May 19, 2024

Stocks Keep Up Gains

The Dow Jones industrial average and the Standard Poor’s 500-stock index climbed to fresh highs on Thursday after data showed new jobless claims dropped more than expected.

The S.P. 500 and the Dow each rose 0.4 percent; the Nasdaq composite index was flat.

Technology stocks were the day’s underperformers. Tech blue chips like Microsoft and Hewlett-Packard were sharply lower after an industry report showed shipments of personal computers had fallen significantly in the first quarter. Microsoft was also hit after Goldman Sachs cut its rating on the stock to sell from neutral.

“It’s not a good day for technology stocks, but over all, we are in a strong market,” said Joe Bell, senior equity analyst at Schaeffer’s Investment Research in Cincinnati. “It’s encouraging to see how the market starts off weak on a bit of natural profit-taking, and then market participants instantly bid the market higher.”

Among the blue chips, three of the Dow’s five biggest gainers — Pfizer, Boeing and Home Depot — hit new 52-week highs.

Before the opening bell, Labor Department data showed initial claims for state unemployment benefits fell much more than expected last week, giving relief to investors who were rattled last Friday by a much weaker-than-expected nonfarm payrolls report.

The Dow reached a new intraday high at around 11:21 a.m. and extended that to a fresh record by early afternoon. The S.P. 500 quickly followed the Dow’s lead in late-morning trading, climbing to a new intraday high of 1,597.35 at 11:29 a.m.

On Wednesday, both the Dow and the S.P. 500 rose more than 1 percent to close at new highs after three straight days of gains.

The Dow got its biggest boost from Pfizer, up 2.6 percent, after JPMorgan raised its target price on the drugmaker’s stock.

A leading tech tracking firm said personal computer sales plunged 14 percent in the first three months of the year, the biggest decline in two decades of keeping records, in a report released after Wednesday’s closing bell.

Hewlett-Packard fell 6.8 percent, Microsoft shed 4.9 percent and Intel lost 2.8 percent. The S.P. information technology sector index slipped 0.6 percent.

Shares of Acadia Pharmaceuticals surged 57.3 percent after the drug maker said data from an initial late-stage trial would be sufficient to file for approval for its experimental antipsychotic drug for Parkinson’s disease patients.

Article source: http://www.nytimes.com/2013/04/12/business/daily-stock-market-activity.html?partner=rss&emc=rss

Wall Street Flat After Weekly Jobless Data

Despite the SP’s gains of about 10 percent this year, investors have been concerned about the pace of recovery, especially after an unusually weak payrolls report for March.

But on Thursday the Labor Department said first-time claims for jobless benefits fell far more than expected last week, dropping to the lower end of the range for the year.

In addition, retail executives and analysts forecast improved same-store sales in April after March’s ho-hum start to spring due to cold weather.

Three of the SP 500’s five top percentage gainers were retailers, including Ross Stores up 6.2 percent to $63.98, L Brands up 5.6 percent at $50.88 and J.C. Penney Co up 4.6 percent to $14.74. The SPDR SP retail ETF jumped 2.3 percent to $73.17 and hit a new all-time high.

“This data is especially welcome on the heels of last week’s jobs report, and it just adds to the tremendous demand that there continues to be for equities,” said Leo Grohowski, chief investment officer at BNY Mellon Wealth Management in New York. “The money that has been waiting for a pullback is running out of patience.”

Still, gains were limited in the Nasdaq as technology stocks sold off on an industry report showing shipments of personal computers had fallen significantly in the first quarter. The SP information technology sector index slipped 0.6 percent.

Hewlett-Packard Co slumped 7.3 percent to $20.70 as the SP’s top percentage loser, following by Microsoft Corp, down 5 percent to $28.76. Microsoft was also hit after Goldman Sachs downgraded the stock to “sell” from “neutral,” citing “worsening PC trends and a lack of traction in tablets and smartphones.”

Both HP and Microsoft are Dow components, but the index saw plenty of strength from other members. Three of the blue-chip average’s five biggest gainers – Pfizer Inc, Boeing Co and Home Depot Inc – all hit new 52-week highs.

The Dow Jones industrial average was up 63.17 points, or 0.43 percent, at 14,865.41. The Standard Poor’s 500 Index was up 6.30 points, or 0.40 percent, at 1,594.03. The Nasdaq Composite Index was up 1.69 points, or 0.05 percent, at 3,298.94.

