A sharp decline in oil prices and a surprise drop in wholesale prices pushed stocks higher on Friday as investors' concerns about third quarter earnings were mitigated. The NASDAQ composite index surged with investors buying heavily into an oversold technology sector.
Oil prices fell briskly through the afternoon, again moving below US$43 per barrel after spiking higher on Thursday. A barrel of light crude settled at US$42.81, down US$1.80, on the New York Mercantile Exchange.
Investors welcomed the 0.1 percent drop in the Producer Price Index, the Labor Department's measure of wholesale prices, since the news was a strong sign that the economy has still managed to keep inflation at bay despite this summer's rising oil costs.
A profit warning from Alcoa Inc, which slashed its third-quarter forecast by about 40 percent, weighed heavily on investors' minds and kept the Dow Jones industrial average lower for most of the session. Automotive systems manufacturer Visteon Corp's warnings drove new fears about the health of the auto market and overall consumer spending.
"I think investors have become a bit spoiled with all the positive pre-announcements and upside earnings surprises we've had over the last year," said Jack Caffrey, equities strategist at JP Morgan Private Bank.
"Companies have been guiding up over the last several quarters, and now investors have become overly enthusiastic. It behooves companies to keep expectations reasonable. And we're still seeing profit growth, it's just that it's moderated," he said.
The NASDAQ gained 24.66, or 1.3 percent, to 1,894.31.
Other stock indicators also moved higher. The Standard & Poor's 500 index was up 5.54, or 0.5 percent, at 1,123.92, and the Dow Jones industrial average rose 23.97, or 0.2 percent, to 10,313.07.
For the week, the Dow rose 0.5 percent and the S&P was up 0.9 percent, while the NASDAQ soared 2.7 percent, though the tech-focused index remains down 5.4 percent for the year.
New uncertainties kept stocks volatile through the week, with concerns over employment, oil prices and earnings all weighing on Wall Street. Positive earnings outlooks from Nokia Corp and Texas Instruments Inc boosted long-suffering tech stocks and the NASDAQ, while blue chips suffered from muddled economic data and negative outlooks.
Friday's drop in wholesale prices was encouraging considering that, aside from food and oil prices, which can vary widely, the "core" PPI also fell 0.1 percent, showing that wholesale prices have become somewhat resilient to the high energy costs that have plagued Wall Street through the summer. Economists had been expecting a 0.2 percent increase in both PPI and core PPI.
"We had good news on the PPI, but you still have the nagging problem of energy prices," said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
"The economy is expanding, but not at a robust pace, certainly, and profits are decelerating. There's nothing to prompt us breaking out of this particular range we're in," he said.
The economic data, combined with worrisome third-quarter profit warnings, raised new questions about whether the Federal Reserve needs to raise interest rates at its Sept. 21 meeting. The Fed is widely expected to raise the benchmark lending rate from 1.5 percent to 1.75 percent. However, the unevenness of the economic recovery -- lagging jobs, a lack of inflationary pressure and underperforming companies -- combined with the election could persuade the Fed to hold off on a rate hike until after Nov. 2.
Alcoa fell US$2.54 to US$30.75 after reducing its forecasts for the third quarter due to labor issues and plant closings. Alcoa expects to earn 30 cents to 35 cents per share, far less than Wall Street's forecast of 52 cents a share.
Visteon cited Ford Motor Co.'s cutbacks in production as a factor in taking a one-time charge of up to US$900 million in the third quarter. The company also warned that profits in the second half of 2004 and for the full year will be "significantly below" expectations. Visteon tumbled US$1.00, or 11 percent, to US$8.00, while Ford slipped 21 cents to US$13.96.
The Walt Disney Co. gained US$0.30 to US$23.16 after chief executive Michael Eisner announced that he would step down as the company's longtime leader on Sept. 30, 2006. Eisner, who relinquished the chairmanship of the company this year amid controversy, said his early announcement would smooth the transition to new leadership.
Advancing issues outnumbered decliners by more than 4 to 3 on the New York Stock Exchange, where preliminary consolidated volume came to 1.56 billion shares, compared with 1.72 billion on Thursday.
The Russell 2000 index of smaller companies was up 3.73, or 0.7 percent, at 569.91.
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to