This month truly exemplified the unpredictable nature of the stock market. Just as investors seemed to embrace a renewed faith in steady interest rates and unrelenting mergers and acquisitions, questions surrounding the housing market and federal interest rates resurfaced. The Dow Industrial Average and S&P 500 began June with new highs of 13,676.32 and 1,539.18, respectively, but the sentiment of the market would soon change. On June 5, the Federal Reserve Chairman left investors with some doubts about the federal rates. In the days to follow, news of weak productivity, higher-than-expected labor costs, a rise in European interest rates, housing market woes and an increase in the 10-year bond rate shook the financial markets. Quick profit-taking led to the worst three-day decline for the Dow since February as it dropped 2.99%. Yet, the markets demonstrated resilience and rallied at the first hint of positive news. On June 8, news of a narrowing trade deficit pushed the Dow 1.19% higher.

The volatility continued. On June 12, yields on 10-year Treasury notes passed 5.25% for the first time in a year, renewing fears of interest rate hikes and another market sell-off. The core producer price index, which excludes energy prices, showed subdued inflation growth. Thanks to a strong retail sales report and retreating bond rates, the market savored a three-day rally, ending on June 15 with the Dow, S&P 500 and NASDAQ climbing 2.59%, 2.67% and 3.02%, respectively. But, on June 20, concerns about the subprime market resurfaced amidst worries about two major hedge funds managed by Bear Stearns, and the market sank again. On June 28, the Federal Reserve Open Market Committee left interest rates unchanged. The markets ended the month in the red. The Dow and S&P 500 slid 1.6% and 1.8%, respectively; the NASDAQ traded flat, spared by the strong performance of several large technology firms. Year to date, the Dow is up 7.6%, the S&P 500 has risen 6.0% and the NASDAQ has gained 7.8%.

Despite downward market pressure, two of the four IBO Stock Indexes ended June in positive territory, while the Process/Metrology/Motion Instrumentation and Laboratory Instrumentation Indexes slipped 3.9% and 0.5%, respectively. The Diversified Instrumentation Stock Index led the IBO Indexes again, gaining 1.3%, and the Lab Consumables/Equipment Index edged 0.4% higher.

Laboratory Instrumentation Stock Index

For June, the Laboratory Instrumentation Index declined 0.5%. Ten companies climbed higher, 12 firms declined and one remained unchanged. Cepheid and Illumina led the Index, climbing 25% and 24%, respectively, while CombiMatrix lost the most ground, falling 11%. For the year, the Index is up 6.2%, with Cepheid leading, up 72%, while Symyx Technologies still leads all decliners, down 47%.

Illumina received attention from analysts and investors this month following the launch of its latest genotyping database. On June 11, the company announced that orders for the new IcontrolDB genotyping database would reach 20,000 by the end of 2007. The same day, Deutsche Bank increased its 2008 revenue estimate for the company from $410 million to $450 million and EPS estimate from $0.90 to $1.35, sending shares up 5.2%. On June 11, OI’s board of directors announced a modified Dutch auction in an attempt to enhance shareholder value. The company intends to purchase 300,000 shares of its common stock at a range of $13.00–$14.75 per share. OI climbed 10.0% to close just below its 52-week high at $13.75. On June 26, several diagnostics makers gained ground on the heels of Roche’s offer to acquire Ventana Medical for $3 billion. Analysts from Thomas Weisel Partners believe Luminex and Cepheid are acquisition targets, mainly due to the limited number of midstage diagnostics firms remaining. Luminex and Cepheid rose 10.0% and 5.1%, respectively. Shares of Applied Biosystems also benefited, rising 3.4% to $30.53. On June 1, SEQUENOM jumped 10.4% on news that its CFO purchased 20,000 shares, increasing his holding to 70,000 shares. On June 5, Symyx Technologies received a boost from its minority interest in Ilyspa, which Amgen plans to acquire for $420 million; this news sent shares of Symyx Technologies up 8.0%.

Favorable research reports helped many firms. On June 13, Matrix Investment Research upgraded Illumina to a “Strong Buy” from a “Sell” after reevaluating the stock’s price, risk and valuation, sending shares up 3.7%. The following day Bear Stearns upgraded Illumina to “Outperform” from “Peer Perform,” boosting shares another 2.9%. On June 13, Cepheid was upgraded to a “Buy” from “Above Average” by Caris & Company, sending shares 8.1% higher. On the same day, Beckman Coulter was downgraded by GARP Research to “Neutral” from “Buy,” sending shares down 1.1%. On June 25, Robert W. Baird & Co. upgraded Applied Biosystems to “Outperform” from “Neutral” and raised the price target to $36 per share from $35, but shares slipped 0.8% to $64.86. The next day, JP Morgan upgraded the stock to “Neutral” from “Underweight.” On June 27, Bear Stearns upgraded Bruker BioSciences to “Peer Perform” from “Underperform,” leading shares 1.8% higher to $9.15.

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index dropped 3.9% in June. Three companies improved, while four companies ended the month lower. Veeco Instruments recorded the highest gain, up 14%, while FEI Company weighed heavily on the Index, declining 13%. Year to date, the Index is up 11.7%, led by FEI and Strategic Diagnostics, which have risen 23% and 20%, respectively. RAE Systems replaced Nanometrics as the largest decliner, down 28%.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index grew 0.4% in June. This month, five companies improved, one company traded flat and two companies were down. Stratagene was removed from the Index after being acquired by Agilent Technologies. Kewaunee Scientific had the only significant gain, up 16%, while TECHNE and Sigma-Aldrich were the only two firms to lose ground, down 4% and 1%, respectively. For the year, the Index has risen 18.6%, with seven companies improving and only one company, New Brunswick, in negative territory, down 1%. Kewaunee Scientific and Pall lead the Index, up 49% and 33%, respectively.

On June 4, QIAGEN’s announced plans to acquire Digene (see IBO 6/15/07) sent shares down 2.0% to $16.14. On June 26, Kewaunee Scientific announced better than expected earnings of $0.62 per diluted share (see page 12), sending shares up 16.2% to a new 52-week high of $13.55.

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index increased 1.3% for the month. Three firms improved, one company traded flat and two companies declined. AMETEK led the Index, up 5%, while Roper Industries and Teledyne Technologies sank 1.6% and 1.8%, respectively. For the year, the Index is up 9.1%, with all companies in positive territory. On June 7, Agilent completed the purchase of Stratagene and increased third-quarter revenue guidance to $1.38–$1.42 billion from $1.36–$1.4 billion. The sharp market sell-off sent Agilent shares down 2.9%. Danaher finished the month up 3%. On June 28, Friedman Billings initiated coverage of AMETEK with an “Outperform” rating, sending shares up 5.2%.

International

In June, the Pacific Region companies gained modestly, with four firms rising and JEOL declining 1%. Techcomp climbed 19%, while Shimadzu, Horiba and Hitachi High-Technologies were up 6%, 4% and 1%, respectively. For the year, four of the five Pacific Region firms have improving in double digits, and only Hitachi declined, down 10%.

This month, seven European companies improved, seven firms declined and Biotage traded flat. Sartorius and Alpha MOS led growth, each improving 10%, while Renishaw lost the most ground, down 19%. Exiqon A/S, a supplier of gene expression analysis products for the life sciences, research and drug discovery industries, was added to the stock table following its initial public offering on May 29 (see page 2). For the year, eight European companies are up, six companies are down and Whatman is trading flat.