From Briefing.com: General Commentary - After launching its most impressive two-day rally in nearly two years, the market levelled off... On the plus side, the market shook off some early profit-taking related to anxiety over the Bali bombing and a key downgrade of General Motors (GM) to close the day with slim gains... While the gains may have paled in comparison to those registered last Thursday and Friday, fact that the sector/market held its ground in the face of early selling pressure was nonetheless encouraging.
Expect additional consolidation early in Tuesday's session as street anxiously awaits earnings from chip heavyweights Intel (INTC) and Novellus (NVLS)... These two reports could well set the early tone for earnings season... Better than expected numbers and the SOX and Nasdaq Composite will off and running again... However, should one or both companies either miss their number or guide future estimates materially lower, then this rally - like all the others over the past three years - will be in serious jeopardy. Traders might wait to see additional evidence before dumping on the sector again... Then again, they might not. Either way, disappointing numbers likely to spell a relatively quick end to the current advance. For a complete list of chip and tech companies scheduled to report results this week, see Briefing.com's Earnings Calendar and/or Tech Earnings Calendar page(s).
With all the chip related companies due to report results over the next several days, influential SOX index will be pivotal in setting overall market direction... Index managed to break, then hold above key 20-day moving average - though only minimally. Next target of relevance is the 50-day moving average of 282.97. Still a long way to go before this ceiling is seriously challenged. Consequently, investors don't want to let a few good days color their judgment on the overall market.
Robert Walberg
5:56PM After Hours Monday : Relatively quiet after hours session with the market taking on a mixed bias. Earnings data dominates in terms of fresh news but there are no market moving reports. The S&P futures, currently at 841.7, is trading 0.3 points below fair value, the Nasdaq 100 futures, currently at 905.50 is trading 1.5 points above fair value while the Nasdaq 100 AHI is down 0.2.
Up substantially amid modest volume is Unisys (UIS +12.5%). The company topped the Q3 EPS consensus by $0.01 with revenue slightly shy ($1.33 bln vs the $1.36 bln). Also, said that they remain on track for 2002 EPS of $0.67-$0.70 (consensus $0.69) and revs of $5.5-$5.6 bln (consensus $5.70 bln).
4:56PM New Focus announces new chairman (NUFO) 2.60 +0.04: Announces that Nic Pignati, President and CEO of New Focus, will replace R. Clark Harris as chairman of the company's board of directors effective October 24, 2002. Mr. Harris will also relinquish his position as chief strategy officer. The company indicated that Mr. Harris' decision to reduce his active role in the company was based upon his desire to spend more time in retirement activities.
4:03PM Unisys beats by a penny, affirms 2002 forecast (UIS) 6.76 +0.17: Reports Q3 (Sep) earnings of $0.18 per share, $0.01 better than the Multex consensus of $0.17; revenues fell 3.2% year/year to $1.33 bln vs the $1.36 bln consensus. Co says it remains on track for 2002 EPS of $0.67-$0.70 and revs of $5.5-$5.6 bln.
3:58PM Marvell (MRVL) 11.52 -2.24: Stock drops off over 16% following Friday's announcement MRVL had renegotiated its relationship with INTC allowing both parties to sell their own GigE NIC/LOM solutions without INTC having to give MRVL 12-months notice. Several analysts remain upbeat on co's near-term prospects: Goldman Sachs believes the INTC relationship "is far from over" and expects no revenue impact from the amendment until H203 at the earliest. Firm maintains their estimates where they are given the likelihood of further upside in the near-term. CIBC similarly believes the perceived impact on financials and decline in stock price may be overblown and maintains their Mkt Outperform rating.
3:34PM PC & Enterprise Hardware : Morgan Stanley cuts estimates on HPQ, SUNW, and IBM (see In-Play for IBM details) based on negative datapoints from suppliers, channel contacts and competitors; firm believes July-mid-Oct was weaker than most vendors expected. Firm lowers HPQ's 2003 revenues/EPS to $72.8 bln/$1.24 and 2004 to $77.5 bln/$1.55; believes co's integration and cost cutting remain largely on track, but concerns over demand cause them to revise their price target to $18. Morgan cuts SUNW's Q1 revenues to down 20% Q/Q and lowers their 2003 revenue/EPS to $12.1 bln/$0.01 citing lower promotional activity; several SUNW suppliers indicated that orders were below mgmt's initial plan (one in particular noted 10-15% below plan) in Q1.
