Semiconductor Industry Association (SIA) : Isn't it amazing how the market's mood can go from dejected to exuberant in such a short time? Traders, who wore dark-colored lenses last week, have changed them out for rose-colored lenses this week thanks to a batch of market-friendly economic data that has alleviated fears about the Fed tightening its grip on monetary policy to slow the economy. Although the May employment report (released this morning) has been the apple of the market's eye today, the chip and chip equipment stocks have been the apple of the market's eye all week. To wit, the Philadelphia Semiconductor Index (SOX) is up 26.7% since last Friday as the chip and chip equipment stocks have led the tech sector's resurgence. Their outperformance has been a welcome sign, too, as their underperformance last month was very disconcerting in light of their earnings visibility and strong growth prospects. Those factors, however, meant very little just a short time ago when traders were wearing dark-colored glasses, fearing higher interest rates might crimp capital spending, but more specifically, fearing that the semiconductor industry's cyclical upturn had already peaked or was about to peak. Although the latter issue remains open for debate, the news this week has made it difficult to believe the semiconductor industry, and the semiconductor-related stocks, have peaked. For instance, there have been a host of reports this week indicating DRAM prices have been rising due to increased PC demand; and in a research note from CS First Boston today, the analyst said Applied Materials (AMAT) expressed high confidence in its Q3 guidance of bookings in excess of $3 bln. Finally, this morning's report from the Semiconductor Industry Association that chip sales, driven by demand for cellular phones and wireless communications infrastructure, rose 35.6% to a record $15.2 billion in April has provided validation for the strong run-up in share prices this week, and has offered a telling reminder that the semiconductor industry remains in good shape. Accordingly, the chip and chip equipment stocks are rightfully regaining their winning form.-- Patrick J. O'Hare, Briefing.com
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I thank stan and his charts for keeping me in when I was looking for a tax writeoff.
Jack |
