2:15PM Rate Hike Fears : A fear of higher interest rates is the most frequently cited factor for explaining the market's weakness today. That fear was stoked by the stronger than expected Housing Starts data for February, yet another item that is drawing some attention is the speculation that Johnson-Smick, a Washington consulting firm, has issued a report suggesting the Fed would raise the fed funds rate by 50bp in May, instead of the 25bp hike currently expected by the market. While Briefing.com would concur that the odds of a Fed tightening in May have increased given the Fed's shift to a neutral directive, we find it implausible that the Fed would raise rates by 50 basis points. First of all, the Fed still has its doubts about the degree of strengthening in final demand over coming quarters. It acknowledged as much in yesterday's policy statement, and because it did, one would think the Fed would want to analyze more than just the next 6-weeks worth of economic data before instituting such an aggressive policy move. It has the luxury of doing that, too, given the benign inflationary backdrop. Aside from that, with the de facto tightening that is already occurring with the jump in energy prices and the rise in Treasury yields, the Fed would run a very real risk with a 50bp tightening in May of squashing the recovery before it even gets going. Remember, a rise in the fed funds rate leads to a commensurate rise in borrowing rates for corporations and consumers alike-- borrowers who, for the most part, are already pretty heavily leveraged. Suffice it to say, a swift increase in the cost of credit would dilute the rebound potential of the anticipated profit recovery; and without a renewed surge in profitability, business spending will continue to be lackluster. Recall that Alan Greenspan has said repeatedly that a pickup in business spending is a necessary component of a sustained recovery. With the strength of that recovery still in doubt, though, you can bet he will maintain his gradualist approach. In any event, today is as good a day as any to speculate the Fed will raise rates by 50bp in May, but in Briefing.com's estimation, it won't happen-- and if it did, it would be both foolhardy and reckless.-- Patrick J. O'Hare, Briefing.com
11:59AM Genesis Microchip (GNSS) 26.92 -2.40 : There have been a number of interesting trends over the last few months. Stocks have sold off for a few weeks at a time on any hint of accounting worries, or ties to Argentina, or financial ties to Enron. Just beginning is the trend of concerns in the 10-K filings. Yesterday, XM Satellite Radio (00C0) was weak after its 10-K disclosed that its auditor KPMG states that XMSR is dependent upon additional debt or equity financing and that this factor raises substantial doubt about our ability to continue as a going concern. This was not new -- as XMSR's 10-Ks have contained similar comments in their 1999 and 2000 reports as well. Nevertheless, the stock sold off 12%. Another trend not getting a lot of publicity is the departures of executives. This morning, Genesis Micro, which makes semiconductors for flat panel displays, announced that CFO Pete Mangan has decided to leave the company to pursue other interests. Eric Erdman has agreed to return to his former role as CFO. The stock is down 8% on the news, and had been as low as -13%. The fear is in asking the question: Why is he leaving? Is there something going on there? Does it mean he is worried about the company's future? Investors are paying more attention to departures these days. Enron's CEO left just months before bankruptcy. Lucent's CEO left saying it was in good condition. Another recent example is Exodus. Top level managers began leaving, but the CEO kept saying everything was rosy, then the company declared bankruptcy. Amazon's CFO recently said he'll resign. Let's be very clear: We are not saying Genesis is of the level of concern as the others. The point here is to highlight the fact that when the top executives leave, investors need to take notice. -- Robert J. Reid, Briefing.com
Jabil Circuit (JBL) 22.30 +1.54: Last night reported Q2 earnings of $0.08 per share, $0.01 better than consensus of $0.07; revs fell 31.5% y/y to $822.0 mln vs $810.8 mln consensus. In an intra-day note, JP Morgan maintains Buy rating; believes revs, gross margin and operating margin have all troughed; impressed with JBL's cost control, stable end-demand, new business wins, balance sheet progress, and cash flow. In a morning note, Robertson Stephens maintains Buy rating; states JBL remains a well run EMS provider capable of generating superior ROICs and with strong balance sheet. Needham & Co reiterates Buy rating; thinks JBL should show sequential quarterly gains in revs and EPS throughout current Y03 aided by restructuring savings and new contract wins, but lowers price target to $29 from $32 following current muted telecom recovery...JBL riding high (+7.42%) on good earnings and positive feedback from brokerages.
XM Satellite (XMSR) 12.93 -0.07: Shares have had a volatile ride in 2002, trading between $13-20 thus far. Robertson Stephens is out this morning with bullish comments following yesterday's 10% fall (after another 10-K going concern comment from auditor): Firm recently completed a channel check survey designed to monitor satellite radio sales; results were better than expectations, with after mkt penetration rates ranging between 10-15% in mkts where only XMSR is available and in the 20% range in mkts where both XM and SIRI units are available.
2:23PM NVIDIA defended byTWP: ATYT not gaining share and valuation low (NVDA) 47.23 -4.42: -- Update -- Thomas Weisel Partners views weakness as exceptional buying opportunity. Firm says weakness is due Salomon Smith Barney cutting Intel estimates, ATYT share gain claims, and stk breaking through 200 day moving avg. Despite short noise, firm believes fundamentals still very strong, all biz segments on plan and valuation low.
11:52AM Telecom equip stocks LU and NT claw way out of new low territory, rising 6% and 1% :
8:28AM Taiwan Semi and United Micro at risk in fab water shortage-- Merrill Lynch : Merrill Lynch is saying that the Taiwanese govt is taking measures to resolve a water shortage at the Science Park fab in Hsinchu; TSM and UMC have the most to lose if the effort is unsuccessful, since they consume nearly 60% of the fab's wafer, followed by DRAM (20%) and other IDMs (2%).
7:32AM Intel: Solly sees modest Q2 rev decline, cuts estimates (INTC) 31.72: Salomon Smith Barney believes that INTC could record a modest seasonal decline in Q2 revs, which will likely feel the impact of a booking correction as the P4 comes off allocation as well as flat prices due to April/May price cuts. Lowers Q2 rev/EPS ests to $6.7 bln/$0.14 from $6.9 bln/$0.16, 2002 to $29.1 bln/$0.70 from $29.8 bln/$0.72, and 2003 to $36.6 bln/$1.30 from $38.4 bln/$1.50. Maintains Buy rating and $45 price target.
7:19AM ATI Tech exceeds consensus estimates (ATYT) 12.55: Reports Q2 adjusted earnings of $0.07 a share, $0.01 better than the Multex consensus. Revenues increased 6.4% to $266 mln (consensus $263.6 mln). ATYT expects revenues and earnings to grow slightly in Q3 and Q4.
7:03AM Genesis Microchip: CFO leaves to pursue other interests (GNSS) 29.32: Announces that CFO Pete Mangan has decided to leave the company to pursue other interests. Eric Erdman has agreed to replace Mr. Mangan, returning to his former role as Chief Financial Officer.
finance.yahoo.com^SOXX+^IXIC&d=t
RtS |
