Once again volatility ruled the markets in July. The major indexes experienced several extreme swings, both positive and negative, mainly due to conflicting news of positive earnings reports and analyst concerns over the debt markets. In response to subprime and other mortgage debt issues, lenders reported tightening liquidity restrictions in the corporate sector. Such limitations in the debt market will have an impact on acquisitions and company stock buybacks. Consequently, on July 24, the markets reacted anxiously. The Dow Jones and S&P 500 declined 1.6% and 2.0% to 13,717 and 1,511, respectively. Subsequently, more subprime news, reports of poor home sales and increasing energy prices sent the market tumbling even further. In the two-day period ending July 27, the Dow, S&P 500 and NASDAQ declined 3.8%, 3.9% and 3.2%. Only a week earlier, on July 19, the Dow closed a fraction above 14,000 for the first time and investors were euphoric about future economic growth. But investors’ fear of a credit crunch prevailed as the Dow, S&P and NASDAQ ended the month down 1.5%, 3.2% and 2.2%, respectively. Year to date, the Dow is up 6.0%, the S&P 500 has risen 2.6% and NASDAQ has gained 5.4%.

Despite the extreme volatility, three of the four IBO Stock Indexes fared relatively well compared to the major stock indexes, while the Process/Metrology/Motion Instrumentation declined 9.7%. The Laboratory Instrumentation Stock Index managed to gain 2.0%, while the Lab Consumables/Equipment and Diversified Instrumentation Stock Indexes slipped 0.9% and 0.6%, respectively.

Laboratory Instrumentation Stock Index

For the month, the Laboratory Instrumentation Index climbed 2.0% to close at 584.65. Eleven companies posted gains and 12 declined. SEQUENOM and Illumina led the Index, improving 18% and 12%, respectively, while Symyx Technologies declined 23%. For the year, the Index has gained 8.3%, with Cepheid leading the way, up 74%, while Symyx Technologies continues to weigh on the Index, having dropped 59%.

The Laboratory Index gain could be attributed to positive earnings reports and favorable outlooks. On July 25, Affymetrix, Applied Biosystems, Illumina and Varian all reported higher quarterly profits (see page 12), sending shares up 4.8%, 1.7% and 9.8%, respectively. Illumina raised 2007 earnings forecast to $1.00–$1.10 from $0.89–$1.00 a share. Varian increased its fiscal 2007 earnings guidance to $1.92–$2.03 a share from $1.88–$2.01. After the market’s close on July 26, PerkinElmer reported better than expected earnings (see page 12), sending shares up 6.6% the following day. After the close on July 25, Symyx and Luminex reported net losses of $0.04 and $0.09 a share, respectively, on lower than expected revenues (see page 12). The next day, Symyx and Luminex decreased 10.3% and 7.5%, respectively.

On July 5, UBS reiterated a “Buy” rating on Cepheid and raised its price target to $18 per share from $15, citing the company as a potential buyout target, which sent shares up 1.6%. On July 12 and 13, William Blair initiated coverage on Cepheid with an “Outperform,” while Caris & Company upgraded it to “Buy” from “Above Average.” Over those two days, shares climbed 6.9% to a new 52-week high. On July 10, Oppenheimer & Co. initiated coverage on SEQUENOM with a “Buy” rating and an $8 price target, citing the its potential in noninvasive prenatal genetic testing, which sent shares up 9.8%. On July 31, Leerink Swann initiated coverage on SEQUENOM with an “Outperform,” sending it up 3.7%. On July 13, STARLIMS received its first analyst opinion, as Oppenheimer initiated coverage with a “Buy” rating and a $16 price target, helping it gain 1.2%. Prior to Illumina’s earning announcement on July 23, Pacific Growth Equities upgraded shares to “Buy” from “Neutral,” leading shares 3.9% higher. Following the earnings report, Cowen & Co. and Leerink Swann upgraded Illumina to “Outperform” from “Neutral” and “Market Perform,” respectively. Shares closed up 9.8% to a 52-week high. On July 31, Bear Stearns upgraded Invitrogen to “Peer Perform” from “Outperform,” sending shares up 9.8%. On July 31, Bear Stearns downgraded Invitrogen to “Peer Perform” from “Outperform,” sending shares down 0.5%.

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index dropped 9.7% to 431.32 in July. All seven companies declining. Zygo lost the most ground, falling 16%, followed closely by Veeco Instruments and FEI Company, both down 12%.Year to date, the Index is up 0.9%, led by Strategic Diagnostics, which has climbed 16%. RAE Systems continues to lead all decliners, down 31%.

After the close on July 25, MTS Systems announced better than expected revenues, but shares traded 5.3% lower. On July 30, following a steep decline for MTS, Ferris Baker Watts upgraded the company to “Buy” from “Neutral,” helping shares retract 7.6%.On July 6, Ferris Baker Watts downgraded MTS to “Neutral” from “Buy,” sending shares down 3.8%.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index slipped 0.9% in July to 448.50, with half of the companies gaining ground and half in negative territory. New Brunswick Scientific led the Index, jumping 40%, while Pall fell 10%. For the year, the Index has risen 17.5%, with all companies in positive territory, six rising in double digits.

On July 24, after the market’s close, Sigma-Aldrich reported better than expected earnings of $0.60 a share, leading shares up 0.5%, and raised its full-year earnings by $0.05 to $2.20–$2.30 a share. On July 11, New Brunswick Scientific agreed to be bought by Eppendorf (see IBO 7/15/07), sending shares up 39.0%. On July 20, Pall tumbled 15.7%, following news that the audit committee launched an investigation into how the company paid and reserved for taxes. Based on the uncertainty surrounding shares, Robert W. Baird & Co. downgraded the company to “Neutral” from “Outperform.”

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index edged 0.6% lower for the month to 108.42. Four companies declined, one company traded flat, and Roper Industries improved 5.0%. Teledyne Technologies weighed on the Index, sliding 3%. For the year, the Index is up 8.4%, with all companies in positive territory.

On July 19, AMETEK reported earnings of $0.54 a share, $0.02 higher than analysts’ expectations (see page 12), and raised 2007 earnings from $2.01 to $2.05 per share. After the close on July 26, Mettler-Toledo reported better than expected earnings (see page 12) and increased full-year earnings to $4.28–$4.33 from $4.18–$4.28. Roper announced profits of $0.66 a share and raised its earnings to $2.60–$2.66 from $2.54–$2.64. On July 26, Teledyne reported earnings of $0.67, $0.07 above expectations, and raised its 2007 earnings outlook by $0.14 to $2.56–$2.62 a share. On July 19, Danaher increasing projected 2007 EPS to $3.74–$3.82 from $3.70–$3.80. On July 20, Bear Stearns downgraded Danaher to “Peer Perform” from “Outperform.” On July 30, JP Morgan upgraded Danaher to “Overweight” from “Neutral,” and Goldman Sachs increased its price target to $90 from $86, leading shares up 4.1%.

International

This month, the Pacific Region companies remained somewhat stagnant. Hitachi High-Technologies and Horiba were the only two companies to record a change, falling 11% and 10%, respectively. For the year, four of the five Pacific Region companies have improved, with only Hitachi declining, down 20%.

In June, five European companies improved, while nine companies declined and Exiqon traded flat. Renishaw led the growth, improving 19%, while Robotic Technology Systems lost the most ground, down 30%, after the company lowered revenue expectations. For the year, six European companies have positive returns and nine companies show negative returns.