2:16PM SpectraLink to buy back additional 2.5 mln shares; float 17.2 mln (SLNK) 5.15 +0.25:
2:06PM QLogic (QLGC) 22.24 +0.38: Stock shrugs off est cuts by SG Cowen thanks to broad mkt gains; firm reduces 2003 EPS and rev estimates to $1.01 on $416.8 mln in sales (from $1.09 on $438.8 mln) and 2004 EPS and rev estimates to $1.20 on $500 mln in sales (from $1.41 on $583 mln) based on a pushout in IT recovery .. firm remains above consensus views in both years. SG Cowen leaves current quarter expectations intact ($1.25 on $521 mln) on their belief QLGC should generate significant profits when IT spending eventually does recover.
1:57PM CSFB names 3 cheap stocks : CSFB says that PBI, EK, and EFII showed up on their screen for cheap stocks; says PBI is the more defensive name, citing the co's 70% recurring revs and the 3.7% dividend yield, and thinks the mkt reaction to the co's aircraft lease exposure has been overdone; on the other hand, firm says that EK still holds some risk given its operating leverage, and EFII has risk due to its high leverage to color copying and printing, which the firm does not expect to recover until late in the cycle.
11:01AM Qualcomm touches four-month high (QCOM) 31.93 +0.56: -- Technical -- Highlighted on this page Friday, stock continues to push to four-month highs. Currently testing resistance in the area of 32.00 -- on a clean break higher, look for subsequent overhead at 32.50 and 33.30. The favorable intraday outlook would deteriorate on a failure to hold very near-term support at 31.60.
9:46AM Nasdaq Composite Intraday : -- Technical -- Index stabilizes after pulling back to support in the 1194/1192 area (20 day ema/chart barrier). On an intraday basis watching resistance at 1203 and 1208/1210. Failure to work through and hold above these levels during the current bounce suggest potential for additional short term downticks. Next support is at 1179/1177 (top of Oct 11 gap and 38% retrace of recovery rally).
TXU TXU Corp downgraded at Morgan Stanley (18.75) -- Update -- Morgan Stanley downgrades to UNDERWEIGHT from Equal-Weight based on the belief that TXU's $2.6 bln bank-line drawdown (see Friday's 5:36 comment) signals that it sees potential for about $1 bln in claims against the parent if TXU Europe is downgraded to junk; estimates at least $1.5 bln in new equity is needed to stabilize TXU's balance sheet.
IBM IBM estimates cut at Morgan Stanley (63.92) Morgan Stanley believes that IBM did not experience the normal pickup in hardware orders in the last few weeks of the qtr, and that Microelectronics remains a wildcard; cuts 2002 est to $3.80 from $3.82 and 2003 to $4.05 from $4.25 (below consensus of $3.93 and $4.41).
Soundview cuts estimates for Linear Tech & Maxim Integrated Soundview believes that consensus ests for LLTC and MXIM could come down following the cos' conference calls in order to reflect a more gradual 2003 recovery; cuts LLTC CY03 rev/EPS ests to $656 mln/$0.81 from $725 mln/$0.94, and cuts MXIM CY03 ests to $1.3 bln/$1.08 from $1.4 bln/$1.21.
MRVL Marvell downgraded at Wachovia, defended by Thomas Weisel (13.76) Wachovia downgrades to BUY from Strong Buy due to the increased uncertainty surrounding the potential impact on MRVL's 2003 earnings from INTC's upcoming gigabit ethernet controller (note that firm had defended MRVL on Friday). Separately, Thomas Weisel says MRVL is oversold on the INTC news; believes sales to INTC should increase in CY03, while new gigabit ethernet and storage customers could deliver upside to current ests.
