Market Report / Mellanox Spoils the Party

TA-25 index of blue chips ends day at 1,196.34 points, a drop of 0.7%, while TA-100 loses 0.6% to end at 1,063.98.

Mellanox Technologies took away the punch bowl just as the market was celebrating Tuesday’s election results, turning in a disappointing forecast for its first-quarter earnings and sinking 14%. The benchmark TA-25 index of blue chips ended the day at 1,196.34 points, a drop of 0.7% while the TA-100 lost 0.6% to end at 1,063.98. Turnover was an unusually heavy NIS 2.24 billion thanks to the expiration of the January Maof contract in the morning, with Israel Chemicals alone accounting for NIS 245 million of that on a decline of just over 2%.

Thursday's drop left the TA-25 down 0.9% for the week and the TA-100 off 0.6%. That trimmed the two indices’ year-to-date performance to gains of 0.9% and 1.4%, respectively.

In the foreign currency market, the dollar continued to weaken Thursday, losing nearly 0.1% to the shekel to reach a Bank of Israel rate of NIS 3.7190. The euro was also weaker, losing 0.15% of its value to NIS 4.9571.

Analysts said that traders are counting on the next government, led by the Prime Minister Benjamin Netanyahu’s Likud Party and presumably Yair Lapid’s Yesh Atid, being able to cut the required NIS 15 billion from 2013’s budget and preserve fiscal discipline.

“A partnership of the Likud, Habayit Hayehudi, Kadima and Yesh Atid will dictate an austere and responsible fiscal policy,” the research department of Alpha Platinum mutual funds said. “This coalition can also advance reforms in equalizing the burdens [of army service], increasing competition in various sectors of the economy and perhaps overhauling education.”

Government bonds were higher due to the election result and expectations of better budget policy. Unlinked shekel bonds due in 2022 rose 0.22%, cutting their yield to 3.72%, which was near a record low. Inflation-linked bonds due in 2022 advanced 0.17% and were yielding 1.35% by close.

Outlook disappoints

The sharp drop in Mellanox shares, which occurred in heavy trading of NIS 143 million, came after the semiconductor company issued a cautious forecast for its first-quarter results. The disappointment for investors was compounded by the fact that the company failed to meet its own fourth-quarter revenue guidance due to what it said was a weaker demand environment. The only good news was that the fourth-quarter figures topped analysts’ estimates.

But Mellanox’s woes were not the only reason for a decline in the TASE’s BlueTech50 Index, which ended down 1.5% at 310.22. Disappointing earnings at Apple Computer overnight soured sentiment for technology shares across the board.

Apple missed Wall Street’s revenue forecast for a third straight quarter as iPhone sales were poorer than expected, fanning fears its dominance of consumer electronics is slipping. The shares dropped 10.9% to $457.94 in early trading Thursday, wiping out about $50 billion of its market value.

Nevertheless, the S&P 500 surged through 1,500 on its seventh day of gains, underpinned by positive economic news. Optimistic economic reports helped reverse the market’s earlier declines as the number of Americans filing new claims for unemployment benefits unexpectedly fell to a five-year low. In addition, factory activity in January neared a two-year high. It was the first time the S&P 500 had risen above 1,500 since December 12, 2007.

In Tel Aviv, EZchip finished the day down 1.5%, Orckit down a stunning 15.2% and Magic down 1%. Babylon extended its losses as well, tacking on a 4.5% decline to the 4% drop it posted the day before, after it said it was laying off 30 sales staffers.

Energy shares also declined, with Modiin’s 21% plunge Thursday bringing the TA Oil and Gas Index to a 1.2% decline and a close of 1,155.49. Modiin completed a rights offering and will officially go ex-rights on Sunday next week. Against that Ormat Industries recovered to end 7% higher Thursday, a day after its Ormat Technologies unit in the United States reported it would take a $140 million to $150 million charge on one of its California geothermal plants.

Ofer Vaknin