RECAP & STOCKS TO WATCH FOR TUESDAY, 1-9-01
Worries over the economy and earnings pressured the major indices for a 3rd straight session, but a late hour buying spree pushed them to close well of their session lows. The bright spot was the Semiconductor Index (SOX), which managed an almost 3% gain. Further strength was seen in the networking sector, with weakness in the biotech, Internet, and financial sectors.
The Nasdaq Composite slipped 11 points, after being down more than 108 points, to close at 2,395. Volume was 1.8 billion shares, with 54 new highs compared to 145 new lows. Blue chips slipped also after recovering from a 120-pt deficit, as the Dow lost 40 points to finish at 10,621. Volume on the Big Board was 1.1 billion shares with 209 stocks making new highs compared to 19 new lows.
Earnings season will officially kick off on Wednesday with Yahoo! (YHOO) and Motorola (MOT) due to report. With that, we should begin to see a shift in the news cycle from negative (earnings warnings) to positive (earnings surprises). Although the Fed has laid down the floor for the markets, traders and investors will need to see some Q4 reports surprises before confidently stepping in to buy.
From a technical standpoint, the Semiconductor Index (SOX) penetrated and closed just above resistance at 633. Support on the Nasdaq Composite stands at 2,250-2,200, with resistance at 2,600 and 2,875. Also, the Nasdaq formed a pattern called a “hammer” on the daily chart, meaning that it consolidated by closing near where it opened for the day, and closed well of its lows. This indicates a possible reversal of the downtrend. Chart of the Nasdaq on a daily basis:
tradewindsonline.net
Earnings Spotlight: Some closely watched earnings reports this week include Infosys Tech (INFY) on Tues., Motorola (MOT), Rational Software (RATL), and Yahoo! (YHOO) on Wed., and Ariba (ARBA), Cree (CREE), DoubleClick (DCLK), and Rambus (RMBS) on Thur.
Intel (INTC): Salomon Smith Barney analyst Jonathan Joseph issued a research note after the close. He believes Intel will hit in the range of its revised Q4 guidance for flat sequential sales growth, plus or minus a couple of points. However Joseph is concerned about Q1 outlook based on PC and Taiwanese motherboard markets. As a result, he is lowering Q1 revenue expectations from flat to down 10-15% due to weak demand and concerns PC component companies, like Intel, are taking from Q1 to make Q4. Current Q1 EPS estimate is $0.35 (First Call consensus is $0.35) but Joseph believes it could come in closer to $0.30 and says 2001 EPS of $1.42 may fall to $1.30 or less (First Call consensus is $1.53).
i2 Technologies (ITWO): Company issues upside pre-announcement for Q4. Sees revenues and EPS exceeding estimates with revenues to exceed $370 mil, operating income to exceed $51 mil.
Amazon.com (AMZN): Company releases news that net sales for the December quarter of 2000 are expected to exceed $960 mil. This is within prior expectations of $950 mil - $1.05 bil. Pro forma operating loss for the fourth quarter of 2000 is expected to be less than 7% of net sales.
MiniMed (MNMD): Company warns for Q4. Sees EPS of about $0.17, below First Call consensus estimate of $0.19. Revenues are to be within the range of $88 to $98 mil. Company cites failure to increase December domestic insulin pump placements as much as expected. Company also announces that its pending supplemental pre-market approval application for the consumer version of its continuous glucose monitoring system will be subject to FDA panel review. The date for the panel meeting has not yet been set.
SeeBeyond (SBYN): Company issues upside pre-announcement for Q4. Sees loss of $0.06-0.10 vs.current EPS estimate of ($0.10). Revenues are expected in the range of approximately $40.0 to $42.0 mil.
eBay (EBAY): Prudential reiterates STRONG BUY rating and price target of $125 following company's announcement that it will pay $120 mil in cash to acquire a majority stake in South Korea's Internet Auction Co. Says the acquisition should be neutral to operating income, but slightly dilutive to EPS in FY2001, due to foregone interest income; firm adjusts 2001 estimates to reflect the acquisition and now sees revenues of $651 mil, from $631 mil, and lowers EPS, excluding non-cash charges, to $0.39 (from $0.40). |
