From Briefing.com: The market gave it its best shot on Thursday, but as hard as it tried, it was unable to rebound from Wednesday's sell-off. For most of the day, the session had an encouraging feel to it for bullish participants as there was limited follow through from sellers in the wake of Wednesday's losses. There was indeed a dip in the initial stages of trading, but the indices soon bounced back and were sporting modest gains, which was in keeping with the underlying bullish bias.
The indices didn't get too far, though, as they were bridled by overhanging valuation concerns. While they spent the majority of the day vacillating on either side of the unchanged mark, the indices closed the session on an inauspicious note. In fact, they encountered a relentless wave of selling interest in the final hour that left them at their lowest levels of the day at the sound of the closing bell.
The late-day capitulation is a sign of a tired market, but considering how far the market has run, it certainly deserves a rest, and frankly, it is in need of a rest.
Leading Thursday's retreat were the small- and mid-cap shares, but there was little leadership to speak of as notable winners were limited largely to individual issues. That was certainly the case in the technology sector, which suffered another day of broad-based profit taking. There wasn't any particular catalyst for the retreat, but again, technical considerations played a role as support levels were violated.
The Nasdaq, for its part, took out Wednesday's low at 1843, moved through the 1826/24 area in the late slide, and broke below a more important intermediate barrier at the mid-September low (1819) identified in Thursday's Technical Take to end the session at 1817.24. The same Technical Take piece noted that recent trading activity has resembled similar price action seen earlier this year in March and June. In both instances, the Nasdaq experienced only a relatively modest correction following an aggressive advance, but then experienced a multi-week consolidation phase before closing back above the peaks in those respective periods.
There is, of course, no guarantee that a similar trading pattern will develop this time around, but thus far, there is little reason to think that the market is experiencing anything more than a normal consolidation phase following a strong run. Even so, we would continue to urge readers to take some money off the table and would refrain from putting new money to work in the technology sector at this time.-- Patrick J. O'Hare, Briefing.com
6:00PM Thursday After Hours price levels vs. 4pm ET: The dreary tone of today's trade is getting carried over into the after-hours market. Presently, the S&P 500 futures are trading 6 points below the fair value of 1002, while the Nasdaq is trading 13.5 points below the fair value of 1329.
Among the biggest losers in the after-hours is Human Genome Sciences (HGSI 12.40 -1.66), a healthcare company engaged in the research and development of gene-based drugs. The company is trading lower after reporting that a Phase 2 clinical trial of topically administered repifermin in adults with chronic venous ulcers did not meet its primary endpoint. According to management, the level of evidence is now "not sufficient to warrant further development of repifermin for use in the treatment of chronic venous ulcers." Separately, the company announced that it has activated clinical sites and begun to screen patients for randomization and treatment in a Phase 2 clinical trial of LymphoStat-B(TM), a human monoclonal antibody to B-lymphocyte stimulator for the treatment of systemic lupus erythematosus. Dosing of patients for the trial is expected to begin shortly.
On the earnings front, world leader in the mobile communications market, Research in Motion (00C0 36.85 +1.13) was bucking the downward trend after reporting its Q2 (Aug) earnings of $0.10 per share, which was in-line with the consensus and at the upper range of previous guidance calling for a range of $0.07-0.11. Revenues of $125.7 were up 71.2% year/year and above the $125.2 mln consensus. According to a Dow Jones report, the company also guided Q3 (Nov) EPS to a range of $0.14-0.20 (consensus of $0.11) and revenues to $150-160 mln (consensus $128.7 mln).
Also on the plus-side was Solectron (SLR 6.13 +0.17), the leading provider of electronics manufacturing and supply-chain management services, after reporting Q4 (Aug) pro forma loss of $0.04 per share, a penny above the Reuters Research consensus and in-line with the previous guidance, which called for a loss of $0.02-0.06. Revenues rose 6.0% year/year to $2.81 bln versus the $2.79 bln consensus. Looking to Q1, the company forecasts a loss of $0.01-0.04 versus the consensus of a loss of $0.02 on revenues of $2.7-3.1 bln, in-line with the consensus of $2.98 bln.