The Dow had reached a record intraday high at around 11:21 a.m. in Thursday’s session, and extended that to a fresh record by early afternoon. The SP 500 quickly followed the Dow’s lead in late morning trading, climbing to an all-time intraday high of 1,597.35 at around 11:29 a.m.

On Wednesday, both the Dow and the SP 500 rose more than 1 percent to close at new record highs after three straight days of gains.

“It’s amazing to me that we’re already a few points away from our mid-year target of 1,600, which had seemed somewhat aggressive,” said Grohowski, who oversees about $179 billion in client assets. “But there’s still skepticism about the market and tons of cash on the sidelines, which encourages me that the market can continue to pull higher.”

The Dow got its biggest boost from Pfizer, up 2.6 percent at $30.70, off its fresh 52-week high at $30.82, after JPMorgan raised its target price on the U.S. drugmaker’s stock to $33 from $32.

Shares of Acadia Pharmaceuticals Inc surged 57.3 percent to $12.54, off a 52-week high at $12.68, after the drugmaker said data from an initial late-stage trial would be sufficient to file for approval for its experimental antipsychotic drug for Parkinson’s disease patients.

Other economic data showed import prices slipped 0.5 percent last month, in line with expectations, while export prices fell 0.4 percent, signaling inflation pressure remained tepid and would allow the Federal Reserve to continue with its current monetary policy.

(Editing by Jan Paschal and Kenneth Barry)

Article source: http://www.nytimes.com/reuters/2013/04/11/business/11reuters-markets-stocks.html?partner=rss&emc=rss

Stocks Little Changed

The Standard Poor’s 500-stock index rose above its previous closing high, set in October 2007, in morning trading on Thursday.

The benchmark index was recently trading over 1,565.15 points, up 0.2 percent, despite a report of rising claims for unemployment benefits.

The blue-chip Dow Jones industrial average, which was up 0.3 percent Thursday in afternoon trading, already passed its 2007 milestone earlier this month, but the S.P. 500 is widely considered to be a broader-based reflection of the American stock market. The Nasdaq composite index of largely technology stocks added 0.1 percent Thursday.

The benchmark index has repeatedly come close to reaching its own record level in recent days, but has pulled back each time as investors grappled with concerns about the banking crisis in Cyprus. European stock markets rose on Thursday after Cypriot banks opened for the first time in two weeks with less turmoil than expected.

The new high caps a four-year run for the S.P. 500 that began in 2009 after the near collapse of the American financial system. The index rose to a high on Oct. 9, 2007, but then fell 57 percent to hit an ominous intraday low of 666.67 on March 6, 2009, and a closing low of 676.53 three days later.

The surge in the S.P. 500 this year still puts the index only slightly above where it was back in the heady days of 2000, when technology stocks were leading the market higher. Factoring in inflation, the S.P. 500 is still well below the highs reached in 2000 and 2007. The index is also still below the intraday record level of 1,576.09 hit on Oct. 11, 2007.

The current rally has been fed by bond-buying programs begun by the Federal Reserve, which helped nourish a recovery in corporate profits.

The gains have not generally been enjoyed by Americans without stock portfolios, leading to widespread skepticism about the sustainability of the market’s rise. But more recently there have been signs that the economic recovery may be broadening out into the rest of the economy.

The Commerce Department said Thursday that the economy grew at a 0.4 percent annual rate in the fourth quarter of 2012, which was faster than the 0.1 percent that the government previously estimated. The number of people filing for unemployment benefits rose 16,000 last week, more than predicted, but longer-term numbers have pointed to a recovery in the labor market. The overall unemployment rate dropped to its lowest level in four years in February.

The market gains on Thursday were relatively broad based, with 333 stocks in the S.P. 500 rising.

Article source: http://www.nytimes.com/2013/03/29/business/daily-stock-market-activity.html?partner=rss&emc=rss

Shares Fall on Cyprus Fears and Oracle’s Weak Sales

The stock market fell on Thursday after Oracle’s weak sales results weighed down big technology companies. Traders also worried that Cyprus was running out of time to avoid a collapse of its financial system.

The American market followed its European counterparts lower at the open and remained solidly negative all day. The Dow Jones industrial average fell as much as 129 points by midafternoon before paring the loss to close down 90 points.

All three major indexes felt the drag from technology stocks after Oracle reported an unexpected decline in sales in its fiscal third quarter. Oracle’s results have an outsize impact on other technology stocks because it reports earlier than most of its peers.

European markets closed sharply lower. The main indexes in Paris and Frankfurt fell 1.4 percent and 0.9 percent on fears that the crisis in Cyprus would intensify. The European Central Bank has threatened to end emergency support of the nation’s banks next week unless leaders can secure more financing.

