From Briefing.com: On Monday, Microsoft (MSFT 25.78 -0.55), Dell (DELL 31.42 -0.55), Intel (INTC 20.36 -0.31), Cisco (CSCO 17.24 -0.69), Qualcomm (QCOM 36.00 -0.45), Applied Materials (AMAT 15.59 -0.19), and IBM (IBM 83.18 -1.74) all ended the day lower. Thus, it should come as little surprise to hear that the tech sector didn't start the week on the best of notes. Contributing to its downfall were a host of reasons that ranged from the simple act of profit taking to concerns about the Fed's likely course of action at the 2-day FOMC meeting that begins Tuesday.
For the record, Briefing.com expects a rate cut of 25 basis points on Wednesday and a risk assessment that is again focussed on disinflationary forces.
As for Monday's action, it was clear that buyers had little interest in the proceedings as breadth figures favored decliners by roughly a 3-to-1 margin, while down volume trounced up volume by a comfortable 8-to-1 margin, at both the NYSE and the Nasdaq. The disparity in those readings, particularly at the Nasdaq, were a bit surprising given the noteworthy announcement out of the biotech sector that IDEC Pharmaceuticals (IDPH 36.96 -2.01) and Biogen (BGEN 41.55 -2.25) are planning a merger of equals.
The lackluster response to the aforementioned merger agreement suggests the market wasn't all that enamored with the proposed union, but at the same time, the lackluster response also fits with Briefing.com's contention that bullish momentum is tiring. Just a few weeks ago, this news, in all likelihood, would have triggered a rally in the biotech sector, if not the broader market. On Monday, it did neither. In fact, the biotech index dropped 3.9% in its wake.
The absence of leadership from the biotech stocks weighed heavily on the tech sector, but in truth, there wasn't any leadership to be found as weakness was broad-based from both a market-cap and industry standpoint. Mindful of that, the weakening market internals, and the potential still for earnings warnings from tech companies with back-end loaded quarters, and we continue to believe the sidelines remain the place to be at this juncture. -- Patrick J. O'Hare, Briefing.com
5:25PM Monday After Hours price changes vs 4pm ET levels: Following the regular session's broad-based sell-off, the tone of the after hours session has improved as traders have accumulated shares on weakness. Presently, the S&P futures, at 982, are 2 points above fair value, while the Nasdaq 100 futures, at 1205, are also 2 points above fair value.
Contributing to the positive tone of trading is BellSouth's (BLS 27.84 +0.82) announcement that it is increasing its dividend by 9.5% to $0.23 per common share, bringing its dividend yield to approximately 3.4%. Over the last five quarters, BLS has increased its quarterly dividend 21% from $0.19 to $0.23 per common share.
In the technology space, Sirius Satellite (SIRI 1.77 +0.01) named Jay Clark as Executive Vice President, in charge of programming Programming. Clark, who joined SIRI in April 2002 as Vice President of Entertainment/Information Programming, will now be responsible for all of the company's programming initiatives and content over its 60 commercial-free music streams and 40+ news, sports and entertainment streams.
The quick services restaurant space, however, has weakened following Sonic Corp's (00C0 23.29 -1.04) Q3 (May) earnings miss. EPS rose 14% to $0.40 and missed the Reuters Research consensus estimate by a penny. Revenues increased 10% to $122.6 mln, fueled by a system-wide same-store sales rise of 0.3%.
Finally, energy company Halliburton (HAL 22.00 -0.57) said it plans to sell $1 bln of 20-year senior bonds convertible into company stock. The sale has the potential to grow by $200 mln, and HAL did not say how it plans to use proceeds from its private bond sale. On Friday, the company announced that it sees Q2 (June) diluted EPS from continuing operations of at least $0.02, below consensus forecasts at the time, due to continued due diligence on current asbestos claims.
Tomorrow, the market will take note of a quarterly earnings report from Federal Express (FDX 62.02 +0.03) and the 10 ET release of June Consumer Confidence. The consensus estimate is set at 82.0, versus Briefing.com's estimate of 85.0.
For added detail on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Economic Calendar page. -- Heather Smith, Briefing.com
Close Dow -127.80 at 9072.95, S&P -14.04 at 981.65, Nasdaq -33.90 at 1610.82: Stocks relinquished a sizable portion of their recent gains as a number of distressing developments for corporate America suggested some profit-taking activity was in order... A New York Times article indicated that money managers and independent accounting experts believe that Fannie Mae (FNM 68 -1.85) may have posted a big loss last year that was obscured by the complexity of its accounting...
Furthermore, Tenet Healthcare (THC 12.12 -4.11), Avery Dennison (AVY 49.63 -4.66), and Rohm & Haas (ROH 31.98 -0.82) reduced their quarterly earnings outlooks, and kept concerns about the June quarter warnings season on the front burner... Other factors that contributed to malaise of the market included the 1.7-2.2% fall in the major European bourses, and the debate over the outcome of the FOMC's June meeting... Pundits are virtually split over whether a 25 basis point cut or 50 basis points cut will occur, with either decision signaling that the Fed remains worried about the economy's growth rate, and the risk of disinflation...
Given such overhangs, traders chose to sell into the previous months' strength rather than bid stocks higher, and the indices finished near their lows of the day... Underscoring the bearish tone of trading were the unfavorable breadth figures, the heavy volume totals, and the strong industry participation on the pullback... Growth-oriented groups that have paced the market's recent rally were the main-targets of sellers, with financial, technology and biotech pacing the way lower... The latter was undercut by criticism of Biogen (BGEN 41.58 -2.22) and IDEC Pharmaceuticals' (IDPH 36.96 -2.01) announced merger of equals...Nasdaq 100 -1.9%, Russell 2000 -2.3%, SOX -2.1%, S&P Midcap 400 -1.7%, NYSE Adv/Dec 794/2472, Nasdaq Adv/Dec 797/2436
9:58AM Centillium sets new benchmark with ADSL chipset (CTLM) 10.12 -0.31: The Company announced the Palladia 220, which is an ADSL 2/ADSL2plus-compatible chipset for customer premises equipment that can deliver up to 50 Mbps and extend the reach 22,000 feet. In addition, it is scalable to provide a full suite of connectivity options such as high speed Wi-Fi.
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