Cypress, Synaptics tumble; WaMu, Countrywide up; Six Flags jostled, Priceline surges on earnings, outlook

By Evan Weinberger

New York, Nov. 9 - Cypress Semiconductor Corp. convertibles took a big hit Friday, a drop partly driven by a falling Nasdaq. Synaptics Inc. convertibles were also down.

Washington Mutual Inc. and Countrywide Financial Corp. led somewhat of a revival in the financial sector.

Meanwhile, AMR Corp., the parent company of American Airlines, was down as airlines have been hurt by high oil prices and American Airlines faces a labor disruption with its pilots union. JetBlue Airways Corp. convertibles were also down.

Six Flags, Inc. mimicked its freefall rides on tough earnings and ratings agency downgrades Friday. Priceline.com Inc. convertibles were up on robust earnings.

Market watchers reported slower-than-usual Friday activity, mostly due to the bond market closing early in advance of a three-day weekend. "I think there were a bunch of trades as the market closed," one analyst said.

Another trader reported that he saw bids out there, but few trades closing. "We had orders but couldn't get anything done," he said.

Reports of further bank write-downs springing from subprime investments and a cloudy outlook for Cisco Systems, Inc. drove stocks down early. "All the market needs is a little reason to take you out and shoot you these days," one trader said.

Stocks rallied from the depths much of the day, but analysts and traders reported a big sell-off as trading came to a close. The trader said investors didn't want to have money sitting in shaky investments over the weekend when more bad news could emerge. "That could be a part of it," an analyst added.

By the end of the day, stocks saw another steep decline.

The Dow Jones Industrial Average fell 223.55 points, or 1.69%, to a close of 13,042.74.

The Nasdaq, which has taken the biggest hits in this week of big hits, lost a further 68.06 points, or 2.52%, for a 2,627.94 close.

And the Standard & Poor's 500 closed at 1,453.70, a drop of 21.07 points, or 1.43%.

No new issues priced in the United States Friday.

Falling Nasdaq hurts Cypress, Synaptics

Among the big three stock indices, the Nasdaq has been the hardest hit over the course of this tough week. And while some analysts say that it's due to the stocks being overvalued, others have told Prospect News that the tech sector is not having its own bubble burst.

"[Cisco] came out with earnings that weren't bad," one trader said, adding that in the current environment it doesn't take much to get other stocks to go down. The falls, he said, have been far more issue specific than broadly felt.

Bubble or not, several tech sector convertibles were down hard Friday, according to market watchers.

Notable among them were San Jose, Calif.-based chip maker Cypress Semiconductor and Santa Clara, Calif.-based computer touch screen maker Synaptics.

Cypress' 1% convertible senior notes due Sept. 15, 2009 closed Friday at 166.56 versus a closing stock price of $36.54. The convertibles closed Thursday at 185.53 versus a stock price of $38.65.

Cypress stock (NYSE: CY) fell $2.11, or 5.46%, in trading Friday.

Synaptics' 0.5% convertible senior subordinated notes due Dec. 1, 2024 closed Friday at 125.695 versus a closing stock price of $54.61. They closed Thursday at 129.064 versus a stock price of $57.68.

Stock in Synaptics (Nasdaq: SYNA) sank $3.07, or 5.32%, on Friday.

Financials set to rebound?

Could the financial sector be poised for a quick rebound following the subprime mortgage mess and the credit concerns that dogged the summer and may be returning? With new subprime write-downs announced seemingly every day by major financial institutions, that may seem unlikely.

Not to one trader. "I think we are at a turning point re: financials," he said in an e-mail. The trader said the Federal Reserve will try to help the banking sector's "functionality and confidence," and ease pressure for a further rate cut.

He may be on to something, because several financial-related convertibles and stocks traded up Friday even as the broader markets continued to fall.

Seattle-based savings and loan Washington Mutual saw its 5.375% PIES due 2041 close Friday at 35.4 versus a closing stock price of $20.51. They closed Thursday at 34.5 versus a stock price of $19.39.