Cyprus must raise about $7.5 billion in the next four days to avoid bankruptcy. Several plans have failed, including a proposal to tax deposits held by the nation’s banks. If Cyprus is unable to secure a bailout, its banks will fail and it could be forced to leave the euro currency. Worries about that possibility first hit stock markets Monday.

“It’s amazing how quickly things can turn back to Cyprus and Europe,” said Oliver Cross, director of research with Carolinas Investment Consulting.

Oracle was the biggest decliner in the Standard Poor’s 500-stock index, falling $3.47, or 9.7 percent, to $32.30. The S. P. 500-stock index lost 12.91 points, or 0.8 percent, to 1,545.80.

The Dow Jones industrial average dropped 90.24 points, or 0.6 percent, to 14,421.49. Cisco Systems was the Dow’s biggest loser, dropping 83 cents, or 3.8 percent, to $20.84.

The Nasdaq composite index, which is weighted heavily toward technology stocks, fell 31.59 points, or 1 percent, to 3,222.60.

Despite being down for the week, the Dow remains near a record high. Its run-up has been powered by optimism about the United States economy and the Federal Reserve’s easy-money policies. The Dow is up 2.6 percent this month. The S. P. 500 has gained 2.1 percent in March.

Given the market’s recent strength, many analysts have been anticipating a decline at the first sign of bad news — whether from Europe, corporate America or the American economy.

A sharp sell-off, however, has not materialized, said Troy Logan, managing director and senior economist at Warren Financial Service. He said Thursday’s losses could have been much worse.

“We thought Cyprus would be the perfect opportunity for the market to step back, but it looks like the market has shrugged it off,” Mr. Logan said.

The job and housing markets continue to improve gradually, according to economic reports released Thursday. The Labor Department said the number of people claiming new unemployment benefits last week was about flat near a five-year low. Sales of used homes rose in February to a three-year high, according to the National Association of Realtors.

Among the stocks on the move, AstraZeneca rose after saying it would cut 2,300 more jobs worldwide and overhaul its research operations. That brings to 11,000 the number of job cuts announced in the last 13 months. Its shares rose $1.77, or 3.8 percent, to $47.95.

The Movado Group fell after the luxury watchmaker said its fiscal fourth-quarter net income fell 26 percent. Its stock dropped $3.89, or 10.5 percent, to $33.23.

In the bond market, the price of the Treasury’s 10-year note rose 13/32, to 100 25/32, while its yield dropped to 1.91 percent, from 1.96 percent late Wednesday.

Article source: http://www.nytimes.com/2013/03/22/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: Defense Opens Insider Trade Case With Attack on Witnesses

Anthony Chiasson, the former hedge fund manager, faces insider trading charges.David Karp/Associated PressAnthony Chiasson, the former hedge fund manager, faces insider trading charges.

Jurors were presented with a stark choice in the insider trading trial of two former hedge fund managers. The defendants were either the senior links in a “corrupt chain” of Wall Street traders, or scapegoats for the criminal conduct of their subordinates.

On Tuesday, a jury heard opening arguments in the trial of Anthony Chiasson, a co-founder of the now-defunct Level Global Investors, and Todd Newman, a former portfolio manager of Diamondback Capital Management. They are accused of conspiring with six others to earn roughly $70 million from illegal trading in technology stocks.

The other six defendants have pleaded guilty and are cooperating with the prosecution. Two of the six, Jesse Tortora, a former Diamondback analyst, and Spyridon Adondakis, who goes by Sam, a former analyst at LevelGlobal, are expected to be the government’s main witnesses.

They “will paint a picture of a corrupt network of professionals who chose to break the rules and to trade on inside information all in order to make a quick buck,” said Richard C. Tarlowe, a prosecutor.

Yet the defense spent much of Tuesday attacking the credibility of the government witnesses. “The biggest mistake Todd Newman ever made, and the reason he’s sitting here today, is because he hired Jesse Tortora,” Stephen Fishbein, a lawyer representing Mr. Newman, said in his opening statement.

“Sam Adondakis is an easy, practiced liar,” said Reid H. Weingarten, a lawyer for Mr. Chiasson. “His word cannot be trusted.”

Early this year, federal prosecutors in Manhattan charged the eight Wall Street traders with participating in a “tight-knit circle of greed” that relied on secret financial information provided to them by corporate insiders at the computer company Dell and the chip maker Nvidia.

