From Briefing.com: The Fourth of July is right around the corner, but there weren't any fireworks in the market on Monday as the major indices drifted aimlessly with neither buyers nor sellers able to dictate the course of the action. Fittingly, the indices ended the session close to the unchanged mark with breadth figures at the NYSE and Nasdaq nearly even. All things considered, it was a rather dull end to what turned out to be the best quarter in four-and-a-half years with the Dow, Nasdaq and S&P registering gains of 12.4%, 14.9% and 21.0%, respectively.
The volume totals (1.59 bln at the NYSE and 1.94 bln at the Nasdaq) were a bit heavier than what has been witnessed of late, but much of the increase was attributed to the impact of quarter-end window dressing and the Russell re-balancing. We would expect volume to taper off the remainder of the week as market participants concentrate on taking advantage of the holiday weekend as opposed to trading in and out of stocks.
Additionally, a wait-and-see attitude looks to be taking root ahead of the Q2 earnings reporting period that begins in earnest for the tech sector in mid-July. To that end, a Smith Barney upgrade of Intel (INTC 20.81 +0.24) from In-Line to Outperform, and SIA data showing sequential growth for the third, consecutive month, with an upward revision to April data, failed to incite a rally in the highflying semiconductor sector. Smith Barney, arguably, mitigated the bullish impact of its specific call on Intel with an added declaration that it continues to recommend underweighting the semiconductor industry due to a belief that expectations about a chip industry recovery are ahead of reality.
Participants, understandably, are anxiously awaiting word from tech companies that suggests the recent rally was warranted. Confirmation in that regard will come in the form of reassuring earnings commentary that touches on the likelihood of an improved second half performance, and preferably, contains an upward revision to sales estimates.
Until then, we look for the tech sector to remain in consolidation mode.-- Patrick J. O'Hare, Briefing.com
1:24PM Fechtor, Detwiler comments on AMD : Fechtor, Detwiler out with call suggesting AMD might have an arduous couple of months ahead despite the uptick in the PC cycle associated with the seasonality of "back to school" and Xmas periods. The firm is saying a recent public showing in Kentucky called "Million Man LAN II" (essentially small scale tradeshow for enthusiasts) over the weekend of its mobile Athlon64 product does not augur well for its compeititive positioning due to issues related to ramping the core frequency of its new processors to market competitive levels.
11:55AM Technical Levels : The market averages failed to work through initial resistances highlighted this morning (see 09:30 comment) and recently slipped back to unchanged territory. The S&P 500 has held near last week's low (973.80) but need sustained gains beyond intraday barriers at 976 and 978 to help improve the pattern. Next support if follow through fails to develop is at 971/970. The Dow held near Friday's low (8970) with 9000 and 9020 standing in the way on the upside. Next support is at 8945. Nasdaq Composite has remained above support at 1621/1618 (Friday's low/20 day ema). Initial resistances are at 1632 and 1636. Secondary support is at 1610/1608.
Close Dow -3.61 at 8985.44, S&P -1.72 at 974.50, Nasdaq -2.45 at 1622.81: In a choppy day of trading, the major indices settled for a slightly lower close after spending most of the session fluctuating just above the unchanged mark... Nonetheless, the Dow, S&P 500, and Nasdaq still ended the June quarter up by 13%, 15%, and approximately 21%, respectively, in the best quarter in four and a half years... Such a sizable advance over a short period of time was reason enough for buyers to exercise some caution in their investment decisions today...
Renewed concerns about the valuation of stocks, particularly in the context of the June quarter warnings season and the upcoming June ISM Index (tomorrow) and employment report (on Thursday), have led traders to take some money off the table in the past weeks... As a result, the market's recent rally has stalled as the indices have been unable to extend their gains off (relatively) reassuring economic news... A case in point was the Chicago PMI Index today... Although the report fell short of the consensus estimate of 53.0, it still indicated (at 52.5) that manufacturing in the region expanded for a second straight month in a row...
Despite this, traders used the disappointing headline number as an excuse to take profits, and concentrated their efforts in some of the quarter's leading groups - namely, biotech, airline, homebuilding, wireless, and drug... Another factor that contributed to the lackadaisical tone of trading was the fact that many portfolio managers engaged in end of quarter "portfolio dressing" - adding/deleting positions - today... One influential area, however, that managed to hold onto some of its gains was the semiconductor group thanks to encouraging developments for its members...
Specifically, LSI Logic (LSI 7.15 +0.10) announced it was guiding Q2 (June) revenues to the 'high end' of previous guidance, and Intel (INTC 20.81 +0.24) was upgraded to Outperform from In-line by Smith Barney... The firm cited its belief that INTC's Q2 (June) and Q3 (Oct) estimates appear achievable, and that the company is beginning to accelerate just as the rest of the chip industry is decelerating... Elsewhere, the price of crude oil surged $0.92 to $30.19/bbl as a tropical storm approaching the US Golf Coast and the start of a general strike in Nigeria renewed supply-related concerns...SOX +0.1%, NYSE Adv/Dec 1648/1614, Nasdaq Adv/Dec 1553/1628
9:30AM Adams Harkness reits Buy on Cree; target $25 (CREE) 16.84 +0.27: Adams Harkness reiterates their Buy rating and $25 target on CREE; co has filed a motion to dismiss the lawsuit filed by former chairman Eric Hunter, and firm believes that as the dust settles the overhang will be removed and CREE's valuation will rise; in addition, firm thinks the co is seeing good demand for its LED products used in cell phones, auto backlighting, and indoor/outdoor signs.
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