MARKET TALK: Internet Security Names Ready For A Run
05 Mar 12:56
Edited by Thomas Granahan
Of DOW JONES NEWSWIRES
(Call Us: 201 938-5299; All Times Eastern)
MARKET TALK can be found using code N/DJMT
12:55 (Dow Jones) Internet security companies' stocks are poised for a bounce
back, says J.P. Morgan's Sterling Auty. The analyst says his IT security index
is down 30% for the year, compared to only 7.6% for the Nasdaq. The index tends
to trade in fairly high correlation to the Nasdaq, though a high beta means it
does underperform in bad times. Still, it has only lagged to this degree one
other time in five years, likely due to "unfounded concerns over insider
selling and investor nervousness regarding accounting concerns." The group's
businesses are strong relative to other tech companies and should benefit from
an improving economic outlook, he argues. His top picks in the group are Check
Point Software (CHKP), NetScreen (NSCN) and Network Associates (NET). (RR)
12:38 (Dow Jones) Cycle of Fed easing, barring another terrorist attack, is
over, says Bill Hornbarger, chief fixed-income strategist, A. G. Edwards. With
recent encouraging data, looks to Fed to change to a neutral bias at one of the
next two meetings. Friendly inflation outlook coupled with neutral to tighter
Fed will lead to continuing flattening of the yield curve, he adds. Looks for
Fed to take back one or two of its rate cuts by midyear, and for 10-year yields
to drift higher with a "target" near 5.50%. (MCG)
12:26 (Dow Jones) Shares of McData (MCDT) fell as much as 19% on fears the
company will issue an earnings warning for its fiscal 1Q when it holds a
business update after the close. The update, which was not previously
scheduled, was prompted by the company's move Monday to file for a preliminary
injunction to enjoin Brocade Communications (BRCD) from infringing its patent
for measuring traffic within a switch. Analysts, according to Thomson
Financial/First Call expect McData to weigh in with earnings of 2 cents a share
and revenue of $91 million for its 1Q. James Poyner, an analyst at C.E.
Unterberg Towbin, said if the company says revenue will be less than $78
million or $80 million, the stock will likely succumb to a "fairly painful"
selloff. (DLF)
12:18 (Dow Jones) Partisan maneuvering continues over the remnants of
stimulus legislation. House Republicans consider bringing up a 13-week
extension of unemployment benefits, which has the backing of both parties,
along with a health care tax credit that is opposed by most Democrats.
Meanwhile, Democrats may try to force a simple unemployment extension to a vote
in the House. None of the maneuvering reflects serious negotiations to find a
plan both parties can support. (MHA)
12:09 (Dow Jones) Northrop Grumman (NOC) filed a lawsuit against TRW seeking
an injunction against Ohio state takeover laws that "deprive the (TRW)
shareholders of a premium bid for their shares that they would otherwise be
able to consider." On Monday, TRW advised shareholders not to act on Northrop's
unsolicited $47-a-share tender offer until the board completes its review,
expected no later than March 15. Northrop said in the lawsuit that Ohio state
laws are superseded by Federal laws and SEC regulations. Ohio's antitakeover
provisions are "unconstitutional and confusing" and "enable a board of
directors to entrench itself and to ignore an opportunity for the shareholders
to act upon premium offers," Northrop said in the lawsuit. By the way, in case
you were wondering, Northrop owns four shares of TRW. (RG)
11:59 (Dow Jones) Equity option trading volume in February exceeded 55.369
million contracts, down slightly from 57.024 million from the same month last
year, according to the Options Industry Council. An average of 2.91 million
stock options traded a day, compared with just over 3 million this time last
year. But "open interest," or the number of total outstanding contracts, rose
to73 million at the end of February, compared with 60.9 million in February
2001. The significantly higher equity open interest suggests more investors are
holding longer-term option positions from month to month as the market remains
choppy. (KT)
11:44 (Dow Jones) Responding to investor inquiries, Tyco International (TYC)
released to the SEC the opening balance sheet for Sensormatic Electronics,
which it acquired in October. In an interview with Dow Jones Newswires Tuesday,
Executive VP Brad McGee said the SEC filing was made to quell investor concerns
about changes made to a company's balance sheet after that company was acquired
by Tyco. "When people talk about opening balance sheets, one of the questions
that comes up is, 'Is there a significant change between the last publicly
