Chips Lead the Dip

Chip stocks led a late stock market decline Monday on concerns about overproduction and weak demand.

Intel led the way with a 2% loss on a Barron’s article that questioned the company’s valuation ahead of its mid-quarter update this week. The article cited slowing motherboard sales and an unsustainable pace in wafer starts that suggests that production may be outstripping demand.

The industry was also hit by a Semiconductor Industry Association report detailing stalled sales.

The issue of overproduction echoes earlier reports that chip companies were loading up on supplies in event of a trade disruption caused by war or the SARS epidemic.

Intel’s mid-quarter update will be held Thursday after the bell.

The broader market gained Monday on a better than expected national manufacturing report.

The Nasdaq slipped 5 to 1590, the S&P 500 rose 3 to 967, and the Dow gained 47 to 8897. Volume declined to 1.67 billion shares on the NYSE, but rose to 2.53 billion on the Nasdaq. Advancers led 21-11 on the NYSE, and 17-15 on the Nasdaq. Upside volume was 66% on the NYSE, and 55% on the Nasdaq. New highs-new lows were 546-3 on the NYSE, and 361-8 on the Nasdaq.

After the close, IBM announced an SEC investigation into the company’s revenue recognition practices in 2000 and 2001. IBM stock fell 2 points on the news.

During the day, JD Edwards rose 6.6% on news that it will be acquired by PeopleSoft .

Cisco rose 2.4% on an optical deal with BellSouth , and Alcatel , up 1.3%, won a DSL contract with Verizon .

Nokia initially surged on strong wireless sales, but gave most of the gains back by the close.

Leaders like eBay and Yahoo got hit for 2-4% losses.

Microsoft rose fractionally on a number of server announcements.

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