The trial, in Federal District Court in Manhattan before Judge Richard J. Sullivan, is expected to last six weeks. If convicted, the defendants could be sentenced to at least 25 years in prison, though they probably would receive far less time.

On Tuesday, prosecutors described how confidential information moved “across a corrupt chain of people” and ultimately into the hands of Mr. Chiasson, 39, and Mr. Newman, 47. That information, Mr. Tarlowe said, gave the defendants “an unfair advantage over honest investors who were playing by the rules.”

The prosecution previewed several pieces of evidence, including e-mails and instant messages among the defendants and their analysts. The communications, according to the government, suggest that in 2008 the managers had secret information about Dell’s gross margin numbers, crucial figures in its earnings release. With access to those inside numbers, Level Global made $50 million and Diamondback about $2.8 million by betting against Dell stock before the company released its earnings, the prosecution said.

Lawyers for the defense spent much of their opening statements trying to distance their clients from those accused of being their co-conspirators.

Mr. Tortora and Mr. Adondakis, with a few of the other defendants, worked together earlier in their careers as technology industry analysts at Prudential Equity Group in San Francisco. Mr. Weingarten, a lawyer for Mr. Chiasson, said that the group referred to themselves as “the clique” and likened themselves to “Fight Club,” a 1999 cult film about a secret, underground fight club.

“The first rule of the fight club is that there is no fight club,” Mr. Weingarten said, paraphrasing a famous line from the movie.

The clique “traveled together, partied together, drank together, vacationed in the Hamptons together,” he said. “They were very close, and they shared information as well.”

But neither Mr. Chiasson nor Mr. Newman was part of this clique, and they were far removed from the original sources of inside information, their lawyers insisted. Instead, the two defendants were depicted as upstanding, hardworking portfolio managers whose investments were grounded in legitimate research.

Both defendants processed so much data over the course of a trading day, their lawyers said, that they would not have been aware of improperly obtained data. To underscore that point, lawyers for Mr. Newman showed the jury a slide highlighting how in a given year, Mr. Newman made 32,222 trades, or roughly 128 trades a day, in the stocks of 366 companies.

The defense lawyers said that Mr. Tortora and Mr. Adondakis had falsely accused their clients to protect themselves. In November 2010, Mr. Tortora had lost his job at Diamondback and was living in Florida. When F.B.I. agents knocked on his door and presented him with evidence of insider trading, his only way out was to help the government, Mr. Fishbein, Mr. Newman’s lawyer, said.

“Make Todd Newman a scapegoat so Jesse Tortora does not have to face the consequences of crossing the line,” said he said.

Mr. Weingarten urged the jury, which includes a dog walker and a retired postal worker, not to resent the extraordinary wealth of Mr. Chiasson, who is worth tens of millions of dollars.

“It’s crazy how we pay people in our society,” Mr. Weingarten said. He noted that his “beloved” New York Yankees paid Alex Rodriguez many millions of dollars a year, only to pinch-hit for him this year in the bottom of the ninth inning of a playoff game.

“In 2007, he made A-Rod kind of money,” Mr. Weingarten said, referring to Mr. Chiasson. “I know you will not hold his economic success against him.”

Article source: http://dealbook.nytimes.com/2012/11/13/defense-opens-insider-trade-case-with-attack-on-witnesses/?partner=rss&emc=rss

News Analysis: Facebook’s Big Problem: Investors Losing Faith

Facebook's stock price fell on Thursday after some 271 million shares owned by early investors were free to be sold as a lockup period ended.Mario Tama/Getty ImagesFacebook‘s stock price fell on Thursday after some 271 million shares owned by early investors were free to be sold as a lockup period ended.

Want to better understand the crazy world of technology stocks? That requires having a grasp of something that can best be described as the curse of the ordinary.

That curse could mean that Facebook, which is already down by nearly 50 percent from its offering price to $19.05 on Friday, could drop even further.

It’s all about valuations.

Most efforts to judge the right stock market value for a company rely on profit forecasts. But earnings at young technology companies are harder to predict than at businesses using traditional approaches to generate earnings in other industries.

In times of optimism, that knowledge dearth can actually work to the advantage of technology companies. Executives fill that emptiness with promises of paradigm-breaking ways of doing business, prompting Wall Street analysts to project amazing profits. Investors get excited and flock to their stock debuts. In short, it’s all about being seen as extraordinary.

That magic allowed Facebook to go public at a stock price that was an astronomical 100 times its earnings per share. Back in May, investors seemingly had little trouble believing that Facebook could entwine advertising into all interactions on its site and generate extraordinary revenue.

