Chip-Maker Shares Rally After Nvidia Reports Gain

Intel, the world's biggest chip company, saw its stock rise 1.4% to close at $27.63 a day after the company reaffirmed its quarterly and full-year guidance. Nvidia also saw its stock jump 6.4% to close at $13.21, after posting better-than-expected results and outlook.

Other chip stocks posted gains on Friday. Shares of Broadcom Corp. added 1.3% to close at $33.79, while Micron Technology gained 1.1% to close at $6.36 and SandDisk Corp moved up by a fraction to close at $35.70.

The Philadelphia Semiconductor Index rallied nearly 1%. The index has lost about 6% over the last three months due to worries of weakening demand.

A brighter view emerged from the Intel analyst day last Thursday. JMP Securities analyst Alex Gauna called the gathering at the company's Santa Clara, Calif. headquarters "boring, but in a good way."

That's partly because of the company's "assertion that the quarter is playing out as expected and that it is not seeing the sort of enterprise weakness that Cisco reported," Gauna wrote.

Cisco Systems on Wednesday warned of cautious spending in information technology, a comment that sent its stock and those of other major tech companies falling.

Analysts noted Intel's positive comments on Ultrabooks, the new category of ultrathin, low-power notebooks based on the chip giant's technology, which it hopes to shake up the personal computer market. Intel also touted its new products focused on the mobile and data center markets.

"Intel has lots of levers and contingency plans in place for downside protection," RBC Capital Markets analyst Doug Freedman said in a note.

Early on Friday, May 11, Nvidia also gave the sector a boost with an upbeat quarterly report that beat Wall Street's expectations.

Nvidia reported an adjusted profit of 16 cents a share, on revenue of $924.9 million, beating consensus estimates of a profit of 10 cents a share, on revenue of $916 million.

"Their revenues came in better than many had feared," Evercore Partners analyst Patrick Wang said in emailed comments. "Management also seems confident in their full-year Tegra target. Their stock performance over the next few quarters will be modulated by how much success they see in handsets and tablets."

Nvidia is looking to expand its presence in the fast-growing mobile computing market with its Tegra platform.

Facebook's Zuckerberg Says Mobile First Priority

Facebook CEO Mark Zuckerberg, whose limited role in promoting the No. 1 social network's market debut has drawn criticism, laid out its growth strategy to investors on Friday, May 11, saying that transforming its mobile and advertising experience are top priorities in 2012. Integrating online apps more strongly into Facebook is also a major goal, he told hundreds of investors at an event that capped the first week of Facebook's cross-country "roadshow" to pitch its highly anticipated initial public offering.

Facebook aims to raise about $10.6 billion, dwarfing the coming-out parties of tech companies like Google and valuing it at up to $96 billion — rivaling Amazon.com's. Zuckerberg, 27, who started Facebook in his Harvard dorm room 8 years ago, said Facebook's key priorities in 2012 were to improve its mobile application, to build stronger ties incorporating its social network with other online apps and to create a "transformative" advertising experience.

The company is "just getting started" with its mobile app, said Zuckerberg, who appeared on stage in a grey T-shirt and dark trousers at Palo Alto's Crowne Plaza, flanked by Chief Operating Officer Sheryl Sandberg and finance chief David Ebersman.

With 900 million users, Facebook is the world's dominant social network. Zuckerberg was Time Magazine's Person of the Year in 2010 and was depicted in the fictionalized 2010 movie "The Social Network". "Over the next 10 years or so, every consumer category should be transformed to be built around people," Zuckerberg told fund managers and Silicon Valley glitterati such as Netscape co-founder and venture capitalist Marc Andreessen. "People will listen to music and watch TV with other people" through Facebook.

"We only recently reached this tipping point," Zuckerberg said as the audience consumed a lunch of curried chicken salad and chocolate-chip cookies.

Wall Street had been concerned about the company's ability to wring revenue from mobile users, considered crucial for long-term growth, as well as slowing growth in Facebook's main advertising business. But that may not dampen demand for shares of the high-flying Web company, which is as much a cultural phenomenon as it is a business success story. On Thursday, a source close to the process told Reuters its IPO was already oversubscribed, a week before final pricing.

Facebook has indicated an IPO price range of $28 to $35 a share on Thursday, which would value the company at $77 billion to $96 billion.

Zuckerberg — sans his trademark "hoodie" sweatshirt — made brief introductory comments at the event, which took place 8 miles from Facebook's new Menlo Park headquarters at One Hacker Way, before opening the session up to questions. The company had provoked some grumbles from investors last week, when it took limited questions from the audience at an event in New York. And Zuckerberg skipped other stops on the roadshow this week, such Boston.

Investors managed to get in more than 10 questions at Friday's event, ranging from capital spending to regulation, even as Facebook maintained tight control over the proceedings, forbidding follow-up questions. Zuckerberg and Sandberg said Facebook's overall advertising business was gaining steam, with increased spending by most of its marketers. The two executives highlighted social ads as an important tool for Facebook to tackle its mobile challenge.

