Updated: 18-Jun-01
General Commentary
Traders snatched victory from defeat on Friday, as indices shook off the warnings from JDS Uniphase (JDSU 12.44 -1.37), Nortel Networks (NT 9.86 -0.74) and Philips Electronics (PHG 24.84 -0.45) and weathered triple expirations to close little changed... Looked like it would get very ugly early in the session, especially when rumors began circulating that Microsoft (MSFT 68.02 -0.88) would issue a warning of their own... However, when the indices failed to take out key support levels on first try, and MSFT gave no indication of trouble, bulls stepped back in and did some light buying.
Still doesn't seem to be much conviction on the part of buyers, but the fact that the sector managed to absorb the barrage of negative earnings news without buckling has to be viewed as at least a short-term positive... Also positive was the way in which the bellwether SOX index rebounded off of key support in the 583 area (50% retracement of Apr-May advance)... Nasdaq flirted with, but never seriously tested its 50% retracement floor of 1974, before it bounced back as well.
Though sector's resilience was encouraging, no debating that psychology took a big hit last week... Investors beginning to question whether earnings will indeed trough in Q3/Q401, or whether business will continue to deteriorate into the first half of next year... A couple more surprise warnings (from companies sacred cows such as IBM, Microsoft, Siebel, BEA Systems and Veritas) or more negative guidance from the cast of usual suspects, could push the SOX and Nasdaq indices through their 50% retracement levels... If the indices were to break these floors it would keep the sector on the defensive and establish secondary targets in the 552 and 1890 areas.
On the plus side, Oracle could give the sector a much needed lift when it reports results Monday... Fact that company never warned has analysts hoping for good news... At this stage of the cycle, good news will have a bigger impact on the overall sector than negative news in that it comes as more of a surprise... Consequently, ORCL could give the entire market a boost if it delivers a decent headline number and puts a positive spin on guidance.
Other tech stocks of note on this week's earnings calendar include Micron Tech (MU 39.50 +1.70), Jabil Circuits (JBL 26.15 +0.98), Solectron (SLR 17.99 -1.26), Progress Software (PRGS 15.86 -0.59), FSI Intl (FSII 11.11 -0.38), Research-in-Motion (RIMM 27.53 -0.29), Manugistics (MANU 33.50 +1.63) and Tibco Software (TIBX 14.75 +1.08)... For dates, consensus estimates, actuals, year-ago comparisons, revenue changes and conference call info see Briefing.com's Earnings Calendar.
We're heading into the teeth of warnings season and we'll need some (relatively) good news from the above companies to offset the negative impact of corporate confessionals... Without it the sector will remain on the defensive for at least another week.
Robert Walberg |