Indeed, each of the companies that have gone public in recent months has needed one main magical story. For Groupon, it was that the company had found a revolutionary marketing tool that was perfect for small businesses. The untapped market was theoretically huge.

But the nightmare begins when investors stop believing in that central story. Earnings don’t have to be terrible, and they haven’t been at the hardest hit firms — Facebook, Groupon and Zynga, the online game company. The earnings just have to contain a few clues that the dream won’t be achieved.

Then, the transition from extraordinary to ordinary is brutal.

Groupon is down 75 percent from its initial public offering. The market now values it as if it were any old marketing company; its shares are trading at 12 times the earnings that analysts are projecting for 2013, according to data from Thomson Reuters.

This is a critical time for Facebook.

The faith level in the company is declining. Right now, Facebook is trading at 31 times the earnings that analysts are expecting for 2013. That’s not too expensive, but it’s far above Google’s 2013 price-to-earnings ratio of 14 times.

One reason investors have fled the stock is that Facebook’s second-quarter earnings showed few signs that it was close to achieving meteoric growth. “There have been almost no positive signals at Facebook in the past six months,” said Anup Srivastava, an assistant professor at the Kellogg School of Management at Northwestern University. He thinks Facebook shares should be worth about $12, based on his estimates of the company’s future cash flows.

Such a fate may seem unthinkable, given how far the stock has already fallen. But Facebook may struggle to keep pace with Google, which, though it is a more mature Internet company, is still finding ways to grow fast. In its second quarter, the volume of “paid clicks” (the number of times users click on a link that generates revenue for Google) rose 42 percent from the year-earlier period. That’s the fastest growth since 2007, according to analysts at Nomura. And despite its extraordinary growth, investors still give Google’s shares only an ordinary valuation.

But there’s still hope for Facebook.

Negativity can feed on itself in the stock market, and the over-optimism of the I.P.O. may simply have been replaced with rabid pessimism today. “As with most other young growth stocks, no one really knows Facebook’s value,” said Aswath Damodaran, a professor of finance at the New York University Stern School of Business. “That means people can overreact in both directions.”

There are ways to get back into investors’ good graces. One is for Facebook to be more convincing when explaining why it’s special.

Since its own I.P.O., LinkedIn has kept investors enthralled. The company trades at 79 times projected 2013 earnings, a clear sign that the market believes the company has created a revolutionary space for companies to recruit.

Then there’s Amazon.com, which is extraordinarily talented at projecting itself as extraordinary. Its shares trade at 100 times its projected 2013 earnings, even though it has reported what might look like disappointing earnings for several years. The dream is that Amazon is well on its way to dominating Internet commerce, and can look forward to prodigious profits.

Amazon.com also shows there’s a way to get investors believing again. Its shares plunged amid fears that it could go bankrupt soon after the dot-com boom of the late 1990s, but in the last 10 years it has regained extraordinary status.

Facebook could use some of that Amazon magic.

Article source: http://dealbook.nytimes.com/2012/08/17/finding-the-facebook-magic/?partner=rss&emc=rss

Unboxed: How Samuel Palmisano of I.B.M. Stayed a Step Ahead

Yet behind I.B.M.’s relentless progress over the last decade is a game plan that has been anything but conservative. The company shed multibillion-dollar businesses. It chose higher profit margins over corporate size, and expanded aggressively overseas, seeking sales, low-cost engineering talent and quicker organizational reflexes.

Investors, however, haven’t been bored. The company’s stock price has surged. In November, Warren E. Buffett, who typically shuns technology stocks, announced he had accumulated $10 billion of I.B.M. shares, a stake of more than 5 percent.

All of that didn’t just happen. A large portion of the credit goes to Samuel J. Palmisano, who steps down on Sunday after nearly a decade as chief executive. During his tenure, I.B.M. has been a textbook case of how to drive change in a big company — when so much of the study of business innovation focuses on start-ups and entrepreneurs.

This column is a glimpse of the thinking behind some of the major steps I.B.M. has taken under Mr. Palmisano’s leadership, based on two recent interviews with him.

He says his guiding framework boils down to four questions:

• “Why would someone spend their money with you — so what is unique about you?”

• “Why would somebody work for you?”

• “Why would society allow you to operate in their defined geography — their country?”

• “And why would somebody invest their money with you?”

