January 18, 2007 / 11:13 PM / 13 years ago

Techs drop on Apple, chip makers

NEW YORK (Reuters) - U.S. technology stocks tumbled on Thursday as investors shunned the sector following disappointing outlooks from Apple Inc. (AAPL.O) and semiconductor equipment maker Lam Research Corp. (LRCX.O).

A woman passes an advertisement of Apple Computer Inc's laptop computer in Tokyo September 30, 2006. U.S. blue-chip stocks rose on Thursday after unexpectedly strong housing starts and in-line inflation data boosted optimism about the strength of the economy. But the Nasdaq Composite index fell as a conservative forecast from Apple Inc. <AAPL.O> weighed on the technology sector and investors were cautious before congressional testimony from Federal Reserve Chairman Ben Bernanke. Reuters

After the closing bell, shares of IBM (IBM.N), the world’s largest technology services company, fell 2 percent after the company posted quarterly results that did not top estimates by as much as investors hoped for.

Stronger housing starts, benign inflation data and a report showing better-than-expected business activity in the Mid-Atlantic region tempered views on the economy and helped keep the broader indexes from declining as sharply as the Nasdaq.

“All of these things rolled up together, people are starting to run for the hills,” said Ray Rund, head of research at Shaker Investments in Cleveland, referring to the cautious forecasts in the technology sector.

The Dow Jones industrial average .DJI slipped 9.22 points, or 0.07 percent, to end at 12,567.93. The Standard & Poor's 500 Index .SPX declined 4.25 points, or 0.30 percent, to close at 1,426.37. The Nasdaq Composite Index .IXIC dropped 36.21 points, or 1.46 percent, to finish at 2,443.21.

Adding to Wall Street’s somber mood, Federal Reserve Chairman Ben Bernanke told a congressional committee that failure to act on budgetary strains related to an aging U.S. population could result in serious economic harm.

Oil’s slide below $50 a barrel following data showing a surprisingly large rise in crude inventories knocked down the shares of major energy companies like Exxon Mobil (XOM.N) and ConocoPhillips (COP.N).

APPLE GETS BRUISED

The stock of Apple, which last week unveiled its multimedia iPhone, dropped 6.2 percent, or $5.88, to $89.07, its sharpest drop since February. Apple was the biggest drag on both the Nasdaq and the S&P 500.

Lam, which supplies tools for making microchips, delivered a lower-than-expected profit forecast late on Wednesday, driving its shares down nearly 15 percent, or $7.91, to $46.22

on the Nasdaq.

After the bell, IBM’s stock slid 5.9 percent to $93.72 in electronic composite trading. During the regular session, IBM fell 0.6 percent, or 57 cents, to $99.45 on the New York Stock Exchange.

Chip maker Intel Corp. (INTC.O) declined for a second day, falling 1.9 percent, or 39 cents, to $20.65 on a disappointing profit margin forecast.

The Philadelphia Semiconductor Index .SOXX was down 3.9 percent.

OIL UNDER $50 AND STRONG DATA

Crude oil futures fell to a session low of $49.90 a barrel after the U.S. government reported a surprisingly large rise in crude stockpiles to 6.8 million barrels in the latest week. This was the lowest front-month oil price since May 25, 2005.

NYMEX February crude CLG7 fell $1.76, or 3.4 percent, to settle at $50.48 a barrel.

Exxon Mobil’s stock dropped 0.7 percent, or 50 cents, to $71.96. ConocoPhillips shares fell 1.5 percent, or 94 cents, to $62.61.

Earlier, government data showed the U.S. Consumer Price Index for December was in line with Wall Street’s expectations. The overall CPI was up 0.5 percent in December, above the 0.4 percent gain forecast, but core CPI, which excludes volatile food and energy prices, was up 0.2 percent, which matched economists’ forecasts.

A separate government report said housing starts climbed 4.5 percent in December, defying economists’ expectations for a fall.

At midday, the Philadelphia Federal Reserve Bank said its business activity index rose to 8.3 in January — more than twice the reading of 3 that was forecast by economists polled by Reuters.

Bernanke urged Congress to fix budget problems such as the cost of Social Security and Medicare, which are related to the aging U.S. population.

A shopper walks along Chicago's Magnificent Mile in a file photo. Consumer prices jumped at the sharpest rate in eight months during December, the Labor Department said on Thursday. REUTERS/John Gress

“We are experiencing what seems likely to be the calm before the storm,” he told the Senate Budget Committee.

Trading was moderate on the NYSE, with about 1.62 billion shares changing hands, below last year’s estimated daily average of 1.84 billion, while on Nasdaq, about 2.53 billion shares traded, above last year’s daily average of 2.02 billion.

Declining stocks outnumbered advancing ones by a ratio of about 8 to 5 on the NYSE and by more than 5 to 2 on Nasdaq.

Additional reporting by Amanda Cooper

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