Hurricanes stir up US indexes but do little damage

Instrument Business Outlook, Sept 30, 2005

The end of the third quarter was marked by turbulent times as Hurricanes Katrina and Rita roared through the Gulf Coast. Once again, the most effected area of the market was crude oil prices, as oil futures jumped to over $70 per barrel following Katrina. However, prices dropped to around $63 per barrel due to minimal damage caused to underwater pipelines. One week later, crude oil prices rose another $3 due to Hurricane Rita and OPEC's decision to leave oil output unchanged. Oil prices bounced around over the final two weeks of September, ending at approximately $67 per barrel, which heightened concerns about high heating costs this winter.

Other major macroeconomic news this month included the Labor Department report that 169,000 new jobs were created in August, which fell short of analysts' expectations of 190,000, but led to the lowest unemployment in four years. Inflation was up as the Consumer Price Index jumped 0.5% in August due to higher fuel costs, but the "core index" moved up just 0.1%. Finally, the Conference Board announced that consumer confidence plummeted to 86.6 in September from 105.5 in August. September's figure fell short of analysts' estimates of 95.0 and was the lowest reading since October 2003.

Despite the fall, the three US indexes were held In check this month, with no index changing more than 1% in either direction. The Dow Jones Industrial Average and S&P 500 inched up just 0.8% and 0.7% to 10,568.70 and 1,228.81, respectively. Meanwhile, the NASDAQ remained virtually unchanged in September, ending the month at 2,121.69. After the first three quarters of the year, only the S&P remains in the positive, up a minimal 1.4%, while the Dow and NASDAQ have dropped 2.0 and 1.1%, respectively.

The Laboratory Instrumentation Stock Index was the only IBO Index to gain ground this month, improving 1.5% to 436.75. The Laboratory Equipment/Distributor Index lost the most ground in September, dropping 3.8% to 325.74, while the Filtration and Process/Metrology/Motion Instrumentation Stock Indexes slipped 2.7% and 1.9% to 235.11 and 357.38, respectively.

Lab Instrumentation Stock Index

Results for the Laboratory Instrumentation Stock Index were mixed this month with 10 companies experiencing share price gains, 11 companies showing declines and three companies remaining unchanged, leading the Index to inch up 1.5% to 436.75. SEQUENOM was the only double-digit gainer this month, improving 28%, followed by Applied Biosystems and Caliper Life Sciences, which improved 8% and 7%, respectively. Invitrogen was the only double-digit negative performer, dropping 11%, followed by Waters, which slipped 9%.

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After the first three quarters of 2005, 11 of the 24 companies in the Laboratory Instrumentation Stock Index have experienced gains, while 13 have declined, leaving the Index down 2.0% for the year. Illumina and Affymetrix are the best performers thus far, climbing 35% and 26%, respectively. Ciphergen Biosystems and CombiMatrix have shown the biggest losses, tumbling more than 50% each.

During the month, Thomas Weisel upgraded shares of Thermo Electron to an "Outperform" rating. Shares of Thermo slipped approximately 2% on the day it announced an agreement to sell its Biostar business (see page 2). Shares of Applied Biosystems improved 1.2% the day it announced a settlement with Promega over a pending patent lawsuit (see page 11). Ciphergen and the American Red Cross announced a new technology for detecting low abundance proteins, causing shares of the company to jump 7.7% that day. CombiMatrix shares plunged 18% after it announced that it obtained commitments from a few accredited investors to purchase 6.4 million shares of the company at a discounted exercise price of $1.65, as the company was trading at just over $2 per share at the time of the announcement. SEQUENOM received a notice from the NASDAQ on September 20 stating that the company does not currently comply with the $1 minimum bid price requirement for continued listing on the exchange, causing its shares to slip 3.7%.

On September 27, Affymetrix lowered its third quarter revenue outlook by $10-$12 million to $80-$82 million due to lower than expected shipment volumes of its 500K Mapping Array Set, sending its shares down nearly 10% in after-hours Wading. However, the company's shares improved 4.3% the following day and another 2.2% two days later when Lehman Brothers upgraded its shares to an "Equal Weight" rating, noting that the negative sentiment had already been included in the share price.

Process/Metrology/Motion Instrumentation Stock Index

Just three of the eight companies in the Process/Metrology,/Motion Instrumentation Stock Index showed gains in September, while five experienced declines, leading the Index to slip 1.9% to 357.38. Zygo was the only double-digit gainer for the second straight month, improving 24%. Veeco Instruments was the only double-digit negative performer this month, dropping 13%, followed by FEI Company and MTS Systems, which fell 8% each.