filed balance sheet for a company and the opening balance sheet when we do an
acquisition?"' he said. "I think this unequivocally shows that the differences
are relatively small and are easily footnoted." (DL)
11:33 (Dow Jones) U.S. steel industry welcomes "gutsy" announcement expected
later Tuesday from White House to impose new tariffs of 30% on many of the 16
steel product categories in Section 201 investigation, says American Iron &
Steel Institute spokeswoman Nancy Gravatte. In Congress, a steel caucus staffer
also welcomed the announcement: "It's 75% of what we wanted." (CW)
11:27 (Dow Jones) Jake Fuller at Thomas Weisel Partners is cutting his rating
on Expedia (EXPE) to "attractive" from "buy", even though the company remains
his favorite online travel retailer. His concern is valuation. Fuller notes the
stock hit an all-time high Monday and is up 70% since Sept. 10 while the rest
of its group has gained 35% over the same period. At its current price, Expedia
is trading at 1.4-times projected earnings growth and a 30% premium to its
peers, Fuller adds. "While a premium would appear to be warranted given the
company's market leading position, attractive financial model and superior
growth prospects, we see upside potential as limited from the current level,"
he says. Expedia shares recently traded at $60.79, down 70c or 1%. (RS)
11:19 (Dow Jones) Over the past one month, just two names are lower among
DJIA components. Those two names are also the biggest percentage losers on
Tuesday - Home Depot (HD) and Wal-Mart (WMT). Unfortunately for the bulls,
there are plenty of other names showing weakness among blue chips. DJIA off 100
at 10486, Nasdaq Comp adds 5 to 1863, and S&P 500 eases 6 to 1147. (TG)
11:08 (Dow Jones) Nymex oil complex surges higher amid dizzying escalation of
violence in Israel and continuing jitters over possible war against Iraq.
"There's the 'war premium,' if you will, and concern about the next news,"
broker says. Expected inventory draws in Tuesday API report seen supportive
along with recent economic strength and OPEC comments that group's own cuts may
continue for rest of year. Russia seen extending oil cuts past 1Q. April crude
+50c to $22.95/bbl; April gasoline +159 points to 72.30 c/gal; April heating
oil +105 points to 59.50c. (MSX)
11:01 (Dow Jones) Department 56 (DFS) received $11 million from Arthur
Andersen and Andersen Worldwide Societe Cooperative to settle litigation.
Andersen filed suit against Department 56 on Sept. 14, 2000, alleging breach of
contract in connection with computer system implementation work. Andersen
sought $600,000 plus interest and legal costs. On March 1, 2001, Department 56
filed suit against Andersen alleging fraud, conspiracy, tortuous conduct and
breach of contract in connection with computer system implementation work
solicited and performed by Andersen. Department 56 sought $1 billion in
compensatory damages plus punitive damages and legal costs. DFS up 1.6% at
$12.95. (TAG)
10:52 (Dow Jones) Stop the presses, sort of! "Although I continue to expect
the recovery to be insipid and to abort sooner rather than later, I have to
accept that right now things are better than expected," says Morgan Stanley's
Barton Biggs. "I'm reducing my underweight in equities by adding to Japan and
going double weight Singapore." (TG)
10:43 (Dow Jones) Exfo Electro-Optical (EXFO), a maker of fiber-optic testing
equipment, has shot out of the gate Tuesday, up 13% at $6.82 after announcing
the launch of a new product that semi-automates manufacturing of photonics
components. The product, the ProAlign 5000 Component Assembly Workstation, is
the first semi-automated assembly workstation, Exfo director of investor
relations Michael Lamanna told Dow Jones. Up until now, most component assembly
has been done manually, he said. (SEW)
10:35 (Dow Jones) In a comment swaddled with caveats, Banc One economist
Anthony Karydakis says "we view (the ISM) as fitting nicely into a broader
array of data recently telling us a consistent story of a surprisingly vigorous
economic rebound." (MSD)
10:31 (Dow Jones) Shares of Intel (INTC) climbed 3% after Morgan Stanley Dean
Witter raised the stock to strong buy from outperform. Analyst Mark Edelstone
says the chip maker will state that 1Q revenue will be slightly above the
mid-point of its revenue target range of $6.7 billion to $7 billion, when it
provides a mid-quarter update after the close Thursday. His expectation differs
from Lehman Brothers analyst Daniel Niles, who said Monday that Intel will
narrow the range of its revenue target and remove the high end of its target.
Edelstone, who has a $45 price target on Intel, also said Intel's margin
forecast could increase. (DLF)
(END) DOW JONES NEWS 03-05-02
12:56 PM |