Mr. Palmisano formulated those questions in the months after he became C.E.O. in March 2002 His predecessor, Louis V. Gerstner Jr., recruited to I.B.M. in 1993, had already pulled the company out of a financial tailspin, first reducing the size of the work force and cutting costs, and then leading a remarkable recovery.

In meetings after he took over, Mr. Palmisano told colleagues that I.B.M. was still good, but that it wasn’t the standard-setting corporation that it had been when he joined in 1973. (A history major at Johns Hopkins and a star offensive lineman on the football team, he turned down a tryout with the Oakland Raiders of the N.F.L. for a sales job at the company.)

The four questions, he explains, were a way to focus thinking and prod the company beyond its comfort zone and to make I.B.M. pre-eminent again. He presented the four-question framework to the company’s top 300 managers at a meeting in early 2003 in Boca Raton, Fla.

“This needs to be our mission and goal, to make I.B.M. a great company,” he said, according to executives who attended the gathering.

THE pursuit of excellence in those four dimensions shaped the strategy. To focus on doing unique work, with its higher profits, meant getting out of low-margin businesses that were fading. I.B.M.’s long-range technology assessment in 2002 concluded that the personal computer business would no longer present much opportunity for innovation, at least not in the corporate market.

The hub of innovation would shift to services and software, often delivered over the Internet from data centers, connecting to all kinds of devices, including PCs. Today, that is called cloud computing; when I.B.M. started promoting the concept several years ago the company called it on-demand computing.

So Mr. Palmisano led a lengthy strategic review of the PC business, deciding to sell while it was still profitable. Internal arguments against a sell-off were intense: PCs pulled in sales of other I.B.M. products in corporate accounts, the cost of electronic parts for its larger computers would jump without the purchasing power of its big PC division, and the corporate brand and its reputation would suffer without PCs, the one I.B.M. product touched by millions of people.

Lately, Hewlett-Packard has engaged in a similar debate, first declaring that it was looking to sell its PC business, then backing off. “I’ve heard every one of the arguments, every one of them,” Mr. Palmisano says. “But if you decide you’re going to move to a different space, where there’s innovation and therefore you can do unique things and get some premium for that, the PC business wasn’t going to be it.”

Article source: http://www.nytimes.com/2012/01/01/business/how-samuel-palmisano-of-ibm-stayed-a-step-ahead-unboxed.html?partner=rss&emc=rss

DealBook: Live from San Francisco, Zynga Pops and Then Flops

Zynga’s chief, Mark Pincus, center, with his wife, Ali, after he rang the Nasdaq’s opening bell.Zef Nikolla/Nasdaq, via ReutersZynga’s chief, Mark Pincus, center, with his wife, Ali, after he rang the Nasdaq’s opening bell.

8:14 p.m. | Updated

Zynga, the online gaming company, kicked off its first day of trading with the usual fanfare.

At the San Francisco headquarters, decorated with huge red banners, its founder, Mark Pincus, rang the opening bell, flanked by his wife, Ali, and the Nasdaq chief, Robert Greifeld. Before a packed room of employees and investors, he made a “raise the roof” gesture in celebration of the initial public offering.

“We brought the Nasdaq here,” said Mr. Pincus, 45. “With our I.P.O., we’re accelerating this mission of connecting the world through games. It’s just getting bigger.”

But the market debut lacked the same pomp.

At the opening, Zynga’s shares rose a modest 10 percent, to $11, and then quickly pulled back. The stock closed at $9.50, or 5 percent below its offering price of $10.

Zynga’s weak performance reflects the broader market for I.P.O.’s. Newly public technology stocks have been buffeted by macroeconomic turmoil and jittery investors, who are skeptical about the business models.

Several Internet companies have stumbled below their offering prices. Pandora is more than a third off its initial price. Nexon, a giant Tokyo-based gaming company, fell on its first day of trading earlier this week.

When Zynga filed its prospectus in July, investors had high expectations for start-ups, particularly those built on social networks. But the market soured in August amid credit pangs in Europe and spikes in volatility.

On the first day of trading, the 42 technology companies that went public this year jumped 20.4 percent on average, according to data from Renaissance Capital, the I.P.O. advisory firm. But they have since struggled, with the group falling 15 percent.

Zynga’s trajectory has followed a similar path. In early summer, insiders pegged the market value of the social gaming company at nearly $20 billion. At its offering price, Zynga, which raised $1 billion, went public at a more muted $7 billion. Its current value is $6.6 billion.

