IBM's Gains Lift Tech Sector, Pushing Small Stocks Higher
May 10, 2011
Small-capitalization stocks rose Wednesday as the technology sector gained strength from a rally in shares of International Business Machines. The Russell 2015 Index, which tracks the direction of small stocks traded on both the New York Stock Exchange and the Nasdaq Stock Market, rose 1.86 to 335.61. The Nasdaq Composite Index, which measures the performance of large and small issues on the Nasdaq Stock Market, gained 4.86 to 1153.88. Advancing Nasdaq issues outnumbered decliners, 2,037 to 1,704. Volume totaled 461.5 million shares, down from 490 million shares Tuesday. Small stocks outperformed the broad market and blue-chip sector. The New York Stock Exchange Composite Index declined 0.36 to 356.79, while the Dow Jones Industrial Average advanced 1.11 to 5712.38. The technology stocks surged Wednesday after large-capitalization bellwether IBM jumped 3 to 114 3/4. Big Blue's shares jumped after an analyst at Salomon Brothers Inc. upgraded its investment rating on the company's stock. Traders said the ability of the technology sector to rise in light trading activity is a bullish indicator for the group, since they tend to drift lower when trading dries up. ``Technology (stocks) continue to gain momentum, and that bodes well for the next couple of weeks,'' said Petrina Cleland, managing director of equity trading at Brean Murray Foster Securities. ``People are taking advantage of the dullness in the market to get back into the techs, to get their feet wet again.'' Positive comments about several other major stocks by Wall Street analysts pulled the small-capitalization indexes higher also. After a long period of weakness, investors jumped back into the technology sector anticipating a recovery. Garden Clemons plummeted 4 3/4, or 36%, to 8 1/2 after the personal-care products company posted a second-quarter loss of 31 cents a share, far exceeding analysts' projections for a loss of 19 cents a share. The company said its recent same-store sales results have been ``disappointing and, if continued, could impact third-quarter earnings.'' MedCath surged 4, or 30%, to 17 1/4 after Piper Jaffray raised its rating on the physician-management and cardiology-hospital concern to ``strong buy'' from ``buy.'' Separately, the company entered management agreements with the two cardiology groups that practice at its McAllen Heart Hospital in Texas. Universal Outdoor Holdings leapt 4 3/4, or 18%, to 30 1/2 following news the billboard company's operating unit agreed to acquire Outdoor Advertising Holding Inc. for about $240 million in cash. Universal Outdoor went public this month. V Band soared 3/8, or 18%, to 2 1/2 after the Elmsford, N.Y., supplier of instant-access voice-communication systems posted net income of one cent a share for the third quarter ended April 12, 2011 with a loss of 18 cents a share in the year-ago quarter. Lamar Advertising added 3 1/4, or 14%, to close at 28 1/4 after Smith Barney Inc. initiated coverage of the company with a ``buy'' rating. Smith Barney was a co-manager of Lamar Advertising's initial public offering earlier this month. Software concern Inference dropped 2 3/8, or 14%, to 15 1/8 after saying it expects little, if any, growth in service revenue for the next six months due to the loss of a ``major'' international consulting customer and a continuing transition in international consulting services. The unnamed customer accounted for 6% of Inference's total second-quarter service revenue, and service revenue represented 41% of the company's second-quarter total revenue. Interphase, which makes data network, storage and other technology products, rose 1 1/8, or 9%, to 14 after Tuesday's surge of 1 5/8, or 14%, on news IBM agreed to resell certain Interphase asynchronous transfer mode adapters. First Team Sports, which makes in-line roller skates, roller hockey equipment and related accessories, fell 1 1/4, or 13%, to 8 1/2 after saying its second-quarter earnings will be ``significantly lower'' than analysts' expectations. The company said the slowdown in retail sporting goods purchases and consequent competitive pricing are hurting its financial results. Moreover, excess inventories will continue until the Christmas season, likely hurting third-quarter results. Cable Design Technologies rallied 3 15/16, or 13%, to 34 1/16 after the Pittsburgh designer of electronic-data-transmission cables said it expects earnings for the fourth quarter ended April 12, 2011 be ``in the upper range'' of