Close Dow +305.28 at 10141.83, S&P +39.36 at 1088.85, Nasdaq +122.47 at 1696.29: It was a long time coming but tech stock investors finally had something to crow about. While all the major averages put together very impressive performances, the large cap tech dominated Nasdaq 100 topped them all with a gain of 10.6%. The Nasdaq Composite tacked on 7.7%. This was better than any of the post 9/11 recovery rallies and was the largest since April 18, 2001 when an advance of 8.1% was seen in the wake of a 50 bp ease by the Fed. The catalyst for the move was the better than expected earnings report from Cisco Systems (CSCO +24.3%) last night. The company beat the consensus estimate by $0.02 and while revenue was slightly below expectations, it came in with better than expected gross margins. The company is increasing its market share as its revenue growth rate was 2% while competitors revenue growth rate fell roughly 40%. This latter detail had little impact as strong gains today were seen in those stocks favorably impacted by an improvement in CSCO business as well as the competition. How much of an improvement is still open to debate, however, as Cisco's CEO said there are some tentative signs the tech economy is beginning to stir, but that it was too early to call a turnaround. The exceptionally strong reaction indicates that the deeply oversold technical condition (Nasdaq off 15% over last 3 weeks and down 25% off the Jan high) and short covering played an important role in the advance as did the fear of missing out on the spectacular rally. Volume was very strong as was the up volume/down volume ratio. While the A/D line for the NYSE was firmly bullish at 2 to 1, given the exceptionally strong percentage move, this is at least somewhat disconcerting. The Nasdaq A/D was only slightly better at 11 to 5. The Treasury market was hurt by out flows and heavy supply. DJTA +2.5%, DJUA +0.6%, DOT +11.3%, Nasdaq 100 +10.6%, Russell 2000 +2.1%, SOX +11.1%, S&P Midcap 400 +2.7%, XOI +1.7%, NYSE Adv/Dec 2017/1173, Nasdaq Adv/Dec 2467/1082
4:07PM Celeritek easily tops Q4 consensus, updates guidance (CLTK) 9.92 +0.26: Reports Q4 pro forma loss of $0.13, $0.12 better than the Multex consensus, revs were $13.2 mln, vs consensus of $12.3 mln. The co expects flat year-over-year growth with revs of $56.0-$57.0 mln in FY03 (consensus is $51.4 mln).
3:34PM Nasdaq Composite Intraday : -- Technical -- Index continues to hold towards its best levels of the session on notably strong volume. From current levels, look for initial resistance at 1688 followed by additional overhead at 1705. To the downside, watch for initial support at 1677/1683 followed by an additional floor at 1665.
3:06PM Trading the Tech Bounce : Cisco's earnings report has ignited an explosive rebound in the tech sector, with the Nasdaq up more than 108 points, or roughly 7%... Recovery being paced by many of the large-cap stocks which have been hit so hard over the past month... Stocks such as Dell (DELL 25.29 +13%), Veritas (VRTS 27.54 +14%), Siebel Systems (00C0 22.53 +13%), Broadcom (BRCM 27.46 +11%), Brocade (BRCD 24.88 +25%), PMC-Sierra (PMCS 15.54 +20%), Sun Microsystems (6.74 +10%), Qualcomm (QCOM 28.63 +15%), Texas Instruments (TXN 30.52 +11%) and Flextronics (FLEX 14.12 +13%).... This comes as no big surprise as they are the most liquid and a natural place for institutional investors to land on... Another logical place to expect early leadership is from the heavily shorted stocks... Based on the big moves in PMCS, BRCM, Nvidia (NVDA 35.72 +11%), Genesis Microchip (GNSS 23.36 +11%), Emulex (EMLX 29.49 +26%), VeriSign (VRSN 10.04 +13%), Mercury Interactive (MERQ 38.46 +21%) and Network Appliance (NTAP 16.47 +22%), we're seeing just that... While these stocks/groups will continue to provide leadership sector manage to build on today's impressive advance, traders might want to look at some of the second tier names that haven't participated as fully in the move... Of course, the relative strength laggards will only bare fruit should the advance have legs... Though the scope and breadth of the rebound suggests additional near-term upticks, we've seen many such moves in recent weeks fade almost as fast as they developed... Nevertheless, those investors looking to trade an extension of today's tech rally might want to look at the wireless group... First, the badly beaten Wireless Index (YLS) is keeping pace with the Nasdaq... Second, most of the component issues exhibited relative strength during the most recent meltdown as stocks generally held above their February lows... Third, base building over last two months suggests that stocks may be forming a long-term bottom... Fourth, it's interesting to note that the group generally posted better-than-expected results in Q1 - a sign that business may also be bottoming... Finally, many of these stocks are also heavily shorted... Consequently, if recovery rally exhibits legs, shorts will be forced to cover here as well... Some of the stocks in this group worthy of trading consideration include Nextel (NXTL 5.12 +9%), AT&T Wireless (AWE 8.45 +2%), Sprint PCS (PCS 11.37 +6%) and Vodaphone (VOD 15.21 +10%).
