MARKET TALK: Breakout On A Big Rally Lends Support
04 Mar 09:58
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
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9:58 (Dow Jones) That Friday's big gain on the DJIA came on a breakout from a
two-month trading range and established a new recovery high is probably good
news for the market, at least for the next few weeks, says Hilliard Lyons
technician Dick Dickson. In fact, with Friday's advance, all the broad market
indexes managed to close above important short-term resistance levels. The only
quibble he had with the quality Friday was the lack of big volume to confirm.
Key support to watch in event of near-term pullback: 10250-10300 for DJIA,
1120-1125 for S&P 500, and 1745 for Nasdaq Comp. (TG)
9:47 (Dow Jones) Merrill Lynch analyst Steven Milunovich says Sun
Microsystems' (SUNW) fiscal 3Q earnings may be at risk. Sun will hold a
mid-quarter business update after the close Thursday, and according to
Milunovich, channel checks indicate business is soft. While he maintains his
earnings estimate of a loss of two cents a share and revenue of $3.25 billion,
there could be downside to that view. Milunovich also said he's "nervous" about
the June quarter, in which he expects Sun to reach $3.65 billion in revenue and
a two-cent profit. "If fiscal third quarter falls short, the sequential
top-line gain required to break even in fiscal fourth quarter may be a
stretch," he says. SUNW off 2.5% at $8.72. (DLF)
9:38 (Dow Jones) Looking for leadership in this market? Lehman's Jeff deGraaf
notes that, within S&P industries last month, construction, tires, appliances,
and auto parts were the strongest groups, while networking, storage, wireless,
and telecom equipment were weakest. "We like this fact for the health of the
market, because as history suggests, leadership is unlikely to be the
leadership in the previous cycle," he says. (TG)
9:31 (Dow Jones) It's even worse then they thought: capital markets activity
in February dropped off nearly 25% from January's levels, says Pru bank analyst
Mike Mayo, given lower equity issuance (down 50%), reduced M&A activity (off
38%) and debt issuance (down 33%), weaker equity trading volume (fell 10%), and
flat equity and debt values. "February's performance fired through the low set
in September, to the lowest value since September 1999," Mayo notes. That said,
there are some mitigating factors, he added, including "an improved equity
underwriting pipeline, the potential benefit in Europe from lower rates,
improved M&A likely following better economic growth, and accounting
uncertainty which may get cleared up after the release of 10Ks." (TAS)
9:22 (Dow Jones) Goldman's Laura Conigliaro sticking with belief that tech
spending is simply bouncing along the bottom, offering little evidence of
near-term demand. Until key end markets show a few consecutive months of
encouraging business, it's unlikely there will be a legitimate demand-driven
recovery. When it comes to positive data out of this space, she's hearing too
much "inventory-related", "consumer-related", or "easier compare" talk, she
says. (TG)
9:13 (Dow Jones) Senate Republican Leader Lott, commenting on President
Bush's upcoming steel tariff decision, said, "I think he will try to find a way
to do it that will help save the domestic steel industry while not violating
international trade agreements. And it's going to be a delicate balance..."
(JCC)
9:07 (Dow Jones) Newspaper stocks are "getting dangerously close to their
private market values," says Merrill Lynch publishing analyst Lauren Rich Fine,
suggesting "that the newspaper stocks' streak of outperformance could be coming
to an end." The stocks are trading at 11.5 times and 10.2 times her estimates
of 2002 and 2003 Ebitda, she says, and "we believe the fundamentals of the
business alone do not support these hefty valuations, not today and not in the
future." Fine cuts Gannett (GCI) to neutral from intermediate-term buy on
valuation, maintains intermediate-term buy rating on Knight Ridder (KRI) and
raises Washington Post (WPO) to near-term buy from neutral. (BS)
9:01 (Dow Jones) Prudential analyst David Trone reiterated his belief that
the worst is over for the brokerage industry's revenue decline. He expects 1Q
revenue for the sector to be "comfortably higher" than 4Q. That didn't stop
him, however, from paring back earnings expectations for the first half of 2002
for Bear Stearns (BSC), Goldman Sachs Group (GS), Lehman Brothers (LEH),
Merrill Lynch (MER) and Morgan Stanley (MWD). He remains confident that a
rebound will come in the second half. (CWM)
8:52 (Dow Jones) The dollar is at a new daily - and three-week - low at
Y132.02 against the yen as NY traders clearly have some USD/JPY longs to clear
out in accordance with the shakeout overnight. The Swiss franc's rise to a new
intraday high suggests market tension over news of the downed U.S. helicopter
over Afghanistan. EUR/USD at $0.8664. (JEN)
8:44 (Dow Jones) There is little Home Depot (HD) or Lowe's (LOW) can do to
surprise the Street at this point, says UBS Warburg, which downgrades the
stocks to buy from strong buy. "We simply cannot justify a strong buy posture,"
the firm says, despite accelerating fundamentals, a still low rate environment
and solid homebuilder fundamentals. UBS says the companies are the "earliest
cycle" retailers around and are expensive with a combined P/E of 30. (GS)
8:38 (Dow Jones) February traffic data from AMR's (AMR) American Airlines and
Continental Airlines (CAL) released Friday are "encouraging" and indicate the
industry's continued recovery from the post-terrorism slump, analysts say.
Continental's unit revenue, watched as an industry bellwether, fell 10%-12%,
compared with a 14% drop in January. "March will still make or break 1Q02;
Easter holiday occurring in March vs. April should help boost 1Q results," says
Brian Harris of Salomon Smith Barney. (SON)
8:33 (Dow Jones) J.P. Morgan upgrades General Motors (GM) to buy because of
the continuing strength of the U.S. light vehicle market and the company's
favorable market share trends. "GM now stands out in our minds as the best
positioned of the Big Three auto companies, distinguishing itself by the
quality of its management and its products, and by its improving operating
performance." The firm sets a $65 12-month price target; GM closed Friday at
$54.97. (GS)
8:30 (Dow Jones) A legitimate turn, or a suckers rally? That's a question
Wall Street has to be asking Monday morning. Friday's huge rally in equities is
in part responsible for a 6% surge in Japan's Nikkei Average, which closed at
its highest level since last August. The rational and sustainability of stock
rallies in Tokyo are the subject of much debate, but one thing's for sure:
Friday's U.S. rally is going to continue early Monday. GM is the subject of
some favorable research, while a handful of big retailers are on the opposite
end. Meanwhile, the 3Q looks tougher for Oracle (ORCL). Not much doing on the
economic calendar, but it's a busy week, capped off with a payroll report
Friday. Investors will also have to grapple with word of a U.S. helicopter
being shot down in Afghanistan. (TG)
(END) DOW JONES NEWS 03-04-02
09:58 AM |