7:44AM S&P futures vs fair value: -5.9. Nasdaq futures vs fair value: -11.0. Seeing some additional deterioration in the futures as Bali bombing provides the catalyst for profit taking after last week's big gains; relatively quiet on research front today aside from Merrill's downgrades of auto stocks. Note that the bond market is closed today for the Columbus Day holiday.
7:43AM Merrill Lynch downgrades select auto stocks : Merrill Lynch downgrades F, GM, DCN, and DPH to NEUTRAL from Buy to reflect worsening auto industry fundamentals; believes continuing deterioration in new and used car prices is an increasingly strong headwind raising the risk of further margin compression for these co's, which have both high operating leverage and constrained financial flexibility.
7:40AM Travel stocks impacted by Bali bombing : The bombing in Bali has depressed prices of airlines and travel agents in European trading; likely to see some impact on US stocks as well, with airlines potentially impacted as well as travel related stocks such as EXPE and ROOM.
7:27AM ADTRAN beats by two cents (ADTN) 21.01: Reports Q3 (Sep) earnings of $0.27 per share, $0.02 better than the Multex consensus of $0.25; revenues fell 7.7% year/year to $88.2 mln vs the $88.0 mln consensus.
7:24AM Tyco audit to determine whether co is in violation of debt covenant - NYT (TYC) 13.64: The New York Times says that depending upon how auditor Pricewaterhouse assesses TYC's enormous amount of goodwill and other intangible assets on its balance sheet, TYC could be in violation of a covenant on some recently negotiated bank debt.
7:23AM B of A raising equity weighting : Banc of America Securities strategist Thomas McManus raises the equity weighting in his model portfolio to 70% from 65% while reducing bonds to 20% from 25%; says last week's reversal indicates that the bottoming process has entered a new phase
10:04AM Technical Levels: A look at the Nasdaq's weekly chart going back 18 months places last week's rally in perspective. The markets have had two consecutive good days now in the wake -- or in the midst -- of a massive 31-month bear market. The Dow is now almost 670 points off its worst levels in a matter of just two sessions. At the same time, the Nasdaq has climbed 102 points off its lows in the same time frame. So those are gains of about 9.3% and 9.2% respectively -- again in just two days.
Admittedly, the recent surge barely registers on the chart. Yet now the question is whether the indices are bloated at current levels. The major averages just managed what would be a solid year's return in less than a week. So with that kind of gain under its belt, how are the markets situated at current levels? We've been harping on the fact that early November is seasonally a standard entry point for stocks. With the markets still in the general vicinity of five or six year lows, many would contend the indices have room for a sizeable move. The point being that the 'early November' entry point is only about two weeks off.
Out of the prior seven weeks, the Nasdaq posted its only weekly gain last week -- in the process carving out an odd-looking bullish candlestick. At the same time, the Dow posted a respectable gain on price action that, from a strictly technical perspective, looked as if it may genuinely serve as a reversal. Also note that the Dow is now coming up on a notable level at 8,000 despite dropping as low as 7,181 intra-week. So we'll see what the market decides.
On the Nasdaq, look for notable resistance initially at congestion in the area of 1,220 -- this is where the powerful Friday rally initially stalled. That's followed by a technically more notable level at its 50-day simple moving average of 1,266. On the Dow, keep an eye on the aforementioned 8,000 level. That's followed by a more important level at its 50-day simple moving average of 8,276.
As a separate, and final matter, note that so long as the averages continue to hold their 20-day exponential moving average's to the downside, the near-term bias is likely to favor additional upside. The Nasdaq's 20-day exponential moving average is currently 1,195 whereas the Dow's 20-day exponential moving average rests at 7,804. -- Mike Ashbaugh, Briefing.com
finance.yahoo.com^SOXX+ADTN+ALTR+AMAT+AMD+BRCM+DCN+DPH+EFII+EK+EXPE+F+GM+HPQ+IBM+INTC+KLAC+LLTC+LSCC+LSI+MOT+MRVL+MU+MXIM+NSM+NUFO+NVLS+PBI+QCOM+ROOM+SLNK+SUNW+TER+TXN+TXU+TYC+UIS+XLNX+^VIX+^IXIC&d=t
Michael, thanks for bringing the articles I all too often miss reading over to the thread!
RtS |
