Texas Instruments leads Wall St losses

A weak outlook from Texas Instruments weighed on the Nasdaq yesterday and pushed an index of chip makers below a key technical level in a worrisome sign for the market’s six-month uptrend.

The PHLX semiconductor index fell 3 per cent to close below its 50-day moving average, which represents medium-term momentum, for the first time since September.

Texas Instruments led the losers, after its earnings target disappointed Wall Street. Its shares fell 3.1 per cent to $34.74.

“I think the markets are ready for a sell-off that continues to be started by the Nasdaq futures markets,” said Harry Michas, technical analyst and stock-index futures trader at Iharmarketmonitor.com.

“If the Nasdaq futures fall back below the 2,313.00 level again, it should attract more profit taking as well as some new shorts.”

The futures were trading around 2,320.

International Business Machines helped the Dow tread water, as the stock, the largest component in the price-weighted index, rose 2.2 per cent to $165.86.

Even though semis’ gains have outpaced the broader market in the last several months, the S&P 500 and the semiconductor index have been moving in the same direction, which could mean further declines in the sector and spell more of the same for the overall market.

A 20-day correlation between the S&P 500 and the semiconductor index was at 0.77, with a reading of 1 suggesting a perfect correlation.

The semiconductor index is up 41 per cent since the start of September, when the recent rally began, while the S&P 500 is up 26 per cent.

High oil prices dragged on the broader market on the two-year anniversary of stocks’ bull run from the S&P 500’s 12-1/2-year closing low of 676.53, which was sparked by the financial crisis.

The Dow Jones industrial average dipped 1.29 points, or 0.01 per cent, to finish at 12,213.09. The Standard & Poor’s 500 Index shed 1.80 points, or 0.14 per cent, to end at 1,320.02. The Nasdaq Composite Index fell 14.05 points, or 0.51 per cent, to close at 2,751.72.

Tech shares also felt the weight of Finisar. The stock plummeted 38.5 per cent to $24.61 after the network equipment maker forecast a dismal fourth quarter, blaming an inventory pile-up by telecommunications equipment makers in China.

Finisar is up 100 per cent since September.