Mellanox Technologies Ltd. (MLNX) dropped the most since December, narrowing the gap with New York-traded shares after Stifel Nicolaus & Co. cut its recommendation on the stock and Intel Corp. reduced its sales forecast.
The maker of technology used to transfer and store data plunged 7.5 percent to 442.9 shekels, or the equivalent of $111.44, at 1:23 p.m. in Tel Aviv. The New York shares closed at $110.85 Sept. 7. Mellanox was the worst performer on the TA-25 benchmark index after leading declines on the Bloomberg Israel- US Equity Index (ISRA25BN) in New York.
Stifel cut its recommendation on Mellanox to hold from buy, saying the Yokneam Elit, Israel-based company may see slower demand for its products. The current price reflects a fair valuation, it said. Intel Corp. (INTC), the world’s largest semiconductor maker, reduced its third-quarter sales forecast, citing declining demand for personal computers from corporate customers in a weakening economy.
“The big move is because of the compounding effect of the Stifel downgrade and news from Intel,” Brian Freed, an analyst at Wunderlich Securities Inc., said by phone from Denver on Sept. 7. “Intel is a bellwether in the semiconductor industry and you probably have people wanting to trim their exposure in the sector.”

Intel Outlook 

Intel agreed to buy QLogic Corp. (QLGC)’s InfiniBand business for $125 million on Jan. 23 and in April said it will spend $140 million to acquire Cray Inc. (CRAY)’s technology to connect server chips. The California company accounts for 2 percent of Mellanox revenues, according to data compiled by Bloomberg.
Sales in the third quarter will reach $12.9 billion to $13.5 billion, down from a prior projection of $13.8 billion to $14.8 billion, Intel said in a Sept. 7 statement. Analysts had estimated sales of $14.2 billion on average, according to data compiled by Bloomberg.
Mellanox’s Israeli shares, which reached a record on Sept. 5, have more than tripled this year, surging 257 percent, the biggest jump in the TA-25 Index. The company has a market value 17.6 billion shekels ($4.4 billion). Mellanox’s reported revenue beat analysts’ estimates in each quarter since it went public in 2007.
“The current valuation reflects an interesting entry point,” said Jonathan Kreizman, an analyst at Clal Finance Batucha Brokerage Ltd. in Tel Aviv.
Mellanox has benefited from demand for its InfiniBand technology, which is used in high-end computing and data centers.
News

Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.
The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. The jobless rate fell to 8.1 percent.
Treasuries and gold rose on bets the figures make it more likely Fed policy makers will expand record monetary stimulus next week after Chairman Ben S. Bernanke called unemployment a “grave concern.” The report dealt a blow to President Barack Obama one day after he accepted the Democratic Party’s nomination for a second term.
“This is definitely a setback for the labor market and the economy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and former economist for the Fed. “This clearly validates Bernanke’s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.”
The yield on the 10-year Treasury note, which moves inversely to price, fell one basis point to 1.67 percent. Gold futures for December delivery climbed 2 percent to $1,740.50 an ounce, a six-month high. The Standard & Poor’s 500 Index advanced 0.4 percent to 1,437.92 at the close of trading in New York, its highest level since January 2008.
 News

The euro rose against most of its 16 major peers after two central bank officials said European Central Bank President Mario Draghi will announce unlimited sterilized bond buying to quell the region’s debt crisis.
The 17-nation currency climbed to a two-month high against the dollar last week amid optimism Draghi would announce additional monetary stimulus at tomorrow’s ECB meeting. Australia’s currency dropped to a seven-week low after the economy expanded less than forecast. Norway’s krone fell after manufacturing contracted for a third month amid dwindling demand from Europe. Canada’s dollar remained lower after the nation’s central bank kept its interest-rate target unchanged.
“Unlimited and sterilized sounds good because it shows they’re willing to support these sovereigns,” said Eric Viloria, senior currency strategist for Gain Capital Group LLC in New York. “Draghi talked about bond buying at the last meeting, so there has been a lot of optimism priced in and the euro has already moved higher. It could be buy-the-rumor, sell- the-fact.”
The euro rose 0.3 percent to $1.2598 at 9:13 a.m. New York time, after falling as much as 0.5 percent. It reached $1.2638 on Aug. 31, the strongest since July 2. The shared currency gained 0.3 percent to 98.82 yen. Japan’s currency was little changed at 78.42 per dollar.
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That’s because trading on Wall Street relies on borrowed money, or leverage, that can be obtained cheaply as long as the traders belong to a conglomerate such as Bank of America Corp., JPMorgan Chase & Co.  or Citigroup that gets federally insured deposits. Jefferies Group Inc. (JEF), a securities firm that isn’t part of a bank and can’t turn to the Federal Reserve for help, currently is charged more to borrow in the credit markets.
“If you divorce them from the mother ship, you’d also be divorcing them from the government at the same time, and that’s where the subsidy is,” Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said in a telephone interview. “The funding advantage is the key.”
With stock prices at or below liquidation value, Wall Street’s biggest banks are fending off calls to break up from stockholders, analysts and industry veterans including Weill. The firms are too complex to manage, over-burdened by regulation, and a risk to taxpayers, their critics say.
Financial companies have sold or spun off units to improve shareholder returns. Under Weill’s leadership, Citigroup sold shares of Travelers Property Casualty Corp. (TRV) to the public in 2002. American Express Co. (AXP) divested most of Shearson in 1993 and spun off Lehman Brothers a year later. What’s different today is that securities firms, such as Bank of America’s Merrill Lynch, are benefiting from a funding discount.