“Raising $1 billion is a large number, particularly in these choppy equity markets where investors seem to be hesitant to take on much risk,” said Peter Falvey, a managing director of Morgan Keegan’s technology group. But “there clearly isn’t a rush to get into the stock at these valuations.”

Zynga’s executives brushed aside Friday’s tepid reception, calling it an insignificant data point in the context of the company’s grander goals. John Schappert, Zynga’s chief operating officer, said he had no regrets about the timing or the structure of the offering, which, at 14 percent of total shares, was bigger than other tech I.P.O.’s this year.

“We’re not looking at it today or tomorrow, or what we could have squeezed out.” Mr. Schappert said. “We’re looking at the long run.”

In the coming months, Zynga will be a critical test for the fragile market. Traders are closely watching the stock to get a sense of how social network giant Facebook will fare when it goes public next year. Facebook is widely expected to go public in the second quarter of 2012, at a market value greater than $100 billion.

Financially, the game maker is on better footing than many of its unprofitable Internet peers. The company recorded earnings of $30.7 million for the first nine months of the year, on revenue of $828.9 million. Zynga’s is also the largest gaming company on Facebook, with some 222 million monthly users.

But Zynga also has its fair share of skeptics. User growth has slowed in recent quarters, while marketing costs remain high. Zynga spent $122 million on marketing and sales for the first nine months of the year, more than all of 2010. There are also lingering concerns that Zynga will always be dependent on Facebook, despite efforts to build out its mobile games and an independent platform.

The headwinds, for now, do not seem to bother Zynga’s early venture capital backers, many of whom planned to sell only a small number of shares, if any, in the offering. John Doerr, a partner at Kleiner Perkins Caufield Byers — Zynga’s second-largest shareholder — said he felt giddy this morning as he headed over to the game maker’s headquarters before sunrise.

“Five, 10 years from now, we’ll look back at this moment and think it was just the beginning,” said Mr. Doerr, who has backed companies like Google and Amazon. “This is the beginning of the second Internet boom.”

Article source: http://feeds.nytimes.com/click.phdo?i=5a0e82476554fddb94a1a441d7395f49

DealBook: Zynga Sets Offering Price at $8.50 to $10 a Share

Mark Pincus, Zynga’s chief executive. The popularity of the company’s games, like Farmville, are  behind its decision to go public.Jeff Chiu/Associated PressMark Pincus, Zynga’s chief executive. The popularity of the company’s games, like Farmville, are  behind its decision to go public.

8:03 p.m. | Updated

Zynga set the price range for its initial public offering at $8.50 to $10 a share, a highly anticipated debut that could value the company at $7 billion.

At the top end of that range, the company, a four-year-old online game maker, is on track to raise $1 billion, which would make it the largest United States-based Internet offering since Google in 2004.

Its underwriters, led by Morgan Stanley and Goldman Sachs, also have the option to sell an additional 15 million shares if demand is strong, according to a regulatory filing on Friday.

Zynga’s debut reflects the tempered expectations in the I.P.O. market.

In recent weeks, investors have been shying away from newly public technology stocks, many of which are now trading below their offering prices. Groupon, the daily deals start-up that went public in early November, is off 5 percent from its debut price. Pandora, the online music service, is 33 percent below its offering.

At $7 billion, Zynga is pitching a relatively modest price to potential investors. A financing round in February valued Zynga at close to $10 billion. At one point, analysts and company insiders floated a value of $20 billion.

Zynga is planning to sell 100 million shares — or 14.3 percent of its total — a bigger stake than many Internet companies that have gone public this year. Several start-ups, like Groupon, have offered less than 10 percent of total shares in their I.P.O.’s. That strategy of constrained supply has allowed many to soar on their first day of trading, but it has also amplified volatility.

“December is historically stronger for Zynga,” said Michael Pachter, a Wedbush Securities analyst. “Most of us are scratching our heads — why go public when the market is in turmoil and you’re in the middle of a strong quarter?”

Despite the choppy nature of the I.P.O. markets, a number of companies are pushing ahead with plans to go public. Two weeks ago, Yelp, the review site, submitted its prospectus for a $100 million offering, based on a figure used to calculate the registration fee. On Friday, Michael Kors, the fashion apparel maker, announced plans to go public in an offering that could value the company at $3.63 billion.

Zynga insiders are largely holding on to their stakes. Zynga’s two largest investors — its chief executive, Mark Pincus, and a venture capital firm, Kleiner Perkins Caufield Byers — are not selling any shares in the offering, according to the filing.

