From Briefing.com: Friday's session completed a tough week for the tech sector, which took the helm in leading a broad-based market sell-off. For the most part, the action on Friday was reminiscent of what took place throughout the week, which is to say the tech stocks struggled to sustain upside momentum. In turn, they ended the day on a weak note that left the Nasdaq at its lowest levels for the session.
The semiconductor sector, which has been among the best performers in the tech sector rally, was among the worst performers in the past week as the SOX Index dropped 7.8%. It is holding just above its 50-day simple moving average (i.e. 421.33), and suffice it to say, further selling pressure in this key leadership group will make it difficult for the Nasdaq to get back on track.
As it so happens, the slide into the close on Friday took the Nasdaq below 1800 (1792.07) for the first time since August 29. For the week, the Nasdaq lost 6.0% and it is again flirting with support at its 50-day simple moving average at 1775.21. The 50-day simple moving average was violated in early-August, but after a brief respite below that area, buyers stepped back in with conviction and drove the Nasdaq to its Sept. 19 peak of 1913.74. Accordingly, the course of trading in the coming week will be dictated by the Nasdaq's behavior around that key support level.-- Patrick J. O'Hare, Briefing.com
6:19PM Weekly Wrap :
Excuses, excuses, excuses. That was the mantra on Wall Street this week as there were plenty of explanations for why the market didn't do too well. The weakness in the dollar and an announcement from OPEC that it was cutting oil production by 900K barrels per day caused the biggest stir, but truth be told, each was given more credit than was due for the downdraft.
On Monday, the market was alleged to have been caught up in the notion that calls for freer-floating exchange rates at the G-7 meeting over the weekend would crimp foreign purchases of Treasury securities and force Treasury yields higher, undercutting the appeal of equities. While that may be true in its own right, it's a stretch to think participants were so caught up in that consideration that it changed their entire outlook for equities, which has been resolutely positive since March. It didn't, so don't believe the hype. What it did was give participants an excuse to take profits from an over-extended market.
The same can be said about the OPEC production cut. Now, we won't dismiss the notion that rising oil prices are bad for the economy and that OPEC's decision did weigh on stock prices, but we will dismiss the notion that OPEC's decision truly rattled the market on Wednesday. If anything, it precipitated the profit taking efforts that were then exacerbated in the wake of the indices falling through technical support levels and amid reports that talked of asset allocation out of equities and into bonds.
Judging by the performance of the Treasury market, the latter reports were credible as the yield on the 10-yr note hit 4.00% on Friday - roughly 16 basis points lower than where it started the week and a far cry from the 4.60% yield it was sporting when the month began
Setting that discussion aside, let's not forget that the equity market was ripe for a period of consolidation, as the rally in preceding weeks left it prone to be stirred up more by negative news items than positive items. Thus, it didn't get any real distance out of stronger than expected earnings news from the likes of Lehman Bros. (LEH) and Morgan Stanley (MWD) nor did it rally around Cisco's (CSCO) announcement that its Board had approved an additional $7 bln for the company's share repurchase program.
Simply put, this week was a week of profit taking, and given the sizable run-up in the indices, there were plenty of profit taking opportunities to be had. The broad-based selling interest was reflected in the fact that there was only one S&P industry group - Specialized Finance - that ended the week with a gain of better than 1.0%. Then again, Moody's (MCO) is the only component in the group, so take from that what you will. Altogether only five industry groups managed a gain on the week. The semiconductor, asset management, biotech, airline, and brokerage groups were among the more notable laggards, but there really wasn't much discrimination in the selling efforts as they hit on just about every front from an industry and market-cap perspective.
Eastman Kodak (EK) will win accolades for stock of the week, but in the worst kind of way. The Dow component tumbled 23.0%, with the bulk of its losses coming at the end of the week after the company revealed a new growth strategy to broaden its portfolio of digital products and services. In accordance with the plan, Eastman Kodak announced it would be cutting its annual dividend to $0.50 from $1.80. In the wake of that news, plenty of investors found reason to cut the stock from their portfolios.
Next week, economic data will provide most of the headline material and serve as the catalyst for trading decisions. The September employment report highlights the action, but it won't be released until Friday. In the interim, several other important reports, like the ISM Index, will capture the market's attention. For added perspective on each, be sure to visit Briefing.com's Economic Calendar.-- Patrick J. O'Hare, Briefing.com
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 9644.82 9313.08 -331.74 -3.4 % 11.6 %
Nasdaq 1905.70 1792.07 -113.63 -6.0 % 34.2 %
S&P 500 1036.30 996.85 -39.45 -3.8 % 13.4 %
Russell 2000 520.20 485.28 -34.92 -6.7 % 26.7 %
3:54PM CTLM -- Unterberg comments on rumor of design win with UTSI : Unterberg indicates that a rumor has resurfaced that CTLM (-3.8%) won the UTSI design for 50 mbps DSLAM board against GSPN (-3.9%). Firm's checks indicate that final decision has not been made yet by UTSI. Consequently, firm reiterates its Buy rating on GSPN.
3:27PM Motorola issues guidance (MOT) 12.23 -0.29: -- Update -- Company also guides for Q4 in release, says sales and earnings to exceed last years Q4, when co reported sales of $7.546 bln, consensus is $7.417, however revenue consensus includes outlier estimates at $6.9 and $6.77 bln that are pushing down consensus estimate. (Outlier implies an estimate within the consensus that may not be comparable to guidance and should be excluded).
3:18PM Motorola says well positioned for holiday cell phone sales (MOT) 12.17 -0.36: -- Update -- "While we are encountering some variation in our introduction of certain new models, we believe PCS is making strong progress overall in its ability to meet market needs by working closely with customers all over the world and successfully testing and launching new products in a timely fashion throughout the year." Consistent with prior guidance, co expects to begin shipping at least 16 additional new phones in Q4, 12 featuring color screens and 8 of these 12 also featuring integrated cameras. Co says Q4 sales and operating earnings in 2003 also are expected to show improvement over the prior yr's Q4.
11:55AM Infineon cut to Sell at Merrill Lynch Europe (IFX) 12.99 -0.49: -- Update -- Merrill Lynch out of Europe downgrades to Sell from Neutral based on their expectation for weakening DRAM price at the end of the year, which firm believes will increasingly overshadow the last month or two of seasonal strength in the mkt; also, MU's Q4 results included the news that Intel is investing $450 mln in the co, which will help MU catch up with IFX and Samsung in 300mm, and firm says IFX's long-term valuation looks very stretched even when building in a substantial improvement in profitability into their model.
9:09AM Silicon Labs: Needham comments on Cygnal acquisition (SLAB) 48.33: SLAB announced last night that it is acquiring privately-held Cygnal for 1.2 mln shares of stock (about $58 mln) with the potential for up to another 1.3 mln shares to be paid out based on Cygnal meeting certain revenue milestones. The deal is expected to be slightly dilutive in 2004 and accretive in 2005. Given that the deal will be dilutive to '04 numbers, firm suspects the stock will pull back today. However, in Needham's view the acquisition makes strategic sense and should accelerate SLAB's expected transition from a communication IC firm dependent on a few application specific chips to a more diversified supplier of a broad range of analog/mixed-signal ICs.
9:00AM Microsoft started with an Overweight at Prudential (MSFT) 28.24: Prudential initiates coverage with an Overweight rating and $35 target; firm says the ongoing industry-wide PC refresh cycle combined with the co's new product cycles have the potential to create a perfect storm of favorable winds, and expects MSFT to experience a declining EPS drag from emerging unprofitable divisions from FY03 to FY06.
biz.yahoo.com |
