Stocks fight to hold ground despite resistance from chip sector, Texas Instruments.
June 11, 2003: 10:22 AM EDT
NEW YORK (CNN/Money) - The Dow regained some strength and the other major indexes held tight in morning trading Wednesday, fighting back against some weakness in the chip sector.
Investors also awaited release of the Federal Reserve's "beige book," hoping for indications of what the board plans to do with interest rates at its next meeting.
Just after 10:15 a.m. ET, the Dow Jones industrial average (up 36.13 to 9091.02, Charts) clocked small gains, while the Nasdaq composite (up 0.62 to 1628.29, Charts) and the S&P 500 index (up 2.13 to 986.97, Charts) waded on either side of unchanged. All three indexes managed modest gains in the previous session, which brought the Dow back above 9,000.
Another possible acquisition came to light early Wednesday, on the back of a $5.1 billion bid by Oracle for PeopleSoft last week.
A $1.1 billion bid by United Technologies (UTX: up $0.48 to $71.18, Research, Estimates) for British security services provider Chubb PLC is expected to be accepted late Wednesday or sometime Thursday, according to news reports. Shares of United Technologies trended higher.
Meanwhile, Oracle (ORCL: up $0.28 to $13.30, Research, Estimates) tipped more than 1 percent higher after saying PeopleSoft (PSFT: down $0.16 to $17.74, Research, Estimates) is withdrawing plans to file a legal complaint in an Alameda, Calif., county court concerning Oracle's unsolicited acquisition offer. Oracle said the withdrawal could be a sign that PeopleSoft is willing to discuss the bid it originally called "atrociously bad behavior." Shares of PeopleSoft slipped early.
But chip shares weighed on the tech sector after Morgan Stanley cut its rating on the group to "in-line" from "attractive." The downgrade came a day after Banc of America slashed its rating on some chip equipment makers.
Texas Instruments (TXN: down $2.03 to $18.36, Research, Estimates), in particular, lost more than 10 percent after cutting its revenue and profit outlook for the second quarter, citing higher-than-expected restructuring charges and the outbreak of the SARS virus. Merrill Lynch and Banc of America also downgraded their ratings on the stock.
Shares of other chip-related stocks also showed weakness, including Intel (INTC: down $0.20 to $21.77, Research, Estimates), slipping more than 1.5 percent, Applied Materials (AMAT: down $0.18 to $15.65, Research, Estimates), declining more than 2.5 percent, and Advanced Micro Devices (AMD: down $0.23 to $6.45, Research, Estimates), falling more than 4 percent.
Investors will get a dose of economic news later in the day. The Federal Reserve plans to issue its beige book, an analysis of economic conditions around the nation, at 2 p.m. ET. The report will be used June 24 when the Fed begins a two-day meeting to set interest rates.
Wednesday marks the end of month three of a stock rally that began just before the war with Iraq. Since March 11, a day traders peg as the rally's start, the Dow has gained more that 20 percent, the Nasdaq 28 percent and the S&P about 23 percent.
Many traders have begun to speculate that the market may have entered a bull phase, while others contend the rally is bound to fizzle out soon.
In other corporate news, IBM (IBM: up $1.47 to $83.18, Research, Estimates) shares helped buoy the Dow, rising more than 1 percent after Merrill Lynch added the computer maker to its "Focus List."
Also, trading on Freddie Mac (FRE: down $0.65 to $50.85, Research, Estimates) shares was halted after news that the U.S. Attorney's office in northern Virginia said it is investigating the company, according to a Reuters report. Shares of the mortgage lender slipped about 1.5 percent before the stock stopped trading.
European markets rose at midday. Asian-Pacific stocks ended mostly higher overnight.
Treasury prices rose in early trading, with the 10-year note gaining 9/32 of a point in price to yield 3.15 percent. The dollar weakened against the yen and euro.
Brent oil futures retreated 21 cents to $27.40 a barrel in London. Gold rose $2.40 to $355.20 an ounce in early trading in New York
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