Technology firms drive USsell-off
Technology stocks drove a broad-based US sell-off yesterday as a brokerage took a dim view of demand prospects for the semiconductor sector, while economic data underscored the fragility of the recovery.
Bank of America-Merrill Lynch cut its 2010 growth outlook for the semiconductor industry on concerns about a rising inventory glut. It downgraded 10 stocks, including Intel, Texas Instruments and Marvell Technology.
The downgrades were a setback for those betting that the technology sector would fare better than others as the recovery takes hold. Chips are essential to a broad range of products, including computers and mobile devices.
Investors have ridden the tech wave since the S&P 500 hit a 12-year closing low on March 9. Shares of Dow component Intel fell 4.1 per cent to $19.30 on Nasdaq. The PHLX Semiconductor Index dropped 3.4 per cent.
On the economic front, the Conference Board’s index of US leading economic indicators, a gauge of the US economy’s prospects, rose 0.3 per cent to 103.8, the highest since September 2007. But the increase fell short of Wall Street’s expectation for a rise of 0.5 per cent.
There was also more disconcerting news in housing. A record one in seven US mortgages were in foreclosure or at least one payment was past due in the third quarter, according to fresh data signaling that the housing market’s recovery will be tepid at best.
The US dollar’s gain was another headwind for stocks as it pressured prices of natural resources like crude oil and gold, pushing down shares of companies such as Alcoa and US Steel. The S&P materials index shed 1.5 per cent as the US dollar index rose 0.2 per cent.
The Dow Jones industrial average shed 93.87 points, or 0.90 per cent, to end at 10,332.44.
The Standard & Poor’s 500 Index slid 14.90 points, or 1.34 per cent, to 1,094.90. The Nasdaq Composite Index dropped 36.32 points, or 1.66 per cent, to 2,156.82.
Bank of America-Merrill Lynch said notions of a strong rebound for the semiconductor industry next year may not be realistic.