From Briefing.com: If the tech sector maintains its current pace, it will make the gains in the second quarter look trivial. That, of course, won't happen, but all things being equal, the third quarter has gotten off to a banner start.
Recall that the Nasdaq, as of Monday's close, had declined in 7 of its previous 8 sessions for a loss of 3.2%. In the first two days of trading in the third quarter, though, it has made up the entirety of that loss, and a smidgen more, having closed Wednesday's session at 1678.73.
There wasn't any, one factor for Wednesday's advance, but rather, there was a confluence of items that prompted the rally effort. In particular, there was carryover momentum from Tuesday's reversal and there was a strong showing from overseas markets. Additionally, participants were enthused by PeopleSoft (PSFT 17.98 +0.19) raising its sales and earnings guidance, the May Factory Orders report being stronger than expected, and Merrill Lynch upgrading Microsoft (MSFT 26.88 +0.73) from Neutral to Buy and adding the stock to its Focus One List. Broad-based leadership, with big-cap issues at the helm, and a resurgence of buying interest in the biotech stocks underpinned the tech advance.
Volume at the Nasdaq totalled 1.88 bln shares, which was fairly heavy for the day before an abbreviated session (as a reminder the NYSE closes at 13:00 ET on Thursday). Market internals were decidedly bullish with advancers trouncing decliners at the Nasdaq by nearly a 3-to-1 margin. Up volume, meanwhile, accounted for 87% of total volume while down volume comprised just 12%. In short (no pun intended), buyers ruled the roost on Wednesday.
How they respond on Thursday will largely be dictated by the details of the June employment report. Data that are in-line, or better than expected, should get the day started on a positive note while disappointing data would be expected to incite some profit taking activity. The market, however, has been inclined to view the economic glass as half full, so an advance in the face of an otherwise lackluster employment report can't be ruled out.
The easy money has been made in the rally off the March lows, but as the earnings reporting period approaches, there is little denying that the tech sector is exhibiting some impressive resilience in the face of selling efforts. Investors still need to be wary, though, about chasing the rally as it has yet to be validated as being sustainable. That will - or won't - happen when companies check in with their Q2 results, and more importantly, with their guidance for Q3 and the remainder of the year.
On the earnings front, a few companies will be fighting an uphill battle on Thursday, namely Micrel (MCRL 10.98 +0.45), Parametric (PMTC 3.32 +0.16), Documentum (DCTM 19.75 +0.28), Pemstar (PMTR 3.99 -0.11), and Adaptec (ADPT 8.44 +0.35), which offered sales and/or earnings guidance that was below current consensus estimates.-- Patrick J. O'Hare, Briefing.com
5:40PM Wednesday After Hours Price levels are as of 4 pm EST: The bulls got out of the gate early this morning, and they never looked back. It was a strong day as investors were looking ahead to the holiday weekend and feeling good about most weather reports. The Northeast has seen more than its fair share of rain on the weekends, but this weekend, and a long one at that is shaping up to be dry for a change. The Dow closed higher by more that 101 points and stands at 9142, the S&P 500 added 11 points and closed at 993. S&P 500 futures were at 993, one point above fair value. NASDAQ 100 futures were down one point from fair value at 1246.
Good news continued for Pediatrix Medical (PDX 37.35 +0.00) as they guided Wall Street higher after hours. The Company sees Q2 (June) EPS of $0.82 vs previous guidance of $0.78-$0.80 on greater than expected revenues; this new guidance exceeds Reuters Research consensus of $0.79. PDX is a provider of physician services at hospital-based neonatal intensive care units.
Boeing (BA 34.79 -0.01) as the Chicago based company reported that it delivered 74 planes in the quarter, a decline of 34 percent from a year earlier, on dwindled demand from slumping airlines.
On the earnings warnings front, Mircel (00C0 10.14 -0.84) warned for Q2 (Jun) and sees revenues down 3-4% from Q1's $51 mln, this equates to $49-49.5 mln compared to Reuters Research consensus estimate $53.7 mln. The manufacturer of a range of analog power integrated circuits and mixed-signal and digital integrated circuits had previous revenue guidance calling for a 3-5% gain from Q1. MCRL sees Q2 GAAP EPS of a loss of $0.01, not clear if this is comparable to consensus of a $0.01 profit. The Company cites SARS for revenue shortfall, also announces its book-to-bill for the quarter was approximately one.
Documentum (DCTM 16.66 -3.09) stated that they expect Q2 (Jun) EPS of $0.07 vs. Reuters Research consensus of $0.08. The provider of enterprise content management solutions also sees Q2 revenues of $68 mln which is below the current consensus estimate of $72 mln. DCTM cites "the challenging economic environment, delays in government spending and inconsistent execution in Northern Asia" as reasons for shortfall.
Adaptec (ADPT 7.19 -0.53), the provider of end-to-end storage infrastructure solutions warned that Q1 (Jun), EPS would be in the "middle of the range" provided on April 28th, when the Company forecast $0.02-0.04. The Reuters Research consensus is $0.03. ADPT sees Q1 revenues of $107 mln, below the consensus estimate of $117 mln which was in line with previous guidance of $115-120 mln.
