From Briefing.com: On Tuesday, there was a 3-yr note auction. It didn't go well, so the bond market sold off, interest rates rose, and stocks retreated in noticeable fashion. On Wednesday, there was a 5-yr note auction. It did go well, so the bond market rallied and interest rates fell. The logical conclusion, then, is that stocks must have advanced on Wednesday. That is partly true as the blue chip averages posted modest gains. The Nasdaq, however, was undercut by a weak tech sector and dropped 20.82 points or 1.24%.
To be fair, the Nasdaq, after enduring an early 25-point drop, did rebound and was posting a slight gain with a little more than an hour left in the session. Thus, it can be argued that it did garner some support from the drop in rates, but it should also be noted that it was on the rebound even before the results of the auction were announced. Anyone who has followed the market since March wouldn't be surprised by the resilience as buying-on-dips has been a profitable strategy. What was unusual about Wednesday's trade - and Tuesday's trade for that matter - is that the tech sector, and the Nasdaq, ended the session with sellers dictating the action.
Beyond the trading action itself, one can also point to the loss of leadership, the weakening market internals, and an inability to capitalize on good news as red flags that bullish momentum has tired. From a technical vantage point, Wednesday wasn't necessarily a confidence builder either as the Nasdaq tried, but ultimately failed with the late-day retreat to maintain a posture above its 50-day simple moving average (currently at 1670.55).
Cisco (CSCO 17.65 -1.21), of course, was an overhang throughout the session as its report encouraged profit taking that was predicated on valuation concerns.
Wednesday's action played into Briefing.com's argument that the path of least resistance for the time being lies to the downside and we would contend a re-test of the bottom of the June trading range (1597-1600) is a distinct possibility. Even though the market has traded poorly of late, and we would refrain from committing new money, it is still too early in our estimation to view the action as anything more than normal corrective activity following a huge rally off the March lows.-- Patrick J. O'Hare, Briefing.com
5:40PM Wednesday After Hours Price levels are as of 4 pm EST: It was a mixed day on Wall Street, as the Dow Jones Industrial Average posted an increase and the NASDAQ posted a loss. It was a volatile session with mostly driven by the effects of the Cisco Systems (CSCO) earnings release last night.. The Dow closed higher by more than 25 points and stands at 9061, the S&P 500 gained a point and closed at 967. S&P 500 futures were at 965, one point below fair value. NASDAQ 100 futures were down one point from fair value at 1215.
Avnet (AVT 13.65 -0.10) Reported Q4 (Jun) earnings of $0.10 per share, in line with the Reuters Research consensus of $0.10. Revenues for the industrial distributor of electronic components, enterprise network and computer equipment and embedded subsystems rose 2.0% yr/yr to $2.19 bln but was below the $2.27 bln consensus. Company sees Q1 EPS of $0.08-0.11 vs consensus of $0.12.
Magna Intl (00C 74.05 -0.79) , the diversified automotive supplier released Q2 (Jun) earnings of $1.76 per share, $0.06 better than the Reuters Research consensus of $1.70. Revenues rose 17.6% yr/yr to $3.85 bln and were better than the $3.58 bln consensus. Going forward, the Company sees Q3 EPS of $1.05-1.25 vs consensus of $1.22; for Y03 sees EPS of $6.20-6.25 vs consensus of $6.13.
Advance Auto (AAP 66.50 -1.60) announced Q2 (Jun) non-GAAP, comparable earnings of $1.21 per share, excluding non-recurring items of ($0.05), $0.16 better than the Reuters Research consensus of $1.05. Revenues for the specialty retailer of automotive parts, accessories and maintenance items to do-it-yourself customers rose 5.9% yr/yr to $839.2 mln above the $835.6 mln consensus. AAP also guided Q3 EPS of $1.18-1.22, vs R.R. consensus of $1.21, and Y03 EPS of $4.01-4.11 vs estimate of $3.94.
Service Corp (SRV 4.19 +0.06) declared that it is not dead yet, reporting Q2 (Jun) earnings of $0.08 per share, $0.01 better than the Reuters Research consensus of $0.07. Revenues for the funeral and cemetery company rose 0.5% yr/yr to $586.2 mln and beat the $528.5 mln consensus.
Hot Topic (HOTT 27.67 +0.18) the specialty retailer operating the Hot Topic and Torrid store concepts sees Q2 EPS of $0.17 vs R.R. consensus of $0.16. The Company also reports July comparable store sales up 8.7% vs consensus increase of 3.3%.
Tomorrow investors will have a lot of information to review as same store sales numbers are released. Early indications are positive, so don't be too surprised if we see strong reports.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages..--Brian Bolan, Briefing.com
Close Dow +25.42 at 9061.74, S&P +1.62 at 967.08, Nasdaq -20.82 at 1652.68: Today was a good day for traders, as it produced plenty of volatility, but not a great day for investors, as the market once again did not make much headway one way or another... The Nasdaq underperformed its blue-chip counterparts on a relative basis throughout the session due to the lagging disk drive, networking, software, computer, communications equipment, and biotech sectors... The profit-taking move was precipitated by a report from Cisco (CSCO 17.63 -1.23) that didn't measure up to investors' expectations and the company's hefty valuation...
Based on the disappointment derived from CSCO's report, investors did not find reasons to bid up other momentum names... Blue-chip laggards of note included the transportation and healthcare sectors... The latter has been a prominent laggard since July 15... On the plus-side were the financial, drug, oil services, retail, and housing sectors... The latter was boosted by upbeat comments out of Toll Brothers (TOL 28.23 +1.76) testifying that the sharp rise in interest rates has not decreased demand, but has accelerated it... Nevertheless, investors' apprehension regarding the rising interest rates remained...
