Updated: 09-May-03 - General Commentary - After staging an impressive advance off its March lows, the sector/market is finally succumbing to a period of backing and filling. Concern over the economy, in the light of weak claims and same-store sales data, combined with the overextended technical tone to provide traders all the incentive they needed to take recently won profits off the table. Briefing.com has been calling for just such a pullback over the past few sessions.
However, it is important that investors be able to distinguish between an orderly, corrective retreat and an aggressive sell-off that presages more to come. One look at the market internals shows that Thursday's pullback fell in the first camp. Volume was relatively light, declines were kept in check, key supports weren't violated and breadth stats were only slightly bearish.
As long as the retreat remains orderly, and we see no reason why that won't be the case, investors should be looking at the dip as a fresh buying opportunity. Stocks exhibiting relative strength on the way up and during the retreat, will be the first to rebound. As institutional investors start buying into the rally, and into the sector's ability to continue outperforming, large caps will begin to play catch up with many of the second and third tier mid- to small-cap names.
Initial support levels for the leading industry groups are: SOX - 325, NWX - 164-160, GSO - 111.50 and DOT - 100.
Robert Walberg, Briefing.com
NVIDIA, a graphics chip company, reported Q1 (Apr) earnings of $0.12 per share, $0.02 better than the Reuters Research consensus estimate, on a 30.5% yr/yr decline in revenues to $405.0 mln. According to Reuters, the company said on its conference call that it expects revenues to rise 12-18% in Q2 and that it will launch its new graphics chip, referred to as NV35, next week.
4:23PM NVIDIA beats by 2 cents, revs light (NVDA) 16.06 +0.01: Reports Q1 (Apr) earnings of $0.12 per share, $0.02 better than the Reuters Research consensus of $0.10; revenues fell 30.5% year/year to $405.0 mln vs the $410.8 mln consensus.
4:21PM NVIDIA headline $0.12, consensus $0.10 (NVDA) 16.06 +0.01: -- Update --
Close Dow -69.41 at 8491.22, S&P -9.35 at 920.27, Nasdaq -17.07 at 1489.69: The bears applied the brakes to the major indices' month-long rally as lackluster April same store sales and disappointing jobless claims for the week of May 3 suggested the rate of economic activity remains sluggish... Comparable store sales in April failed to show a substantial pick-up - which was expected due to the late timing of Easter and the impending end to the war in Iraq - and spoke to the detrimental effects of the weakening labor market...
A continuation of above 400K weekly initial claims further confirmed the soft employment picture as they (at 425K) brought the 4-week moving average to its highest level in over a year (at 442K)... Additionally, concerns about the recovery in corporate America were renewed by comments out of Fed Chairman Greenspan, and a Goldman Sachs IT Spending survey, also curbed widespread buying... Specifically, at a Chicago bank conference, Dr. Greenspan said that an 'awful lot' of investment is being placed on hold, and Goldman's mid-April survey indicated that 2003 spending intentions should decline...
As a result, traders used such discouraging developments as an excuse to take some money off the table following the stock market's tremendous run since March... Technology bore the brunt of the selling and was responsible for the Nasdaq's relative underperformance of the blue chip averages... The Dow and S&P 500, however, posted significant losses of their own due to the stubborn financial sector... Brokerages, in particular, were the source of the financial group's strife following their unsuccessful re-test of their Jan/Feb highs... On the flip side, the gold stocks found a bid today in response to the price of gold's $6.50 spike to $348.70/oz ...
The commodity's advance was aided by the dollar's dive to a new four-year low against the euro... The European Central Bank's decision to leave rates unchanged, at 2.5%, contributed to the flight out of the greenback, and into the euro...SOX -2.0%, NYSE Adv/Dec 1457/1812, Nasdaq Adv/Dec 1213/1894
3:30PM Credence up 6.5% on rumor of positive preannouncement (CMOS) 8.04 +0.49: -- Update --
11:52AM Silicon Strategies article highlights DRAM markets; MU and IFX gain market share : An article in silicon strategies highlights a research bulletin provided by iSuppli discussing the current market share numbers for the DRAM markets. Currently, Samsnug continues its lead as #1 for Q1:03 but witnessed revenue and pricing declines while competitor Infineon (IFX) experienced an increase in sales according to the firm's preliminary quarterly DRAM ranking. The article describes competition as "harsh" with leading provider Samsung retaining the highest ASPs from its competitors and the only firm to produce positive operating margin. However, the #2 DRAM co Micron (MU) gained market share slightly in light of its aggressive Q1 aggressive inventory housecleaning. In addition, IFX made the most aggressive move in market share with double data rate or DDR memory representing 79% of its units shipments. Overall, MU and IFX were the only two firms to increase market share with q-to-q increases of 1.8% and 4.2%, respectively.
11:18AM NVIDIA rises ahead of this evening's earnings report (NVDA) 16.38 +0.33: In a preview of the qtr yesterday, Thomas Weisel said it sees EPS of $0.12 on revs of $415 mln. Reuters Research consensus for the qtr is $0.10/$410.8 mln: First Call consensus is $0.11/$410 mln). In firm's view, if there is risk to the qtr it is on the top-line, which could have been dampened by production delay/yield issues at foundry Taiwan Semi. However, looking out to next qtr, firm said it was confident that consensus estimates for the qtr are too low. Firm is modeling Q2 earnings of $0.16/share vs consensus of $0.12.
10:02AM Westell Tech -- Morning Breakout (WSTL) 5.17 -0.08: Talk of aggressive DSL roll-out by Regional Bells has drawn interest to this name in recent trade. WSTL is a provider of broadband and DSL technology solutions that allow the transport of high-speed data over the local loop. Co's product offerings include ADSL modems for Ethernet connectivity with plug and play simplicity. Stock broke out yesterday to a new 52-wk high on more than double avg volume. Issue has rallied 90% since we highlighted it as a New High Profile in Feb. Recent run leaves WSTL trading at 32x projected 2003 earnings; EPS seen growing 69% in 2004 to $0.27 (p/e 19).
9:49AM Qualcomm cut to Sector Perform at Moors & Cabot (QCOM) 30.97 -0.97: The downgrade from Sector Outperform reflects growing risks related to: 1) the entrance of TI in CDMA2000 1x chipset market starting in 2H:03, 2) the anticipated correction in CDMA handset sell-through and inventory in Greater China region, 3) revenues and margins pressures posed by Samsung and Nokia, and 4) still-high consensus estimates for FY04. Firm believes QCOM shares have another 20% downside in the near-term.
9:12AM EMCORE correction (EMKR) 2.21: Earlier we reported incorrect information for EMKR's Q2 earnings release, the correct information is as follows. Reports Q2 (Mar) loss of $0.26 per share, ex items, $0.01 better than the Reuters Research consensus of ($0.27); revenues rose 19.9% year/year to $27.7 mln vs the $27.0 mln consensus.
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