Failed Model

The 2008 collapse of Bear Stearns Cos. and Lehman Brothers Holdings Inc., as well as last year’s bankruptcy of MF Global Holdings Ltd., taught investors that securities firms not attached to banks are riskier than they once acknowledged. Merrill Lynch & Co. agreed to sell itself to Bank of America the same day Lehman declared bankruptcy. A week later Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) converted to bank holding companies that are regulated by the Fed.
Breaking up today’s banking conglomerates would mean restoring the old model of financing securities firms in the bond markets, which failed in 2008. Without Bank of America’s $1.04 trillion of deposits -- about 80 percent of them federally insured, according to Jerry Dubrowski, a company spokesman -- Merrill Lynch would have to depend again on capital markets to fund trading and back up derivatives
News

The BAK Basel Institute, Bank Sarasin, Zuercher Kantonalbank,  and the State Secretariat for Economic Affairs might lower their 2012 forecasts after a government report today showed that GDP fell 0.1 percent from the first quarter, when it rose 0.5 percent, less than the 0.7 percent previously reported. That’s the first drop since the third quarter of 2011, when the Swiss National Bank imposed a franc ceiling to help protect the economy.
SNB President Thomas Jordan yesterday reiterated his commitment to defend the franc ceiling with the “utmost determination” amid signs the economy is faltering as the euro area’s deepening slump and waning global growth erode export demand. Bruno Parnisari, head of the state secretariat’s economic policy, said in an interview the government may need to cut its 2012 outlook in new projections on Sept. 18.
“The risk for the full-year forecast has increased,” Parnisari said by telephone from Bern. The June forecast of 1.4 percent growth “seems a little bit optimistic at this stage. Up to August, we don’t have any clear signs of economic improvement.”

SNB Ceiling

The franc traded at 1.2010 against the euro at 11:52 a.m. in Zurich, little changed on the day. It was at 95.31 centimes versus the dollar. The benchmark Swiss Market Index dropped for the first time in three days, declining 0.7 percent.
Economists had forecast growth of 0.2 percent in the second quarter, the median of 16 estimates in a Bloomberg News survey showed. From a year earlier, GDP rose 0.5 percent, less than the 1.6 percent economists had expected. First-quarter annual GDP growth was revised to 1.2 percent from 2 percent.
The third quarter of 2011 was also revised lower to show a contraction, followed by an expansion of 0.4 percent in the subsequent three months, suggesting the franc ceiling of 1.20 versus the euro introduced in September to stem a surge in the currency to a record helped stabilize the economy.
“Switzerland has weathered the crisis relatively well, but not as well as previously thought,” said Alexis Koerber, a senior economist at the BAK Basel Institute, which will lower its 2012 growth forecast from 1.5 percent. “It could be difficult” to reach growth of more than 1 percent, he said.

European Confidence

Swiss gross fixed capital formation including construction spending stalled in the second quarter after rising 0.2 percent in the previous three months, the GDP data showed. Exports of goods excluding precious metals, jewelry and antiques dropped 0.7 percent after falling 0.5 percent in the first quarter.
In the 17-member euro area, the destination for about two thirds of Swiss exports, the economic slump is deepening with at least five nations in recession and Germany showing increasing signs of slowdown. Euro-area manufacturing output shrank more than initially estimated in August, economic confidence slumped and German unemployment increased.
The European Central Bank forecast in June that the euro- area economy will shrink 0.1 percent this year. The central bank will publish new forecasts after a meeting of policy makers on Sept