US stocks rose for the fourth week in five, lifting the Standard & Poor's 500 Index and the Dow Jones Industrial Average to their highest since 2001.
Intel Corp, the Dow average's second-worst performer this year, paced gains after Lehman Brothers Holdings Inc said sales next quarter at the No. 1 chipmaker may exceed forecasts.
PHOTO: EPA
The S&P 500 climbed 1.3 percent since last Friday to 1,210.13, closing at its highest since August 2001. The benchmark has gained 8.8 percent this year, extending last year's 26 percent surge. Further advances may be limited, according to Ted O'Connor of Cooke & Bieler Inc.
"We've had a strong two-year rally and a good earnings pickup, but that's now behind us," said O'Connor, who helps manage US$6 billion in Philadelphia.
"Earnings aren't going to grow that fast," and investors will "have to work for their money," O'Connor said.
He forecasts the S&P 500 will rise 5 percent to 10 percent next year.
The Dow average added 1.7 percent to 10,827.12, a level not seen since June 2001. The NASDAQ Composite Index gained 1.2 percent to 2160.62, leaving it less than 2 points shy of a three-year high set on Dec. 15.
US exchanges were closed on Friday for Christmas Eve. Average daily volume on the New York Stock Exchange during the holiday-shortened week was 12 percent less than the three-month average.
Intel climbed 3.4 percent to US$23.54 since last Friday, pacing gains in the Dow average. The shares stand to benefit as sales next quarter may top forecasts and profit margins improve in the second half, Lehman analyst Tim Luke wrote in a report. He raised his rating to "overweight" from "equal weight."
The rally in Intel shares led a 2.4 percent advance in an S&P 500 index of semiconductor stocks. Applied Micro Circuits Corp, a maker of chips used in computer-networking equipment, added 5.4 percent to US$3.88.
Micron Technology Inc rose 4.3 percent to US$11.80. The world's No. 2 maker of computer-memory chips said Dec. 22 it had the highest profit in four years in its fiscal first quarter.
Micron was one of the last S&P 500 companies to report quarterly results this year, capping off the best year for corporate profits since 1993, according to Thomson Financial. Earnings growth for companies in the benchmark is expected to slow to 10.5 percent next year from 19.2 percent this year, Thomson said.
Solectron Corp was among the week's worst performers, tumbling 12 percent to US$5.17. The world's No. 2 maker of circuit boards and network gear for other companies said on Dec. 21 that fiscal first-quarter sales missed analysts' estimates and will fall short again this quarter.
AmerisourceBergen Corp dropped 7.8 percent to US$56.84. The No. 3 US drug wholesaler said next year's earnings will miss its forecast because of lower-than-expected drug-price increases and fewer deals from manufacturers.
Another sign that the rally in stocks may fade is a nine-year low in the Chicago Board Options Exchange's SPX Volatility Index, according to Bernie Schaeffer, chief executive of Schaeffer's Investment Research in Cincinnati.
The so-called VIX index, which reflects the prices paid for S&P 500 options, dropped 5.9 percent for the week to 11.23, the lowest since December 1995.
Low volatility "increases vulnerability of the market to shocks," said Schaeffer. He said investors are underestimating the risk of a 20 percent to 25 percent drop in the S&P 500. "It may be the calm before the storm."
Still, troughs in volatility haven't always led to declines in stocks. When the VIX fell below 17 and reached a 20-month low in 1998, stock prices didn't peak until two years later.
Benchmark indexes were helped this week by a spate of government reports that showed the US economy grew at a faster-than-expected rate in the third quarter, consumer spending increased for a fifth month in November, and durable goods orders rebounded.
Gross domestic product expanded at a 4 percent annual rate from July through September, more than a previous estimate of 3.9 percent. Last month's personal spending rose 0.2 percent, suggesting income growth is enough to fuel demand.
The durable goods report fueled an advance in manufacturers including United Technologies Corp, the maker of Pratt & Whitney jet engines. Its stock climbed 1.6 percent for the week to US$105.52. 3M Co, the maker of Scotch-brand tape and films used on liquid crystal displays, gained 2.4 percent to US$82.55.
Of the 30 stocks in the Dow average, only McDonald's Corp, the world's largest restaurant chain, and Verizon Communications, the biggest US local-phone company, declined for the week.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the