MORE LOSSES

The semiconductor index was poised for its first weekly drop in four and was on track for its fifth drop in six sessions, with declines on Friday coming on the heels of results from Cypress Semiconductor, InterDigital, MicroSemi Corp and Intel.

“A year ago, I would say you have to be careful, but now I’d say you have to be extremely careful,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

“The ones that have these exotic stories and high growth are probably frothy.”

The forward price-to-earnings (P/E) ratio of the S&P 500 semiconductor and semiconductor equipment index stands at 15.2, above its five-year average of 14.4 but below the forward P/E of the broader S&P 500 of nearly 18.

In addition, the 14-day relative strength index reading for the PHLX Semiconductor index stands at 51.6, below the 70 level that indicate an overbought condition, which suggests the sector may have room to run higher.

“The expectations are high in terms of growth rates: you keep raising the bar, raising the bar; even if you hit the number or get a penny over, it’s not good enough anymore,” said Daniel Morgan, portfolio manager at Synovus Trust in Atlanta.

“You are getting some mismatched trading related to earnings reports coming out; it creates some opportunities to be in some great names where the fundamental themes are still in place.” Reuters