The ads, which incorporate information about Facebook users' friends who "like" certain products, are better suited to the smaller screens of smartphones, from which more than half of Facebook's users access the service, executives said. As Facebook collects more user data, such as location, it will be able to offer more relevant mobile ads, executives said.

Asked about Facebook's $1 billion purchase of mobile app maker Instagram, its largest acquisition, Zuckerberg said the deal was under consideration for one to two months before it occurred. Media reports had said it was forged over a weekend. The number of Instagram users has already grown from 30 million to 50 million since the deal was announced in early April, he noted.

Facebook's offering marks a watershed moment for the new generation of Web companies that are challenging established players such as Google and Yahoo for consumers' online time and for advertising dollars. The company's shares, which will be listed on Nasdaq under the symbol FB, could begin trading as soon as May 18. "They did a good job of addressing the tough questions. They have a clear vision," said one investor who attended the event but did not want to be named.

Gas Prices Continue to Fall

A month ago, it looked like retail gasoline prices would soar above $4 a gallon and stay there all year, sucking precious dollars out of American consumers' pockets, and hobbling the economic recovery. By early April, the average price of a gallon had risen to $3.94, jumping an incredible 50 cents in just two months' time, according to the Energy Information Agency.

The media was full of stories about the pain at the pump and about what the price of gas might mean for the economy. Prices had never been so high so early in the year, proclaimed the pundits. And with the peak driving season yet to come, there was even chatter that gas prices would hit $5 over the summer.

That was then. Pump prices have now fallen five weeks in a row, dropping by 15 cents to an average of $3.79. That's still pretty high, but it's lower than it was a year ago, when prices hit $3.97, and it's lower than the all-time peak of $4.11 in July 2008.

The Energy Department now projects that gas prices will average $3.79 a gallon this summer and will average $3.71 for all of 2012. Next year, gas will cost about $3.67. In other words, gas prices aren't expected to change very much for the next year and a half. Futures for crude oil and for wholesale gasoline indicate that retail gas prices will probably be about $3.65 on Election Day. Those projections are down significantly from April.

The price of gasoline mostly reflects the global market for crude oil, which in turn reflects current global supply and demand, as well as expected supply and demand. That market is now pricing in more supply and less demand than it was earlier in the year.

The price of Brent crude oil hit $126 a barrel on April 3 and has now fallen to $112, a drop of 11%. Gas prices have fallen only about 4%, so further declines in retail prices are likely in coming weeks, even if crude oil prices don't fall farther.

Tensions with Iran have eased and the latest production numbers reported by Platts show that any shortfall in Iranian production due to stepped-up sanctions is being more than matched by increased production by other OPEC members, particularly Saudi Arabia, Libya, Iraq and Nigeria.

Lower prices should help improve consumer psychology, says Chris Christopher, director of consumer economics at IHS Global Insight, the economics consulting firm. Christopher finds a direct relationship between pump prices and consumer sentiment surveys.

Higher gasoline prices in the first quarter were offset to some extent by lower heating bills, due to warmer weather and the collapse in natural gas prices. Consumer spending was quite robust in the first quarter, despite the pain at the pump.

All things being equal, a sustained $15 a barrel decline in oil prices would be expected to boost gross domestic product by about 0.3 percentage points after a year, and would save about $45 billion on consumers' annual gasoline bill, according to econometric models. It would be expected to lower the unemployment rate by 0.1 percentage point, and lower the consumer price index by about 0.5 percentage points.

Top EU Official Praises Spain's Plan to Bolster Banking Sector

The European Union's top economic official said on Sunday that Spain was taking decisive action to shore up its banking sector and that its overall reform efforts were essential to bolster confidence in the sector.

On May 11, Spain offered high-interest loans to banks suffering the fallout of a property crash and ordered an independent audit of lending across the entire banking sector. But the attempt to plug a hole in the country's banking system fell short of expectations.

Olli Rehn, Europe's commissioner for economic and monetary affairs, praised the plan in a statement. "These actions should dispel the lingering doubts about the stability of the Spanish banking sector," he said. "The combination of increased provisioning against potential future losses, segregation of troubled assets, independent validation of balance sheets, and the availability of necessary public funds to support the overall reform effort is essential in order to reinforce investor confidence in Spanish banks," he said.

Rehn said the European Commission, the EU executive, would continue to cooperate closely with Spanish authorities reform, and that measures implying state aid would have to be analyzed and approved by the Commission.

"A prompt and profound reform of the banking sector is a cornerstone of Spain's crisis response and its overall reform strategy," he said. "It is an indispensable supplement of the determined fiscal consolidation and front-loaded structural reforms that can bring sustainable growth and more and better jobs."