Delta cuts hits airline sector as Xilinx knocks techs

Xilinx, a maker of programmable microchips, slid 2.8 per cent to $27.65, after revising its revenue guidance for December lower. Shares of other chip makers such as Altera were also down. Altera fell 1.5 per cent to $18.90.

Airline shares plunged after Delta Air Lines cut its fares by up to 50 per cent for travel in the continental US. Analysts said other cash-strapped carriers would have to match the fare cuts. Delta shares fell 9.3 per cent to $6.63, while rival AMR, parent of American Airlines, dropped nearly 11 per cent to $8.93.

In afternoon trading, the Dow Jones industrial average was up 13.45 points, or 0.13 per cent, at 10,644.23. The Standard & Poor’s 500 index fell 0.50 of a point, or 0.04 per cent, to 1,187.55. The Nasdaq Composite index was down 10.44 points, or 0.50 per cent, at 2,097.42.

Al Goldman, chief market strategist at AG Edwards, said: "We had some negative news on Xilinx, which is hurting the semiconductor group. There is an unforgiving mood in the market over the last two days. We are seeing some profit- taking and the question is, do we have enough momentum to take the market higher or are we going to see a moderate correction?"

In corporate action, Gilead Sciences fell 3 per cent to $32.83 after Credit Suisse First Boston lowered its investment rating on the biotechnology firm, citing its stock price appreciation.

Circuit City Stores fell 6.8 per cent to $13.94 after the second largest US electronics retailer posted a 5.8 per cent drop in December sales at stores open at least a year as customer traffic fell below year-ago levels.

Among advancing issues, department store chain Nordstrom rose 4.3 per cent to $47.58 after reporting sales at its stores open at least a year rose 9.3 per cent during December.

American International Group rose 1.3 per cent to $67.11 after the world’s largest insurer by market value increased its quarterly dividend 66.7 per cent, citing company growth in recent years.

Procter & Gamble rose 2 per cent to $55.54. Banc of America raised its rating on the consumer products maker to "buy" from "neutral".

In economic news, the Institute for Supply Management said that its non-manufacturing index rose to 63.1 in December from 61.3 in November, beating Wall Street’s median estimate of 61.0.

A number above 50 indicates growth in the sector, which accounts for about 80 per cent of the US economy. The index has been above 50 every month since March 2003. The ISM survey’s employment index eased slightly to 54.9 in December from 55.0.

But another measure of US employment was not quite as a healthy, showing planned job cuts rose in December.

Employment consulting firm Challenger, Gray & Christmas said employers announced 109,045 lay-offs, making December the second-worst month for lay-offs in 2004. The number was up from 104,530 in November. For the year as whole, job cuts decreased from 2003, and Challenger said there was reason to be optimistic in 2005.

EUROPE: Shares fell on concern over the pace of US monetary tightening, while losses among technology heavyweights such as Ericsson also weighed.

The FTSEurofirst 300 index of leading pan-European shares ended down 0.7 per cent to 1,043.7. The DJ Euro Stoxx 50 index shed 0.8 per cent to 2,947.19.

Technology issues were a sore spot, with Ericsson, Philips and Micronas losing between 1.8 and 2.8 per cent after the Xilinx warning.

Sentiment was further pounded by a survey showing business sentiment in Asia had deteriorated to a greater degree than the consensus believes, which strategists said could hurt European stocks, particularly in sectors such as basic resources, industrials and luxury consumer goods.

ASIA: Tech stocks followed Wall Street lower yesterday. Tokyo’s main stock index fell on profit-taking, while other Asian markets closed mixed.

The Nikkei Stock Average shed 80.23, or 0.7 per cent, to end at 11,437.52. Hi-tech issues Advantest, Pioneer and TDK fell, as well as some banks, including Mitsubishi Tokyo Financial Group and Mizuho Financial Group.

Taiwan’s Weighted Average index closed down 1.2 per cent at 5,988, Australia’s S&P/ASX 200 index fell 0.5 per cent, South Korea’s Kospi index eased 0.2 per cent to 885 and Hong Kong’s Hang Seng index lost 1.8 per cent to 13,764.