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China Rate Hike and Lots of Chip Deals

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

The Dow slumped at the open Tuesday after hitting a new high. Futures had been a bit lower overnight, as global markets were weak.

Weighing on stocks: a Moody’s downgrade of Portugal’s debt and another interest rate hike by China’s central bank. (See: Sovereign Credit-Default Swaps at a Glance)

Moody’s downgrade follows similar downgrades by Fitch and Standard & Poors, while the interest rate hike in China was the country’s fourth since October, extending concerns about greater inflation in that country. Meanwhile, Japanese stocks fell 1 percent as workers struggled to contain the radioactive leak, with radioactive water still being dumped into the Pacific Ocean.

Back in the U.S., a full bag of “chip” deals is highlighting this morning’s headlines:

a) Shares of analog chipmaker National Semiconductor surge 71 percent after agreeing to be acquired by Texas Instruments for $6.5 billion. The deal doesn’t come cheap as National Semi shareholders will get $25 per share in cash, a hefty 78 percent premium to yesterday’s close.

Volume is extremely heavy, with National Semi already seeing 7 times normal volume for an entire day prior to the market open. Meanwhile, shares of Texas Instruments are falling 2 percent on the announcement. Shares of other semiconductor are rising on the news: STMicroelectronics (STM), AMD , and Analog Devices (ADI) are all up 2 percent.

b) In chips of a different kind…Dow component Procter & Gamble announced it is selling its Pringles chips brand to snack foods maker Diamond Foods (DMND) for $1.5 billion in stock. That’s a big acquisition for Diamond Foods, which will triple its revenues as a result of the deal. Diamond owns brands including Kettle chips, Emerald nuts, and Pop Secret popcorn.

Elsewhere:

KB Home falls 6 percent after reporting a Q1 loss amid a steep 25 percent drop in revenues (more than expected). Despite seeing slightly higher prices, deliveries plunged 28 percent, thanks to tough comparisons from last year’s homebuyer tax credit. Another weak number: net orders fell 32 percent in the latest quarter from a year ago.

Walgreen rises 1.5 percent after it reported its March same-store sales rose 3 percent, more than the Street expected. Higher traffic and transaction values helped boost sales. Comps were led 3.7 percent rise in pharmacy comps and were helped by a surprising 1.6 percent rise in general merchandise sales (analysts had expected general merchandise sales to drop by 1.3 percent in the quarter).

Shares of the ASX, the operator of Australia’s stock exchange, fell 3 percent in Aussie trading after it said that the country’s Treasurer Wayne Swan is leaning toward rejecting the bourse’s merger with Singapore Exchange, the owner of Singapore’s stock exchange. Swan argues that the deal “should be rejected as contrary to the national interest. While Singapore Exchanges rose 5 percent, the ASX indicated that in would continue to pursue various strategic growth opportunities. The Street had assumed a deal between the two exchanges would see difficulty getting approved.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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