Technology company, Lawson Software (LWSN 7.99 -0.27), was in the news on several accounts. First, the company reported Q1 (Aug) earnings of $0.04 per share, excluding non-cash items of $1.3 mln, which was $0.03 better than the consensus. Revenues of $88.0 mln were above the consensus of $84.4 mln and marked a 0.7% increase year/year. Second, LWSN announced the acquisition of Closedloop Solutions, a privately held provider of collaborative applications to help businesses with financial budgeting, planning and forecasting. The terms of the deal, which is expected to be finalized within ten days, were not disclosed.
Another software & programming player to report earnings was Manugistics Group (MANU 5.86 +0.41). The company checked in with Q2 (Aug) loss of $0.04 per share, excluding amortization of intangibles, restructuring charges, and non-cash stock compensation charges, in line with the consensus. Revenues fell 14.6% year/year to $59.7 mln versus the $61.8 mln consensus. Going forward, MANU said it expects Q3 adjusted net income to be approximately breakeven versus the consensus of a loss of $0.01.
For more detail on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages.-- Victoria Glikin, Briefing.com
Analog Devices (ADI) 38.69 -0.11: Upped to Buy from Hold at Sanders Morris Harris...The upgrade comes amid firm's view that the Industrial market (35-40% of co's revs) appears to be on the cusp of a stronger rebound phase. Firm's price tgt is $50-51.
Dresdner Kleinwort downgrades global Semi Industry to Neutral : Firm lowers its investment opinion on the global semiconductor equipment industry to Neutral, as data points indicate a disconnect between actual demand and expectations. As a result, firm believes upside is either limited or in some cases considerable downside exists among semiconductor stocks. Firm lowers its rating on MU to Reduce from Hold, NSM to Hold from Buy and TXN to Add from Buy.
Genesis Microchip (GNSS) 12.10 +0.08: Pacific Growth said it is relatively more bullish on GNSS's opportunities after its trip to Asia; firm believes the co is very well positioned for the looming LCD-TV boom, and comments made from BenQ, Lite-On, and Samsung all identify GNSS as having the best product on the mkt; in addition, as the mkt shifts away from 15" monitors and toward LCD-TVs, the total number of panels produced is expected to be reduced, but GNSS's total dollar content per substrate is expected to increase.
Maxim Integrated (MXIM) 39.72 -0.11: Wedbush Morgan added MXIM to its Focus List based on compelling relative valuation. Firm's 12-month tgt remains $57 (40x CY04 est of $1.43). Firm believes MXIM has arguably the best business model among the best segment of the whole semiconductor industry -- high performance analog ICs.
NVIDIA (NVDA) 17.53 -0.25: UBS initiated coverage of NVIDIA with Neutral and target of $17.50. Firm believes its current desktop product generation is disappointing, the co will continue to have margin pressure with no catalysts near-term growth. However, its longer-term view suggests the sector is growing and NVDA will turn around. The analyst is encouraged by its recent acquisition of MediaQ and the prospects for Nvidia to be a growing supplier of graphics processors in handsets in the next 6-12 months. The firm's target is based on a multiple of 23 times our CY05 EPS estimate of $0.77
Cree (CREE) 21.04 +1.68: ThinkEquity upgraded stock after Nichia struck a blow against Taiwanese competitors in court that will likely result in less pressure on LED ASP's in the near-to-medium term. Specifically, Nichia won a preliminary attachment order in Taiwan against EPISTAR Corp, freezing assets due to patent infringement issues regarding LED products. Cree and Nichia have cross licensed patents, but have seen ASP pressure mounting from Taiwanese manufacturers. ThinkEquity believes this represents the first shot across the bow of LED manufacturers that have not licensed IP from Nichia, which could result in reduced LED pricing pressure for Cree going forward. With this court decision, it is likely that Cree will benefit from more stable ASP's as Taiwanese vendors are forced to license IP from Nichia. Firm raises price tgt to $25 from $18. |
