either prove their estimates were realistic or way off the mark.

Investec's Ross thinks it will take even longer than that. He said corporate information technology spending will have to improve for chip stocks to trade higher.

"I don't really see an upturn in semis until you see a return of the enterprise buyer," said Ross. "It will be in 2004 before that really starts to take hold."

But not every Wall Street watcher is taking a bearish approach when it comes to investing in semiconductors. Aziz Hamzaogullari, an analyst at Evergreen Investments in Boston, said that even though uncertainties will abound, chip stocks should outperform the overall market, in large part because technology is one of the only subsegments of capital spending that's improving.

"What's happening right now is these companies are coming out with much healthier outlooks than people were expecting, especially given the uncertainties," said Hamzaogullari. "There's a lot of subcurrents people are coming to appreciate more as these results come out."

-By Donna Fuscaldo, Dow Jones Newswires; 201-938-5253; donna.fuscaldo@dowjones.com .

(END) Dow Jones Newswires 04-16-03 1524ET- - 03 24 PM EDT 04-16-03

we are still trading at pretty high multiples

Yep.

I think the funds bought tech stocks 'hoping/assuming' things could not get worse, and recently others have bought on headlines, and then sold after studying the returns and rallies didn't materialize.

The reality is the [not quite] earnings are being met on other than product/service fundamentals, and the [unconfident] guidence indicates more of the same at best. To say nothing of the warnings, losses, underfunded pensions, continue layoffs (CNBC surveys estmate addtional 10,000 for April 7th week - to 415,000 I think), debt, etc.

So the earnings aren't likely to catch up to the price and stocks remain and look to continue to be overpriced, at least for one more quarter. Fortunately the recovery isn't due until (say it with me now) "the second half".

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.