The bigger gains were seen in Providian Financial Corp., now a subsidiary of Washington Mutual under the name New American Financial Capital, Inc. Providian's 4% convertible senior notes due May 15, 2008 closed Friday at 79.17 versus WaMu's closing stock price of $20.51. They closed Thursday at 74.65 versus a stock price of $19.39.

Providian's 2.75% convertible senior notes due March 15, 2016 closed Friday at 80.2 versus a stock price of $20.51 after finishing Thursday at 75.64 versus a stock price of $19.39.

Washington Mutual stock (NYSE: WM) gained $1.12, or 5.78%, on Friday.

Calabasas, Calif.-based mortgage lender Countrywide saw its Libor minus 350 basis points series A convertible senior debentures due April 15, 2037 closed Friday at 85.91 versus a closing stock price of $13.83. They closed Thursday at 83.73 versus a stock price of $13.47.

Countrywide's Libor minus 225 bps series B convertible senior debentures due May 15, 2037 closed Friday at 82.049 versus a stock price of $13.83. They finished Thursday at 81.37 versus a stock price of $13.47.

Stock in Countrywide (NYSE: CFC) gained 36 cents, or 2.67%, on the day.

Oil prices, labor problems hurt AMR

Fort Worth, Texas-based AMR, the parent company of American Airlines, faced the double-whammy of surging oil prices and the prospects of a walkout by its pilots. AMR rejected a salary proposal presented by the pilots' union Thursday.

The pilots' proposal would have cost the company $1.4 billion per year, including a raise of 2.68% per year stretching back to 1992. The contract with pilots can be amended in May.

The Transport Workers Union has also been talking tough against American Airlines in recent days, citing the recent payouts to AMR executives as evidence that they should get a raise.

Both unions said they had been agreeing to below-market deals in order to keep the airline afloat.

AMR's 4.5% convertible senior notes due Feb. 15, 2024 closed Friday at 115.646 versus a closing stock price of $20.42. They closed Thursday at 117.096 versus a stock price of $20.97.

AMR stock (NYSE: AMR) clanged to a 55 cent loss, or 2.62%, in trading Friday.

New York-based JetBlue also had a tough day.

The airline's 3.75% convertible debentures due March 15, 2035 closed Friday at 88.43 versus a closing stock price of $7.03. The convertibles closed Thursday at 89.13 versus a stock price of $7.72.

JetBlue stock (Nasdaq: JBLU) tumbled 69 cents, or 8.94%, on the day.

Six Flags on bumpy ride

New York-based amusement park operator Six Flags said that bad weather over the summer severely hampered third-quarter earnings. Bad press following a ghastly accident on a malfunctioning ride at a Kentucky theme park over the summer didn't help matters. Six Flags posted net income of 61 cents per share in the third quarter of 2007, compared to $1.08 for the third quarter of 2006.

With a $30 million charge to replace old rides set for the fourth quarter, Six Flags lowered its earnings estimates for 2007.

And down went the stocks and convertibles.

Six Flags' 4.5% convertible senior notes due May 15, 2015 closed Friday at 67.4125 versus a closing stock price of $2.25. They closed Thursday at 72.387 versus a stock price of $2.69.

Six Flags stock (NYSE: SIX) fell 44 cents, or 16.36%, on the day.

Priceline surges on earnings

Norwalk, Conn.-based travel web site Priceline.com announced a 54% surge in third-quarter profits Thursday evening. The company earned $2.27 per share in the third quarter of 2007 versus $1.05 per share in the third quarter of 2006. The outlook is also looking bright, the company said.

Predictably, Priceline.com's convertibles and stock surged.

Priceline's 0.5% convertible senior notes due Sept. 30, 2011 closed Friday at 257.568 versus a closing stock price of $103.68. They closed Thursday at 213.68 versus a stock price of $84.27.

Priceline's 0.75% convertible senior notes due Sept. 30, 2013 closed Friday at 257.158 versus a stock price of $103.68. They closed Thursday at 214.511 versus a stock price of $84.27.

Stock in Priceline (Nasdaq: PCLN) flew $19.41, or 23.03%, on the day.

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