It has been a roller-coaster week on Wall Street, and today's volatility
was further fueled by economic concerns and a downgrade of the
microprocessor sector's shining star.
Intel (INTC) shares lost as much as 7.4 percent before closing the day at
96-1/4, down 2-1/8 from yesterday, after Tom Kurlak, an analyst with Merrill Lynch, downgraded the stock to "near-term neutral" from "buy."
Kurlak also downgraded Texas Instruments (TXN) to a "near-term neutral" from "accumulate" and kept the long-term rating at "buy." The stock closed at 118-3/4, down 6-1/4 points from yesterday.
Kurlak said the companies' businesses have softened and will go sideways
for the near term. He expects the companies will not duplicate their growth
the second half of last year.
But some analysts question if the Intel downgrade is the cause of the tech
Brian Eisenbarth, an analyst with Collins
& Company, said the cause was an overall downward turn in the markets.
"Intel has become a big enough stock that it is market-driven," he said,
noting that the downgrade has contributed to some profit-taking. (Intel is
an investor in CNET: The Computer Network.)
Bruce Lupatkin, the research director at Hambrecht & Quist, agrees that Intel is
not the cause of the downward turn in the tech stocks. He said that the
real issue is the fear of interest rates being raised again.
That fear stems from the UPS strike settlement and investors' concerns that
it will prompt other unions win higher concessions from companies, Lupatkin
said. That, in turn, could drive up labor costs, leading to inflation and
raised interest rates, he said.
Although recent economic indicators and the Federal Reserve Board meetings
have given no indication that rates are on their way up, analysts say
become jumpy as Fed's release their report each month.
Even if the semiconductor sector steps back to take a breather, a year of
strong growth is on the books. Seth Dickson, a research analyst at
Hambrecht & Quist said, "the sector rebounded from a correction, and now it
is driven by not just the personal computer market, but by other emerging
markets, like the communications and telecom sectors. Those other sectors
will be the catalysts going forward."
He expected the long-term
growth rate for the chipe sector to be in the high teens through at least
the year 2000.
The markets were largely down across the board today.
The Dow Jones Industrial Average, which dropped 250 points last week, fell as much as 198.59 points before recovering ground to close at 7887.91, down 6.04 from yesterday. The technology-laden Nasdaq index was off as much as 38 points, before closing at 1598.69, down 8.67 from yesterday.
Reuters contributed to this story