Its other major venture capital investors, Institutional Venture Partners, Union Square Ventures, Foundry Venture Capital and Avalon Ventures, will each sell a little more than two million shares, but only if the underwriters exercise the overallotment option.

Zynga, unlike many of its peers, is churning out a profit, a crucial selling point as it starts its road show on Monday. It recorded earnings of $30.7 million for the first nine months of this year, on revenue of $828.9 million.

The company, which makes the bulk of its money from the sale of virtual goods, is the top game maker on Facebook, with some 227 million monthly active users. Its latest franchise, Castleville, which started about two weeks ago, has already attracted about 20 million users on Facebook, according to AppData, a site that tracks online games.

Still, there are signs that growth may be slowing. After hitting an average of 236 million monthly unique users in the first quarter, Zynga has pulled back modestly. Attracting and keeping new users is critical because only a small percentage of Zynga users actually buy virtual goods.

The company is expected to make its debut on the Nasdaq in mid-December, under the ticker ZNGA.

Article source: http://dealbook.nytimes.com/2011/12/02/zynga-aims-to-raise-up-to-1-billion/?partner=rss&emc=rss

Stocks and Bonds: Shares Close Down on Wall Street

Trade figures from the world’s two biggest economies, the United States and China, also stoked concerns over the economic outlook, ending a rally in European stocks as well.

The Dow Jones industrial average closed down 40.72 points, or 0.35 percent, at 11,478.13. JPMorgan fell 4.8 percent. Other banks also fell. Citigroup dropped 5.3 percent, Morgan Stanley 4.4 percent and Bank of America 5.5 percent.

JPMorgan is the first big American bank to announce quarterly results. Next week Wells Fargo Company, Citigroup and Morgan Stanley will report. JPMorgan is considered one of the industry’s leaders, so its results do not bode well for other financial companies, said Jason Lilly, a portfolio manager at Rockland Trust Investment Management Group.

An afternoon rally in technology stocks trimmed some of Wall Street’s losses. Yahoo rose 1 percent as investors speculated the company might be bought. The technology-focused Nasdaq composite rose 15.5 points, or 0.6 percent, to 2,620.

“There’s a mounting interest in Yahoo and that has filtered out into tech stocks,” said Quincy Krosby, a market strategist for Prudential Financial.

The S. P. 500 index fell 3.59 points, or 0.3 percent, to 1,203.66. Financial stocks fell 2.4 percent, the most of the 10 company groups that make up the index.

Investors were also disappointed by a report that China’s trade surplus narrowed for a second month in September. That suggests the Chinese economy is slowing more than previously thought, which could hurt demand for exports from the United States.

The United States trade deficit was essentially unchanged in August at $45.6 billion, with exports and imports both slipping. Lower imports are a bad sign for the United States economy, since it shows weakness in demand.

Before Thursday, stocks had soared for a week on signs that Europe was starting to get a handle on its financial crisis. The Dow had rallied 8.1 percent since last Tuesday, when it hit its lowest point of the year. The S. P. Poor’s 500-index rose even more in that time, 9.8 percent. That was the biggest seven-day jump for the S. P. since March 2009, when the market hit 12-year lows.

The sharp highs and lows are typical of the volatility that has plagued markets since August, when investors began reacting to fears that indebted economies in Europe would collapse and the United States would slide back into recession. Many analysts say they think the market is in for more big swings until a resolution to Europe’s debt is reached.

“Europe will definitely contribute to more volatility. That story isn’t done,” said Mr. Lilly.

In corporate news, the BlackBerry maker Research in Motion fell 1.13 percent after a three-day outage that cut off service to users across the world. The company said it fixed the problem, which resulted from a breakdown in its European infrastructure.

The Blackstone Group lost 5.4 percent after a Citi Investment Research analyst dropped the private equity firm from a list of favorite stocks, saying the firm would not be able to make strong real estate investments for some time because of the weak economy.

Netflix rose 3 percent after the company secured a deal with Warner Brothers Television Group and CBS to stream programs from the CW television network.

The Treasury’s 10-year note rose 8/32, to 99 16/32. The yield fell to 2.18 percent, from 2.21 percent late Wednesday.

In Europe, Britain’s FTSE 100 closed down 0.7 percent, while Germany’s DAX and France’s CAC 40 were both 1.3 percent lower.

Oil prices meanwhile tracked European equities lower — benchmark oil was down $1.33 to $84.45 a barrel in electronic trading on the New York Mercantile Exchange.

Article source: http://feeds.nytimes.com/click.phdo?i=359a05ef31ba9c3e7541b50a9aebf627