Insights

Wall Street Wrap – Intel and AMD Settle, Wal-Mart Digs In

Up and down chip maker Advanced Micro Devices (NYSE: AMD) struck a settlement with Intel Corp. (NSDQ: INTC) for $1.25 billion.  In return AMD drops all the outstanding legal disputes it has against Intel and the two chip manufacturers agreed to a new five-year cross-licensing deal.  Back in the fall of 2002, AMD was a sub $4 stock but they were just about to leapfrog Intel with their new generation of 64-bit chips.  AMD stock went from a low of $3.10 to a high of $42.70 in 41 months as the underdog started giving Intel a real battle.  In March of 2006 the top for the stock was in, and from there AMD’s stock and sales dropped until a new low was put in at $1.62 one year ago.  On the news today, AMD’s stock closed up $1.17 or $21.80% at $6.48.  Intel traded down 16 cents to $19.68.

Possibly the last AMD decline had something to do with Intel’s business practices, which have raised the eyebrows of various regulators and governmental agencies from The European Union to The New York State Attorney General, both of whom have filed suits against the company.  This settlement helps AMD out with their $3 billion in debt while possibly helping Intel get some leeway with antitrust regulators.  European regulators levied a $1.4 billion fine against Intel recently and Intel appealed the fine.  If this settlement gets that fine reduced, or eliminated, this settlement pays for itself.

Wal-Mart Stores Inc. (NYSE: WMT) reported earnings of 84 cents a share against analyst expectations of 81.  The world largest retailer also raised its fourth quarter forecast but issued a warning of sorts.  In comments on their customers, Wal-Mart warned that unemployment and concerns about the economy may cause shoppers to become cautious heading into the very important holiday shopping season.  Wal-mart traded as high as $53.74 before settling lower and closing up 27 cents at $53.24 (+0.50%).

Overall the market took it on the chin today with the Dow Jones Industrial index dropping 93.79 points (-0.91%, 10,197.47) while the S&P 500 lost 11.27 points (-1.02%, 1,087.24).  The Nasdaq 100 performed best by losing only 9.81 points (-0.55%, 1,773.14).

The dollar turned in a strong performance today with the PowerShares DB US Dollar Bull ETF (NYSE: UUP) gaining 1.42% or 32 cents to $22.80.  The U.S. Dollar Index Future spot price (the ‘dixie’ or DXY) was only up 0.70%, which is strange as the UUP usually trades very closely, but did not today.  The UUP has become very popular as a dollar trading vehicle.  The demand for shares in this ETF is so high that a registration was filed for an additional 100,000,000 shares which will not be available until sometime in the future.  Until this registration is approved, the ETF managers have decided not to issue additonal shares, and this has caused a change in supply and demand for the ETF’s shares and is probably what has knocked it out of whack with the DXY.  You might want to stay away from the UUP until this all sorts itself out.

Of course this dollar strength caused commodities and commodity based stocks to drop and contributed to the selling pressure which brought the market lower.

New York Spot Gold cooled off after a 9 day hot streak that added $70 per ounce and ticked all time highs.  At 4:20 p.m. the cool yellow metal was down $13.40 an ounce (-1.20%, $1,103.40).   The iShares Gold ETF (NYSE: GLD) chart shows that it is back to trading inside the uptrend channel and the stochastic oscillators have peaked and are cycling lower.  The chart shows support at $105 for the GLD (about $1,070 for gold spot) and a pullback is expected here.

Nymex Crude dropped $2.34 a barrel (-2.96%, 4:30 p.m.) to $76.68 on a strong dollar and slightly higher inventory levels.  This rise in inventories and a decrease in demand for gasoline were cited as causes for the move lower.

The big number tomorrow is Consumer Confidence at 9:55 a.m. (71.0 expected).