The market got a breather intra-day following a strong 5-year note auction (bid to cover 2.48), which forced the interest rates lower and allowed the market to advance to new session highs, with the Nasdaq reaching into positive territory... The advance ultimately proved unfruitful, however, as the indices gave back most of their gains after the Nasdaq proved unable to hold above its 50-day moving average of 1670... This late-day selling, despite the improvement in the bond market, suggested that the bullish momentum has tired... Elsewhere, the 10-year note closed the day up 29/32, with its yield at 4.27%...NYSE Adv/Dec 1661/1609, Nasdaq Adv/Dec 1191/1947
3:30PM : The indices are extending their slide precipitated by the Nasdaq's failure to maintain its positioning above the 50-day moving average at 1670... The retreat is supported by the majority of the sectors, including the influential semiconductor, financial, biotech, drug, and retail groups... One lagging group worth highlighting is the healthcare sector, which has been weak since July 31 and has given back roughly 14% since last Thursday...
JP Morgan commented on the sell-off this morning saying they expect favorable pricing trends and premium yields in 2004, and with the stocks trading at almost a 35% discount to the S&P 500, believe valuations reflect the potential for a cyclical slowdown, which likely would not occur until 2005... The firm recommends Anthem (ATH 67.97 -4.29), UnitedHealth (UNH 48.75 -2.10), and WellPoint Health (WLP 76.16 -3.04), as these stocks offer the benefits of enrollment growth, SG&A leverage, and strong premium pricing... The market is clearly not giving JP Morgan's call much notice...NYSE Adv/Dec 1795/1433, Nasdaq Adv/Dec 1347/1760
3:44PM Nasdaq Composite pulls back in late trade (COMPX) 1658: -- Update -- -- Technical -- Index held at its breakaway gap from July 02 (1648/1641) in early action and bounced but it has been unable to work through resistance at 1675 (Mid-July low) or hold above its 50 day simple mov avg (1670). Short term need sustained action above these resistances and 1686 (June range top) to help improve the recent weaker bias. Next short term supports on a failure are at 1633/1630 and the 1620 area.
1:52PM Applied Materials EVP, board member to resign (AMAT) 18.72 -0.15: Announces that Dr. Sasson (Sass) Somekh, EVP and board member, will resign from his day-to-day management responsibilities with the company, effective the end of August.
12:33PM Cisco Systems attempting to bounce off support (CSCO) 17.76 -1.10: -- Update -- -- Technical -- Stock gapped down in early traded and tested support near its Mid-July low (17.55). Has recently extended the recovery off this floor but is facing resistance at its 50 day averages (exp 17.84, simple 17.94).
11:44AM WR Hambrecht reits Buy on SanDisk (SNDK) 51.95 -4.95: -- Update -- WR Hambrecht reiterates their Buy/Analyst Select List rating on SNDK, saying LEXR is more at risk than SNDK from Samsung's Memory Stick announcement (see 7:35 comment); firm cites the following factors: 1) SNDK is well-diversified into other card formats, including Secure Digital, 2) co is still set to gain share through mini-SD, USB flash drives, xD-Picture, and Memory Stick, and 3) co has dedicated supply through its FlashVision joint venture with Toshiba.
10:52AM HMO stocks entering "Groundhog Day" period - JP Morgan : Despite excellent Q2 earnings growth, JP Morgan sees several factors behind the recent sell-off in HMO stocks: profit-taking would be one reason, but firm also suspects that we are entering the "Groundhog Day" period of each year's trading cycle, when the Street partakes in the annual tradition of asking whether the "cycle" will now turn for the worse and whether investors should thus sell their managed care positions. However, firm expects favorable pricing trends and premium yields in 2004, and with the stocks trading at almost a 35% discount to the S&P 500, firm believes valuations already reflect the potential for a cyclical slowdown, which likely would not occur until 2005. Firm recommends ATH, UNH, and WLP, as these stocks offer the benefits of enrollment growth, SG&A leverage, and strong premium pricing.
9:36AM CTI Molecular: Mixed news creates oversold situation -- Pacific Growth (CTMI) 12.86 -0.23: Although Pacific Growth doesn't think there are many short term catalysts, firm believes the stock looks attractive at current levels and that management has created very "doable" expectations. Thinks stock could trade in a tight range in the low teens until mgmt can demonstrate that they are in fact fixing the margin issues as promised on the recent conference call. That being said, firm still believes there is an attractive opportunity over the longer term and believes the stock can trade up significantly over the next several quarters.
9:21AM Advanced Micro to acquire certain National Semi assets (AMD) 7.27: Co enters into definitive agreements to acquire substantially all of the assets of the Information Appliance (IA) business unit of National Semi (NSM) to enhance AMD's Personal Connectivity Solutions group's portfolio. Financial terms of the sale were not disclosed.
Genesis Microchip (GNSS) : Terminated merger agreement with Pixelworks (PXLW)... Under terms of the agreement, each of the parties has agreed to a mutual release of claims and Pixelworks has agreed to immediately pay Genesis Microchip $5.5 million as a reimbursement for its expenses.... Following news, CIBC said it believed that GNSS shares could trade down Wednesday (to as low as $7-$8) following the disappointing -- and slightly surprising news -- of termination of the PXLW merger. Although GNSS indicated last week the deal was in jeopardy, firm expected a renegotiation of terms rather than a full termination. In firm's view, deal was strategically important to both parties, as both badly need diversification.
biz.yahoo.com |