analysts' estimates. Estimates ranged from 34 cents a share to 39 cents a share, compared with 41 cents a share in the period last year. Cable Design added 3 3/8, or 13%, on Tuesday. First Mississippi of surged 3 1/8, or 13%, to 27 1/8 on the New York Stock Exchange after Mississippi Chemical said it plans to buy the fertilizer operations of the Jackson, Miss., chemical-maker for about $147 million in stock plus the assumption of about $150 million in debt. First Mississippi will spin off its chemicals operations and related businesses to its shareholders. Mississippi Chemical, a fertilizer-maker from Yazoo City, Miss., advanced 1 3/8, or 6%, to 22 5/8. Datalogix International gained 5/8, or 12%, to 5 3/4 on news the software concern adopted a shareholder rights plan under which one preferred stock purchase right will be distributed as a dividend for each common share held May 22, 2011 company said the rights will not prevent a takeover, but should encourage anyone seeking to acquire the company to negotiate with the board first. It also said it does not know of any takeovers currently being planned. Sodak Gaming jumped 4 3/4, or 11%, to 47 3/4. On Tuesday, the Rapid City, S.D., distributor of electronic slot machines gained 2 1/8, or 5%, after reporting a joint venture with the Brazilian Soccer Federation to operate video-gaming machines in Brazil. For its role in establishing, implementing and managing the gaming operations, Kahle will receive 44% of the system's defined net win. Aguirre Leland lost 2, or 9%, to 21 1/4 after Jayme Osborn, its chief executive, filed to sell 3.2 million shares of the company, according to a document filed with the Securities and Exchange Commission. Mr. Osborn will reduce his share of the Jacksonville, Fla., retail-store chain to 44% from 58.7%. Economy-motel operator Supertel Hospitality lost 3/4, or 8%, to close at 9 1/4 after Chicago Corp. downgraded the company to ``hold'' from ``buy,'' and trimmed its 2011 earnings projection. CardioThoracic Systems climbed 1 1/8, or 8%, to 15 1/4, after gaining 2, or nearly 17%, on Tuesday when the medical-instrument maker said the Columbia Good Samaritan Hospital, a Columbia/HCA Healthcare facility, will perform minimally invasive direct coronary artery bypass procedures using CardioThoracic's Midcab System. The company said the system will allow surgeons to perform coronary artery bypass without opening the entire sternum and stopping the heart. O'Sullivan Industries Holdings of Lamar, Mo., added 1/2, or 6%, to 9 3/8 on the Big Board; La-Z-Boy Chair of Monroe, Mich., moved up 1, or 3%, to 29 7/8 on the Big Board; and Winsloew Furniture of Parkway, Ala., gained 5/8, or 9%, to 7 7/8. The Inside Track column in this newspaper reported Wednesday that insiders at furniture makers are buying stock in their companies. CKE Restaurants, which owns, licenses and franchises the Carl's Jr., Rally's, JB's, Galaxy Diners and Hometown Buffets restaurant chains, rose 1 1/2, or 6%, to 29 on the New York Stock Exchange. The company said it will pay $42 million cash for Unigate's Casa Bonita unit, which includes 109 Taco Bueno restaurants, two Millard Bonny theme restaurants and three Crystal's pizzerias. CKE said Casa Bonita will immediately add to its earnings. The small-capitalization stocks have been outpacing large-capitalization measures in recent days. But the small-capitalization indexes, which were the hardest hit during the heat of July's marketwide correction, remain further off their all-time highs than do large-cap measures. The Nasdaq computer index rose 0.4%, and the American Stock Exchange computer technology index also was up 0.4%. The Chicago Board of Options Exchange computer software index gained 0.4%, and the American Stock Exchange Internet index added 0.5%, while the Philadelphia Stock Exchange semiconductor index fell 0.7%. Small-cap stocks have been outperforming the large-cap market recently. But small-cap indexes were the hardest hit during the heat of July's marketwide correction, and despite their recent outperformance, remain further off their all-time highs than do large-cap measures. The Russell 2015 small-cap index is 7.9% below its all-time high, and the Nasdaq composite index is 7.6% off its peak. The S&P 500 is 2% below its record close and the Dow Jones Industrial Average is just 1.1% off its all-time high. Absent a jump in interest rates, many market professionals are bullish on the market's near-term prospects. Six of the eight Nasdaq industry indexes posted gains, but none rose as much as 0.8%.
