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Applied Materials, Lam Research, Micron Fall Late

Stock market futures rose modestly late Thursday, with Dow Jones futures, S&P 500 futures and Nasdaq futures all higher. Applied Materials (AMAT) was a big after-hours loser on disappointing sales guidance. Fellow chip-equipment makers such as Lam Research (LRCX) and KLA-Tencor (KLAC) also retreated. So did Micron Technology (MU), as Applied Materials is a key player in memory chipmaking gear.

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Stock Market Thursday

In Thursday’s regular stock market trading, the Dow Jones, S&P 500 and Nasdaq composite closed with slim losses. Small caps continued to lead, with the S&P 600 rising for the ninth time in 10 sessions.

Stock Market Futures

As for stock market futures today, Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures climbed 0.2%. Nasdaq 100 futures advanced 0.3%.

Applied Materials

Applied Materials earnings rose 54% to $1.22 a share in its fiscal Q2, with revenue rising 29% to $4.57 billion. Both comfortably beat analyst views. But the chip-equipment maker sees Q3 revenue of $4.43 billion. That’s roughly in line with the Zacks estimate of $4.45 billion, but clearly below other consensus targets for $4.53 billion.

Applied Materials fell 4.5% in late trade, suggesting a move below its 200-day moving average at Friday’s open. On Thursday, the stock fell 2.2% to 53.96, once again hitting resistance at its 50-day moving average.

The Applied Materials stock chart, which previously had been forming a double-bottom base, is starting to look like a bearish head-and-shoulders pattern.

Lam Research, Micron Fall

Meanwhile, Lam Research and KLA-Tencor lost 1.5%. Lam has been fighting to hold above its 50-day, while KLA-Tencor is just above that level.

Applied Materials is heavily exposed to the memory market, with over half its sales going to the DRAM and flash markets. Memory giant Micron Technology lost about 0.7% in late trade. Micron fell 3.2% to 54.70 on Thursday. The IBD 50 chip stock has been building the right side of a consolidation, retaking its 50-day line on Monday.

The broader chip sector has been so-so in recent months. Chipmakers and fabless chipmakers have done reasonably well, helped by Intel (INTC) and Nvidia (NVDA) moving into buy range. A few others are consolidating in decent form, but breakouts are scarce. But chip-equipment makers have struggled in recent months, with the Electronics-Semiconductor Equipment group falling to 133 out of the 197 industries tracked by IBD. The group’s relative strength line has been lagging for nearly six months, reflecting its underperformance vs. the S&P 500 index.

Chip Stocks And The Market

Typically, the broader stock market struggles to rally without chips. The major averages have largely done so in recent weeks in part due to the surge in oil stocks. But it’s also due to Apple (AAPL), which is a huge buyer of chips. But Apple’s big recent breakout reflects optimism about a $100 billion buyback, strong growth in services and Warren Buffett buying more shares. None of that benefits chipmakers. Indeed, iPhone shipments were slightly below estimates in the latest quarter.

But with Apple now pausing after its 17% surge over nine sessions, watch to see if the relationship between chips and the broader market reasserts itself.

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