From Briefing.com: Updated: 17-Mar-03 - General Commentary - It's amazing how quickly the technical tone of the sector/market has changed. Last week's impressive recovery effort has propelled the Nasdaq to within striking distance of its key 200-day moving average, which currently sits at 1351. Over the past year, index has only traded above this key resistance level for a few days. More significantly, 50-day moving average on verge of crossing above 200-day moving average as well - again this has only happened on one occasion over the past two years, and then only briefly.
Basically, if stocks continue to climb upon greater clarity to the Iraqi situation then sector's technical tone could quickly flash its strongest buy signal in more than two years. Not bad considering that just last week the Nasdaq had drifted to its lowest level in roughly 5-months.
Semiconductor, software, wireless, networking and Internet service stocks have provided sector leadership during the past few months. Given their relative strength and the overall improvement in the tech sector/market's technical picture, Briefing.com expects these same groups to offer leadership over the near- to intermediate-term.
How high these groups climb will depend upon how quickly corporations start spending upon resolution of the crisis in the Middle East. If war occurs (and we think that it will some time this week), and the US achieves its objectives in a short order, then traders will hope to see a jump in IT spending from corporations that have, up until now, been sitting on their wallets. If, however, corporations decide to stand pat either over disappointing results in the Gulf War or sluggish economic activity, then traders will quickly grow discouraged by the further delay in the earnings recovery.
Without a material pick up in demand that would bolster top and bottom line results, sector won't be able to sustain its current upward momentum much longer as valuations are still too rich. Need the "e" part of the p/e equation to start climbing faster than expected in order to generate sustained excitement in tech. Unfortunately, at this stage we see little to no evidence of that happening. Hopefully, we'll be pleasantly surprised along with the rest of the marketplace. If not, the current recovery effort will run out of steam rather quickly.
Robert Walberg
5:32PM Weekly Wrap: The modest net change on the week belies the wild ride the indices took to get there. Stocks began the week on the defensive as US marched closer to war with Iraq; North Korea fired a 2nd test missle, oil rose to its highest level in over a decade and the dollar fell to a four year low. But after slumping to their lowest level in 5-months, the indices staged a powerful late week recovery.
Rally began overseas, with the European bourses surging by more than 3%-6% on perception that Iraqi crisis was nearing a resolution. Fact that US failed to secure another UN resolution seemed to bolster sentiment. US markets responded with gains of between 3% to 5%, with the tech heavy Nasdaq leading the rebound. Advance also fuelled by sharp drop in crude and gold prices, and corresponding rebound in dollar.
Though market spent Friday's session merely consolidating the big Wed-Thu rebound, traders were encouraged by fact that indices didn't give back significant ground. Too early to tell if this is the beginning of the much anticipated relief rally, or if it's just another in a long list of head fakes. But one thing was clear - investors happy to post some gains for a change. Fact that gains came despite lingering uncertainties surrounding Iraq and some pretty disturbing economic reports (retail sales fell 1.6% and michigan sentiment at 75) was all the more encouraging. Ability to climb in the face of adversity suggests that at least a near-term bottom has been put in place.
Week's winners led by the semiconductor, retail-apparel, software, casino, home construction, retail-specialty and chemical groups. Losers led by precious metal, tobacco, tire, oil and steel stocks.
Geopolitical events likely to dominate trading again next week, though investors will also be asked to digest a growing number of earnings reports. Chief among them are the brokerage companies such as GS, MWD, LEH and BSC. Also tech leaders ORCL, MU and JBL. Fed could steal some thunder as well, especially if Greenspan & Co. pull a surprise and cut rates at the upcoming FOMC meeting.
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 7740.03 7859.71 119.68 1.5 % -5.8 %
Nasdaq 1305.29 1340.33 35.04 2.7 % 0.4 %
S&P 500 828.89 833.27 4.38 0.5 % -5.2 %
Russell 2000 354.18 354.39 0.21 0.1 % -7.5 %
2:27PM Cymer Update (CYMI) 24.93 -1.21: We are hearing from Hoefer & Arnett analyst that radiation damage issue addressed with co management and they are unaware of any customer complaints.
12:15PM Cymer concerns highlighted by Hoefer & Arnett analyst (CYMI) 24.62 -1.57: A Hoefer & Arnett analyst made comments this morning about concerns over possible long-term laser damage with its Nanolith 7000. Briefing.com just spoke with the analyst. He believes they probably have a solution to any potential engineering problems. However, the analyst believes the co is finally seeing pricing pressures from customers because of lower margins at comparable sales levels. This appears to be the catalyst for pressure on the stock in the last 30 min. He believes a good entry point for the stock is in the low 20's. (see 11:53 comment)
2:26PM GlobeSpanVirata downgraded at Thomas Weisel (GSPN) 4.24 -0.64: Thomas Weisel downgrades to Underperform from Attractive based on deteriorating growth prospects resulting from increased competition, pricing pressure for ADSL chipsets, mkt share loss, and slowing subscriber add growth; in addition, firm believes GSPN could lose share at UTSI, which may be moving designs away from GSPN in favor of other suppliers such as CTLM.
9:58AM Microchip expected to give conservative outlook - Merrill (MCHP) 22.50 -1.21: Merrill Lynch expects MCHP to be slightly more conservative in its outlook during its mid-qtr update next week; cuts FY04 est to $0.82 from $0.85 (consensus $0.85), and lowers their rev growth forecast to 13% from 16%; sees fair value at $22.
9:52AM MCHP a notable laggard in early trading 25.56 -1.15: Hearing that weakness is tied to pre-announcement rumors.
9:28AM Semtech power management chip to support AMD next gen processors (SMTC) 15.69: Semtech announced it would be supplying power management chips for AMD's next generation 64-bit processors. These chips will be included in AMD's PC and server markets.
9:24AM Silicon Labs: cautious comments from Legg Mason (SLAB) 28.50: Legg Mason says that although SLAB was up 9.7% yesterday, partially on speculation of an impending introduction of CMOS PA, firm does not expect the introduction of such a product to have a dramatic impact in the marketplace in the near-term; with a Q2 introduction of a discrete CMOS PA, the horizon for a truly competitive product introduction from SLAB will likely be pushed out into at least 2004, and during this time intense pricing pressure will continue to erode the apparent price benefit of CMOS over current PA process technologies to the point where the advantage becomes negligible.
Silicon Laboratories -- is closing in on notable longer-term resistance right around 30.00. This is a $1.4 billion market-cap company that makes proprietary mixed-signal integrated circuits (ICs) for the wireless, wireline and optical communications industries. Mixed-signal IC's are electronic components that convert real-world analog signals, such as sound and radio waves, into digital signals that electronic products can process. SLAB is projected to earn $0.86 this year (0/E 33.7) and EPS is projected to grow 21% next year to $1.04 (P/E 27.9). This is another one we touched on earlier in the week -- then at a share price of 26.00 -- and it continues to look interesting at current levels.
finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+CTLM+CYMI+GSPN+INTC+KLAC+LLTC+LSCC+LSI+MCHP+MOT+MU+MXIM+NSM+NVLS+SLAB+SMTC+TER+TXN+XLNX&d=t
I would think that removing the if from the attack on Iraq would be somewhat positive but it still has not happened. I'm still in cash. How about you Sun?
RtS |