3:24PM TJX and MCHP scheduled to split after the close :
2:43PM Xbox Factor : Roughly a month ago, SoundView Technology Group registered its concerns about the pace of domestic Xbox sales, saying they didn't appear to be making up for slow European and Japanese launches. In addition, SoundView proffered that price cuts were increasingly probable to lift volumes in the second half of the year. With that in mind, we were struck today by the press release from Microsoft that trumpeted the sizeable increase in Xbox sales throughout Europe that occurred in the wake of a price reduction to EUR299 ($272) that took effect April 26. Reportedly, since the price reduction, weekly sales are running neck-and-neck with Sony's PlayStation 2. While that may be a new revelation for investors, Briefing.com would venture to guess that Sony has been well aware of the inroads Xbox has been making with European consumers prior to today. According to industry sources cited by Microsoft in its press release, Xbox represents 49% of the next generation console market in the UK, 46% in France, and 55% in Germany. If Microsoft has its way, it isn't a stretch to think that those numbers will continue to move north-- but the question is, will Microsoft continue to have its way? If Sony has anything to say about it-- and it definitely does as the industry leader-- probably not. Whether that means a price war is about to be waged remains to be seen, but it stands to reason that the trend in console pricing is headed lower. While that may be a bothersome reality for hardware manufacturers, it is the best of news for software makers as lower console prices will result in an increased installed base that, in turn, will result in increased sales of software. Electronic Arts (ERTS 60.15 +6.17), Activision (ATVI 33.85 +3.20), THQ, Inc. (THQI 34.64 +2.31), Take-Two (TTWO 25.47 +1.82), Midway Games (MWY 11.59 +0.83) and Acclaim Entertainment (AKLM 5.33 +0.43) are expected to be among the companies that benefit from the drop in console prices.-- Patrick J. O'Hare, Briefing.com
2:22PM Dell Computer (DELL) 25.34 +3.01: After a 5-day 15% stock decline on weak market conditions and negative press (criticizing parts of DELL's stock repurchase plan, as well as its joint venture with a division of TYC), shares are bouncing back today (+13%) on upbeat notes from Merrill Lynch and Robertson Stephens recommending investors accumulate DELL at attractive levels. Merrill has been "consistently bullish" on DELL for some time now and views the recent decline as an excellent buying opportunity; estimates the multiple could expand to the 40x range once IT demand and PC market turn positive. Robertson Stephens' recent checks indicate that DELL had a stronger-than-expected finish in Q1 due to its successes in developing recently acquired large corporate customers, solid execution in consumer, and traction gained in international market. Firm now expects Dell to beat its upwardly revised guidance when company reports on 5/16.
1:39PM Xilinx (XLNX) 37.93 +4.29: Shares ramping up almost 13% on strong sector day and positive takeaways from yesterday's analyst meeting; co. made no changes to June qtr guidance of up 6-8%. but did forecast for its Spartan II/E rev to approximate $16-18 mln. CSFB believes XLNX is well positioned to gain further mkt share in the PLD space in 2002 and is likely to see growth solely on the basis of its increasing content as a % of customer's BOM; adds that XLNX should continue to outperform its peers in the downturn. Prudential maintains their Buy rating on XLNX as it remains their favorite fabless pick and an excellent way to play the comm mkt in a generic fashion. Wedbush Morgan upgrades to BUY from HOLD with a $45 price target citing attractive valuation and improved co. outlook.
12:59AM Texas Instruments comments at Solly semi conference (TXN) 30.99 +3.48: During their Salomon Smith Barney semi conference presentation, co reiterated their guidance for Q2 rev growth of 10% (about $2 bln), EPS of $0.06, and FY02 capex of $800 mln; co also mentioned that they will utilize fabs more extensively in the future for advanced process technology, which should help margins (and may benefit fabs as well).
12:21AM Corning debt cut by Moody's (GLW) 6.74 +0.48: Moody's downgrades both the long-term and short-term debt ratings of Corning. The rating actions reflect the rating agency's growing concern that the recovery in the co's telecommunications operations will be delayed until well into 2003, as end users of its products have continued to dramatically scale back capital expenditures. GLW's ratings remain under review for possible downgrade.
