On September 18, on the heels of a market correction, the Federal Reserve cut the Fed funds rate by a surprising half-point to 4.75%, sending the Dow, S&P 500 and NASDAQ up 2.5%, 2.9% and 2.7%, respectively. Signs of a slowing economy incited by the declining housing market apparently swayed the Fed to take drastic action. While resurrecting the financial markets, the rate cut unfortunately provoked a devaluation of the US dollar against foreign currencies, leaving US cash investors surveying alternative currencies. Despite the US dollar closing the month at an all-time low against the euro and crude oil prices near record highs, equity investors seemed undaunted. Moreover, on September 28, a report of easing core inflation evoked further expectations that the Fed might cut interest rates, enticing more investors back into the markets, but also renewing concerns over impending inflation. Investors will attentively watch third quarter corporate earnings for any warning of declining economic conditions.

For the month of September, the Dow, S&P 500 and NASDAQ ended in positive territory, improving 4.0%, 3.6% and 4.0%, respectively. Year to date, the Dow is up 11.5%, the S&P 500 has gained 7.6% and the NASDAQ has climbed 11.8%.

All four IBO Stock Indexes closed the month significantly higher, with 40% of the companies generating new 52-week highs. The Laboratory Instrumentation Stock Index jumped 7.3% and the Process/Metrology/Motion Instrumentation improved 8.0%, while the Lab Consumables/Equipment and Diversified Instrumentation Stock Indexes grew 6.4% and 5.0%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index jumped 7.3% to close at 648.03. Twenty companies improved, while only three companies declined. SEQUENOM led the Index, improving 47%, while Starlims and Symyx Technologies declined 6% and 3%, respectively. For the year, the Index has gained 20.1%, with Cepheid leading the way, up 168%, while Symyx Technologies continues to weigh on the Index, having declined 60%.

News released on September 18 that Applied Biosystems settled a patent infringement lawsuit (see page 2) helped push shares 2.6% higher. On September 19, Cepheid received two new contracts for diagnostics tests and instruments to combat staph infections, sending shares up 3.9%. Following several positive press releases from SEQUENOM, shares climbed 35.7% in the final week ending September 28.

This month, the Index entertained several new research evaluations, particularly for diagnostic makers. On September 11, Canaccord Adams initiated coverage of Luminex with a “Buy” rating, sending shares up 2.3%. After the market close on September 25, Banc of America Securities initiated coverage of Bio-Rad Laboratories and Thermo Fisher Scientific with a “Buy” ratings and price targets of $110 and $65, respectively. The following day, shares of Bio-Rad and Thermo Fisher traded up 4.0% and 1.1%, respectively. On September 12, Matrix Research upgraded Dionex to “Hold” from “Sell,” leading shares up 1.8%. On September 24, Cowen & Co. reiterated its “Outperform” rating on Illumina and raised its EPS estimates for fiscal 2007 through 2009 based on potential growth in the personal genomics segment and applied markets. Despite analysts’ comments that Illumina’s price target should trade 15%–20% above current levels in the next 18 months, shares closed down 0.6%.

Conversely, in view of the recent stock appreciation for several companies in the Index, a number of analysts have expressed concerns over price valuations and, accordingly, lowered their ratings. On September 5, UBS downgraded Cepheid to “Neutral” from “Buy,” sending shares down 4.2%. On September 19, GARP Research downgraded Illumina to “Neutral” from “Buy,” leading shares 0.5% lower. On September 24, Bear Stearns downgraded Beckman Coulter to “Peer Perform” from “Outperform” and removed its price target of $75, sending shares down 1.2%.

Process/Metrology/Motion Instrumentation Stock Index

For September, the Process/Metrology/Motion Instrumentation Stock Index grew 8.0% to 468.40, with six companies improving and only MTS Systems losing ground, slipping 1%. Strategic Diagnostics and RAE Systems jumped 29% and 25%, respectively, to lead all companies. Year to date, the Index has climbed 9.6%, led by Strategic Diagnostics, which has advanced 35%. On September 18, Am Tech/JSA Research downgraded Veeco Instruments to “Neutral” from “Buy,” leading shares down 0.4%.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index improved 6.4% in September to 470.34, with six companies gaining ground and TECHNE trading flat. QIAGEN NV and Kewaunee Scientific led the Index, both climbing 14%. This month, New Brunswick Scientific was removed from the Index following the completed merger transaction with Eppendorf AG (see IBO 7/15/07). For the year, the Lab Consumable/Equipment Index continues to lead all IBO Indexes, improving 23.2%, with all seven companies in positive territory.

Following Pall’s announcement that it will restate financial results (see IBO 8/31/07), an investigation by the Securities and Exchange Commission and the Department of Justice has been initiated. However, Pall managed to recover 2% this month, following a sharp decline over the previous two months. On September 7, Leerink Swann downgraded TECHNE to “Market Perform” from “Outperform,” sending shares down 2.5%. After the market‘s close on September 25, Banc of America initiated coverage of Sigma-Aldrich with a “Neutral” rating, helping shares gain 2.2% the following day.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index grew 5.0% for the month to 115.16, with all six companies trading higher. AMETEK and Mettler-Toledo led the Index, both improving 8%. For the year, the Index is up 15.2%, with all companies in positive territory.

After the market’s close on September 13, Banc of America initiated coverage of Teledyne Technologies with a “Buy” rating and maintained its price target of $57, helping shares climb 1.0% the following day. The analyst expects Teledyne to beat earnings estimates by 10%–15% and considers the stock undervalued. On September 20, William Blair upgraded Danaher to “Outperform” from “Market Perform,” yet shares traded flat. After the close on September 25, Banc of America initiated coverage of Mettler-Toledo and a price target of $120, sending shares 2.6% higher the following day. Concurrently, the company initiated coverage of Agilent Technologies with a “Neutral” rating, yet shares gained 0.4%. On September 14, FBR downgraded Roper Industries to “Market Perform” from “Outperform,” suggesting that the company’s current share price leaves only modest room for appreciation, sending shares down 2.2%. Similarly, on September 19, Robert W. Baird downgraded shares of Roper to “Neutral” from “Outperform,” leading shares down 0.5%.

International

In September, three Pacific Region companies traded lower, while two companies improved. Techcomp was the only company to report a significant gain, climbing 31%, while JEOL continued to decline following weak interim financial earnings, falling 16%.

This month, eight European companies declined and two companies remained flat, while five companies improved. Cybio AG led all companies, climbing 18%, while Millbrook Scientific Instruments declined 18%. For the year, only five European companies have positive returns, while 10 firms remain in negative territory. Biohit and Spectris lead the way, both up 12%, while Millbrook continues to lead the decline, down 41%.

On September 19, Whatman reported an 8% decline in revenues to £53.7 million ($105.3 million) and a 69% drop in EPS to £2.33 ($4.57) for the six months ended June 30 (see pages 2 and 12), sending shares down 8.2% for the day and 16% for the month. The company announced it will increase its interim divided by 4% to 2.18 pence ($0.04).