From Briefing.com: Updated: 14-Nov-02 - General Commentary
Stocks rallied in response to news that Iraq had accepted the UN resolutions, but failed to build on the advance into the close. One reason for this is simple - acceptance does not equal compliance, and many traders remain skeptical that Iraq will live up to demands. Second, traders were reluctant to build long positions ahead of earnings from Applied Materials (AMAT) and Dell (DELL).
Of the two heavy weights, AMAT was first to unveil its quarterly numbers and the results were mixed. Though firm beat the street by one cent in posting a Q4 gain of $0.09, it guided Q103 estimates sharply lower. Company sees Q1 revenues 20% below Q4 numbers, or at about $1.16 bln. Also expects to incur a small loss in Q1, which includes charge for headcount reduction-- but still expects operational profitability. Street had been looking for sales of $1.39 bln and earnings of $0.07 cents. Most telling, company doesn't see very difficult environment improving anytime soon.
Soft report out of Applied Materials is apt to weigh on influential Philadelphia Semiconductor (SOX) index, and thus entire sector off the open on Thursday... Traders also likely to be a little gun shy about going long ahead of Dell's report.
News out of Dell expected to be decent, with a few firms on street hinting that they see Dell exceeding consensus estimates and possibly even guiding higher. Share gains, efficient model and slight pick up in demand seen as reasons for optimism. If Dell does suggest a turn is at hand in the depressed PC business, that could be the catalyst bulls need to take recovery rally to new heights.
However, if Dell disappoints as Applied Materials has, then the focus will be on the fact that earnings remain depressed and that the rebound is still in the distance. Given the sector's/market's recent gains, and the ongoing concerns over the economy (which could be stoked by Thursday mornings Retail Sales data - see Economic Calendar), the potential for a quick and sharp decline could easily be realized as bulls go back on strike.
Robert Walberg |
