Dow Jones futures jumped slightly last week, in addition to S&P 500 futures and Nasdaq futures. Technology stocks like Micron Technology (MU) beat earnings views by leaps and bounds, but dropped on weak guidance, blaming the latest flurry of tariffs. Micron stock and chip plays like Western Digital (WDC), Applied Materials (AMAT) and Lam Research (LRCX), as well as the overall key semiconductor sector aren’t seeing a positive to these new tariffs. Fellow chipmaker Texas Instruments (TXN) jumped on a dividend increase and stock buyback plan. Adobe Systems (ADBE) agreed to buy marketing automation company Marketo for $4.75 billion but shares slipped following the news.
Micron earnings per share vaulted 75% to $3.53 in the fiscal fourth quarter. Revenue climbed 34% to $8.44 billion. Analysts expected Micron earnings of $3.54 a share on sales of $8.25 billion.
Micron Technology forecast fiscal Q1 revenue of $7.9 billion to $8.3 billion and EPS of $2.88-$3.02. That was below many analyst estimates.
Micron Technology used Trump tariffs as a scapegoat in the escalating China trade war for the weak forecast. Trump tariffs are hitting more tech and consumer products.
Micron stock, which initially popped on the earnings beat, reversed to trade down 3.9% before Friday’s open, but better than overnight lows. The company did say it would accelerate its previously announced $10 billion stock buyback program.
Shares of Micron have been sliding since a partial breakout in May, amid growing concerns of weak memory chip prices. Nonetheless, Micron stock rose 2.2% to 46.06 in last Thursday’s stock market trading, aided by a report that Samsung Electronics will slow down its memory chip output to boost prices.
Chip Stocks & Technology Stocks Are Important & Here’s Why
The Philadelphia Semiconductor Index popped 1.2% last week, rebounding from its 50-day moving average. The “Philly Sox” has lagged for much of 2018. Even with a rally from a Sept. 12 intraday plunge, the Philly Sox index’s relative strength line is near a 2018 low. The relative strength line tracks a stock’s performance vs. the S&P 500 index.
Chip stocks usually lead or play a large role in market breakouts. They account for a big share of market capitalization, especially considering the Nasdaq composite. Also, chips are used in just about everything, so if chip stocks aren’t faring well that could be bad news for many key market sectors.
Technology Stocks: Texas Instruments
On the bright side for chip stocks, Texas Instruments will hike its quarterly dividend by 24% to 77 cents a share. TI will also buy an additional $12 billion worth of its stock. That’s on top of $7.4 billion remaining as of June 30 from a prior buyback program.
Texas Instruments rose 1% early. In Thursday’s session, shares rose 1% to 108.49, a few cents below their 200-day moving average. Texas Instruments stock is in an eight-month consolidation, but its RS line is well off highs.
Technology Stocks: Adobe Systems
Adobe Systems announced that it will buy Marketo for $4.75 billion. Marketo provides marketing automation software. The deal had been expected, so Adobe stock was mute, edging up to 267.
Adobe stock closed Thursday at 266.34, still in buy range from a 263.93 flat-base buy point.