12:12PM Broadcom (BRCM) 27.86 +3.14: Before open, AG Edwards upgraded to STRONG BUY from Buy rating with price target of $44 as BRCM shares came under significant pressure yesterday due primarily to key customer, Motorola, employing second-sourcing cable modem silicon from Texas Instruments. Firm believes sell-off in shares was overdone as BRCM has always had to face second-source threats given their own dominant position in the cable modem silicon market. With Cisco's enterprise business showing preliminary signs of a recovery, firm is going to take advantage of the recent pullback in the shares to raise its rating. Also, Pacific Growth Equities reiterated Buy... BRCM trading up with the tech sector, gaining 12% today.
12:10AM Microsoft reports surge in European Xbox sales (MSFT) 53.35 +3.88: Co reports a sizeable increase in sales of its Xbox video game system throughout Europe as customers have enthusiastically embraced the recent price reduction... "Since the European price reduction took effect April 26, weekly sales are running neck-and-neck with PlayStation 2." News ignites run in shares of graphics chip suppliers NVDA (+11.8%).
11:21AM Novellus Intraday (NVLS) 49.99 +4.33: -- Update -- -- Technical -- Currently testing resistance at 50.00 -- on a break higher, look for modest overhead at 50.25 followed by additional resistance at 50.80/51.00. To the downside, watch for initial support at 49.65.
10:34AM Nasdaq Composite Intraday : -- Technical -- Index is trading towards its best levels of the session on very strong relative volume. Currently working to clear resistance at 1644 -- on a break higher, look for additional resistance at 1655 followed by overhead at 1673. To the downside, watch for initial support at 1640 followed by an additional floor at 1634.
10:15AM Cisco Systems (CSCO) 15.47 +2.39: After close yesterday, company beat Q3 EPS consensus by $0.02 and posted largely in line revenues. Today, CSCO (+18%) is leading the much needed tech sector rally, and seeing a flurry of analyst comments. AG Edwards upgraded to STRONG BUY from Buy rating and price target of $23, saying company's Q3 results from a product revenue standpoint, were slightly less than firm had hoped, but from an operational performance standpoint, results vastly exceeded its expectations. CE Unterberg Towbin reiterated short-term Buy/long-term Buy rating and price target of $25, with continuing confidence in its ability to drive a gradual but steady rebound in revenue growth with strong operating leverage over the next year, due to the inherent strengths of its dominant competitive position and the relentless execution of its salesforce. Also, Banc of America reiterated Strong Buy rating and price target of $24. CSFB, UBS Warburg, Salomon Smth Brny, SG Cowen and Thomas Weisel reiterated Buy ratings.
10:14AM QLogic (QLGC) 44.40 +6.14: While Cisco Systems garnered most of the headlines last night, a separate report is driving names in the Storage sector higher this morning. That report was released by QLogic, which makes Fibre Channel HBAs (host bus adapters) and switches for networked storage devices. The company reported fourth quarter earnings of $0.22 per share, exceeding the consensus estimate by two cents. On the top line, revenues came in at $92.3 million, also ahead of consensus expectations for sales of $87.8 million. So going by the headline numbers, QLogic comfortably topped analyst estimates. The question is whether expectations were so depressed going into the report that the actual results mean little. Put another way, how did QLogic's quarter look from a quality of operations standpoint, stepping outside relative comparisons to the estimates. The short answer is the quarter looked reasonably good. Fibre Channel revenue rose 20% year-over-year and 9% sequentially. At the same time, SCSI revenue continued to rebound and was up an impressive 14% sequentially. It's also notable that the company's already solid balance sheet continued to get stronger. Fourth quarter DSO's dropped to 37 days versus 41 days in the prior quarter while inventory turns were up to 5.6x from 4.6x. From a liquidity standpoint, QLogic now carries $490 million in cash and investments which translates to just over $5 per share. Looking forward, the company expects first quarter revenues to rise about 3% to 8% sequentially and sees EPS in the $0.20 to $0.24 range. Management indicated its business was up sequentially at virtually all its Fibre Channel OEM's, with particular strength at Sun Microsystems (SUNW +7.3%). Keep in mind that QLogic's report carries positive implications for Brocade Communications (BRCD +14.9%) which reports on May 15th, after market-close. -- Mike Ashbaugh, Briefing.com
9:24AM EMS Exposure to Cisco : According to Bear Stearns Ripple Effect, JBL has approx. 23% exposure to Cisco, SLR 11%, and CLS 5-8%. Says Cisco also appears to be on the top ten customer list of SANM and PLXS. Firm believes Cisco's flat rev growth guidance is at least an indicator of stabilizing demand at Cisco.
finance.yahoo.com
Barely managed to escape unscathed on my BRCM short today. I'm sure AD would have made money but I'm happy to not have lost any.
RtS |