Parametric (PMTC 3.08 -0.24) sees Q3 (Jun) GAAP EPS in the range of a loss of $0.12-$0.14, this includes an $8 mln restructuring charge and a $6 mln charge from an acquisition, and is not comparable to our Reuters Research consensus of a loss of $0.04. The developer of software solutions that help manufacturers improve the competitiveness of their products and product development processes expects revenues of $165 mln which is below the consensus of $169mln.
Pemstar (PMTR 3.84 -0.15) the provider of a range of engineering, manufacturing and fulfillment services warned for Q1 (Jun), sees a loss of $0.18- $0.20, excluding $0.10 in restructuring charges. PMTR expects revenues of $145-$150 mln, below that of the Reuters Research consensus estimate of $164 mln. PMTR cites SARS, sluggish tech marketplace for shortfall.
Tomorrow looks to be a light day, as no companies are scheduled to report earnings and the markets will close at 1:00 EST.
Close Dow +101.89 at 9142.84, S&P +11.44 at 993.76, Nasdaq +38.64 at 1678.77: In a virtual dearth of corporate news, the market extended yesterday's gains and closed near its session highs, spurred on by the sizeable advance of the international bourses (Nikkei +3.38%, DAX +3.0%, CAC +2.2%, FTSE +1.1%) and favorable brokerage calls of significance... To wit, Microsoft (MSFT 26.89 +0.74) was upgraded at Merrill Lynch to Buy from Neutral and added to the firm's Focus 1 List based on MSFT's potential for EPS upside, a possible increase in the dividend, and the valuation disparity to its peer group...
Separately, Goldman Sachs stated its expectation of mostly in-line results from the Biotech companies when they begin reporting Q2 results on July 9 and singled out Amgen (AMGN 67.26 +1.41) for a potential upside surprise based on strong sales... As a result, the biotech and technology sectors were among the strongest performers throughout the session, although the market also got a boost from gains in sectors such as financial, drug, retail, paper, transportation, defense, and restaurant...
As a matter of fact, the only laggards of note were the department store and airline sectors, which capped the advance of the blue-chip averages and aided in the Nasdaq's relative outperformance... On the economic front, May's Factory Orders rose 0.4%, above the flat consensus, as customers ordered more seasonal items, but cut back on big-ticket purchases... The market popped on the news, but the report was not a driving force behind the market due to its largely predictable nature... Tomorrow's Economic Calendar is jam-packed with reports of importance, including June's Employment report and the Initial Claims report for the week of 6/28...
Note that economic reports may have an exaggerated effect on the market tomorrow due to it being a half-day, with relatively light volume expected... Elsewhere, after starting the day in negative territory Treasuries staged a nice recovery and closed the session with gains to show for it... The 10-yr note finished the session with gains of +4/32, bringing its yield to 3.53%...NYSE Adv/Dec 2510/782, Nasdaq Adv/Dec 2312/853
4:35PM Adaptec guides EPS in line, revenues below consensus (ADPT) 8.44 +0.35: Company warns for Q1 (Jun), sees EPS in the "middle of the range" provided on April 28th, when company forecast $0.02-0.04, Reuters Research consensus is $0.03. However ADPT sees Q1 revenues of $107 mln, consensus estimate is $117 mln and previous guidance called for $115-120 mln.
4:25PM Documentum guides below consensus for Q2 (DCTM) 19.75 +0.28: Company sees Q2 (Jun) EPS of $0.07 vs. Reuters Research consensus of $0.08, also sees Q2 revenues of $68 mln vs. R.R. consensus of $72 mln. Co cites "the challenging economic environment, delays in government spending and inconsistent execution in Northern Asia" as reasons for shortfall.
4:24PM Micrel guides below consensus (MCRL) 10.98 +0.45: Company warns for Q2 (Jun), sees revenues down 3-4% from Q1's $51 mln, this equates to $49-49.5 mln, Reuters consensus estimate $53.7 mln. Previous revenue guidance called for a 3-5% gain from Q1. MCRL sees Q2 GAAP EPS of a loss of $0.01, not clear if this is comparable to consensus of a $0.01 profit. Company cites SARS for revenue shortfall, also announces its book-to-bill for the quarter was approximately one.
4:19PM Parametric guides for Q3 (PMTC) 3.38 +0.22: Co sees Q3 (Jun) GAAP EPS in the range of a loss of $0.12-0.14, this includes an $8 mln restructuring charge and a $6 mln charge from an acquisition, and is not comparable to our Reuters Research consensus of a loss of $0.04. Company sees revenues of $165 mln vs. Reuters Research consensus of $169mln.
9:40AM Semiconductor Equipment Preview : UBS previews earnings for the Semiconductor Production Equipment group. Firm believes that most of companies under its coverage made the quarter with some (VECO, COHR, ATMI) at risk of missing consensus; says upside surprises are not expected. Notes that the stocks are richly valued when viewed on a historical basis relative to the S&P500, which makes them vulnerable to any downside in demand. At current prices, and given the current economic environment, firm believes the stocks will likely soften into the summer from current levels.
8:25AM MRVL insider sells 200,000 shares -- Dow Jones : Dow Jones reports that VP Sutardja Pantas sold 200,000 shares between 6/27 and 7/1 at prices ranging from $33.30-$35.22. Ownership 11.276 mln.
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