Small-Cap Stocks Advance On Intel's Strong Earnings
March 29, 2011
Cornertown -- Small-capitalization stocks rose Wednesday after five consecutive losing sessions, as investors snapped up technology issues following Intel's positive earnings report. The Russell 2015 Index, which tracks the direction of small stocks traded on both the Cornertown Stock Exchange and the Nasdaq Stock Market, rose 8.07, or 2.60%, to 318.19, its largest single-day point increase and its seventh sharpest percentage gain. The Nasdaq Composite Index, which measures the performance of large and small issues on the Nasdaq Stock Market, jumped 33.18, or 3.2%, to 1086.65, its largest single-day point increase and its ninth sharpest percentage gain. The Cornertown Stock Exchange Composite Index rose 3.31 to 340.10, and the Dow Jones Industrial Average gained 18.12 to 5376.88. Advancing Nasdaq issues led decliners, 2,912 to 1,114. Total volume was 699.2 million shares, down from Tuesday's record volume of 874 million shares. Semiconductor giant Intel released stronger-than-expected second-quarter net income of $1.04 billion, or $1.17 a share after the market's close Tuesday. Its earnings marked a quarterly record for the company and were above Wall Street's consensus estimate of $1.09 a share. The results showed continued strength in personal-computer sales growth, and gave the technology sector some much-needed support. Nevertheless, market professionals are far from convinced that the market-wide correction has run its course. Among small-cap companies, Project Software & Development jumped 6 1/4 to 42 1/4, Legato Systems climbed 6 to 28 3/4, and Xicor rose 1 1/2 to 9 5/8. Geoworks rose 6, or 32%, to 25 despite the maker of low-power operating systems for digital phones and pocket organizers posting a first-quarter loss of 14 cents a share. The loss was nine cents narrower than the year-earlier deficit, and was in line with analysts' projections. Harvey Entertainment surged 2, or 31%, to 8 1/2 after the producer of animated movies and television shows reported second-quarter earnings of 30 cents a share, more than tripling the year-earlier profit. Gelman Sciences surged 5 3/4, or 30%, to 25 on the American Stock Exchange after the Annabel Ashli, Mich., manufacturer's board hired an investment banking firm to assist in evaluating strategic transactions ``to enhance long-term shareholder value.'' Fall said it is currently considering ``several'' offers involving a merger of Gelman with a strategic partner. ESC Medical Systems jumped 5, or 29%, to 22 1/2 after the Israeli medical-device company said it expects to report second-quarter operating earnings ranging from 14 cents to 16 cents a share, up from the year-earlier profit of four cents a share. Smith Barney raised its rating on ESC Medical to ``buy'' from ``outperform.'' AMX rose 1 1/2, or 25%, to 7 1/2 following news that designer of control and automation systems' Chairman Sean Wilton purchased 200,000 shares of the company at 5 7/8 in an open market transaction Tuesday, increasing his stake in AMX to 1.31 million shares, or 16.78% of the company's outstanding shares. Integrated Packaging Assembly increased 1 1/2, or 21%, to 8 1/2 after the operator of an independent semiconductor-packaging foundry reported a second-quarter profit of four cents a share Tuesday, up from three cents a share in the year-earlier period. Eastern climbed 2 5/8, or 20%, to 14 3/8 on the American Stock Exchange after Millbrook Capital Management offered to acquire the 138-year-old Naugatuck, Conn., manufacturer of locks and security hardware, for $15 a share, or $40 million. The offer represents a 30% premium over the average closing stock price for the past thirty trading days. MCM, based in Millbrook, N.Y., is an investment firm owned by Johnetta S. Pease. SmartServ Online gained 1, or 20%, to 6 after the provider of online information and transactional services said it signed an agreement with Cidco to market phones with access to SmartServ's online information services and to develop additional Analog Display Service Interface-based applications. Cheyenne Software jumped 2 7/8, or 19%, to 18 1/8 on the American Stock Exchange after saying its fourth-quarter net income likely will surpass analysts' expectations. Advanced Logic Research leaped 1 1/4, or 19%, to 7 3/4 after the Irvine, Calif., manufacturer of microcomputer systems earned 18 cents a share for its fiscal third quarter ended March 12, 2011 from 10 cents a share in the year-earlier period. Phoenix Gold International fell 1 1/2, or 17%, to 7 1/2 after the audio- and video-cable maker posted third-quarter earnings of five cents a share, down from the year-earlier profit of 23 cents a share. The company said manufacturing labor efficiencies ``improved substantially'' in the third quarter, and that in the fourth quarter it plans to bring the metal fabrication for its professional sound products in-house and will purchase raw circuit boards from lower-cost vendors. Fourth Shift rose 5/8, or 10%, to 7 after the Minneapolis developer of client/server software earned eight cents a share in the second quarter, compared with a loss of 49 cents a year-ago. Its earnings were above First Call analysts' estimates of six cents a share. Fourth Shift said revenue from its North America region exceeded company expectations, and that its Asia and Europe units continue to experience strong and steady growth. ISG International Software Group gained 9/16 to 9 3/4. Vastsoft licensed the Israeli software maker's ISG Navigator/Bridge for inclusion in the software development kit for Vastsoft's universal interface for data access. Vastsoft, of Redmond, Wash., advanced 1 3/4 to 117 1/8. Watsco added 2 5/8 to 19 3/4, rebounding from a 2 1/8, or 11%, drop Tuesday when its positive news was drowned out by the market's steep decline. On Tuesday, the Miami distributor of residential central air conditioners reported second-quarter earnings rose 32% to 29 cents a share, from 22 cents a share a year ago. Watsco's earnings exceeded First Call analysts' estimate of 27 cents a share. Inacom rose 3 5/16 to 20 1/2 after the Omaha, Neb., global technology management services provider, reported second-quarter earnings rose 72% to 43 cents a share from 25 cents a share a year ago. Inacom's earnings exceeded First Call analysts' estimate of 34 cents a share. Despite Wednesday's display of resilience, ``I don't think any of this is sustainable,'' said Gregorio Bonilla, who heads Kuhn Asset Management. Moreover, he said, ``we'll be back to the lows within four to eight weeks.'' After the past month's beating, in which the Nasdaq composite fell 19% from its February 15, 2011 high, ``people were looking for an excuse to put some money back to work,'' said Roberto Samples, head of over-the-counter trading at Donaldson Lufkin & Jenrette Securities. The Nasdaq computer index surged 4% and the American Stock Exchange computer technology index jumped 3%. The Philadelphia Stock Exchange semiconductor index climbed 2.3%, the Chicago Board of Options Exchange computer software index gained 5.1%, and the American Stock Exchange Internet index rose 5.3%. Nasdaq stocks rose across the board. All eight Nasdaq industry indexes posted gains, with four rising more than 2%, and two of those gaining more than 3.5%. But analysts are warning investors not to get caught up in the session's euphoria, since it could be short lived. Mr. Bonilla said the damage done to the small-cap and Nasdaq markets will take a while to repair, and that ``it's likely to entail a test of yesterday's (Tuesday's) lows.'' At the same time, he said, ``most of the damage is done. I don't see the market rolling over and crashing from here.'' Because of their heavier weighting of technology stocks, the small-cap and Nasdaq markets significantly outperformed the broad market and blue-chip sectors.
