From Briefing.com: A stronger than expected Consumer Price Index capped this holiday-shortened week paced by conflicting economic indicators and strong earnings reports. Investors' ambivalence to the conflicting data was reflected in trading thoughout the week. Stocks rose on Tuesday, boosted by favorable January Industrial Production data and a strong February NY Empire State Index; sagged on Wednesday after Housing Starts came in weaker than expected; opened modestly higher on Thursday but closed down for the session after a lower than expected Philadelphia Fed Index offset favorable initial jobless claims data; and slumped on Friday after the January CPI rose a higher than expected 0.5%, primarily due to a 4.7% jump in energy prices.
The Dow (DJI 10619.03 -45.70) slipped 0.43%. The S&P (SPX 1144.11 -2.95) eased 0.26%. The Nasdaq Composite (IXIC 2037.93 -8.03) dipped 0.39%.
Tech stocks mirrored the broad market. The Philadelphia Semiconductor Index (SOXX 509.80 -4.93) dropped 0.96%. Decliners outnumbered advancers 5.0:1 with decliners falling 1.6% and advancers rising 1.2%. The Briefing.com Tech Index (BTI) declined 1.0%. Decliners outnumbered advancers 2.5:1, with decliners losing 2.5% and advancers gaining 2.6%.
Among today's movers: I C O S Vision Systems (IVIS 34.50 +3.43) rose 11.0%, extending a run that began before the company posted Q4 results ahead of the open on Thursday and that has taken shares higher 40.8%; KVH Industries (KVHI 15.21 -1.94) dropped 11.3%, part of a two day slide that has taken shares down over 16% since the company's Q4 report before the open on Thursday; and Printronix (PTNX 16.00 -1.94) fell 10.8% after lowering Q4 guidance.
Looking ahead to next week: Novellus (NVLS 33.01 -1.00) and Synopsys (SNPS 35.57 +0.27) report after the close Monday; Ingram Micro (IM 16.57 +0.11) and Semtech (SMTC 24.33 -0.27) report after the close Tuesday; and Autodesk (ADSK 26.62 -0.16), Bearingpoint (BE 10.42 -0.28), Marvell Technologies (MRVL 42.29 -1.02), McData (MCDTA 7.65 -0.26) and ScanSoft (SSFT 5.64 -0.17) report after the close Thursday.
Please visit the Story Stocks and Daily Sector Wrap pages for the latest thinking on investment opportunities across market sectors, and The Big Picture, Page One, Looking Ahead and Economic Briefing pages for broad market perspective and outlook, and the Economic Calendar page for scheduled data releases. For active investors and traders, visit the In Play, Swing Trader, and The Technical Take pages for actionable ideas.
Have a great weekend.--Ping Yu, Briefing.com
5:02PM Weekly Wrap :
The week ended with numbers almost identical to the prior two weeks. The S&P 500 and the Dow were little changed, but the Nasdaq was decidedly lower. This was the fifth straight down week for the Nasdaq. The theme is thus also the same: market momentum is slowing, with rotation continuing out of high flying tech stocks into more conservative stocks, as well as cyclicals.Tuesday started the holiday-shortened week with the only up day.
The announcement that Cingular, a joint venture of SBC Communications (SBC) and BellSouth (BLS), had made an aggressive bid of $15 cash for AT&T Wireless (AWE) had the market feeling exuberant. A strong gain of 0.8% in January Industrial Production as well as record reading on the NY Empire State index of manufacturing, added to the good cheer. Virtually every sector was up on Tuesday.
Then came the rest of the week. The major indices were down Wednesday, Thursday, and Friday. The news was not all that bad. In fact, earnings reports were good. Deere (DE) had an excellent report, as did Applied Materials (AMAT) and Nordstrom (JWN). Broadcom (BRCM) guided revenue estimates significantly higher for the current quarter. Wal-Mart (WMT) and Hewlett-Packard (HPQ) had solid if not spectacular reports. DaimlerChrysler (DCX) made some disappointing comments about their profit outlook, but that didn't really surprise anyone.
The economic numbers were mixed. January Housing Starts dipped due in part due to the severe weather. New Claims for unemployment showed an encouraging drop. The Leading Indicators Index was up a solid 0.5%. The Philadelphia Fed Index for February was a very strong 31.4, even though it was below expectations. The most negative number was the surprising jump in January CPI of 0.5% reported Friday. A surge of 4.7% in energy prices was a major factor, but the core rate (excluding food and energy) was up a larger-than-expected 0.2%. Most analysts blew off inflation concerns, but the bond market wasn't so sure, and the 10-year note fell significantly on Friday, pushing the yield to 4.09%. That was up a bit from 4.04% at the start of the week.
For the week, energy, consumer staples, and materials were strong sectors. Gold, technology, telecom, and utilities were all weak. The weakness in the technology sector is somewhat troubling, and many analysts believe the charts suggest a correction may be imminent. Underlying valuation concerns in that sector have many suggesting a move into more conservative positions. Briefing.com has been advocating such a posture for several weeks now.
The calendar for the week ahead is light. Durable Goods New Orders on Thursday and a revision to fourth quarter GDP on Friday are the only major economic releases. Earnings reports slow down considerably, with retailers highlighting the calendar. Light news days may leave the market subject to chart considerations. A quick look at the charts shows that is a bit worrisome. The Nasdaq is slipping, and a breakdown is possible. The S&P and Dow are barely holding up. Briefing.com does not expect any major shift in these conditions change near term, and continues to advocate a cautious, patient approach.
Index Started Week Ended Week Change % Change YTD
DJIA 10627.85 10619.03 -8.82 -0.1 % 1.6 %
Nasdaq 2053.56 2037.93 -15.63 -0.8 % 1.7 %
S&P 500 1145.81 1144.11 -1.70 -0.1 % 2.9 %
Russell 2000 585.14 579.89 -5.25 -0.9 % 4.1 %
10:57AM Semitool Inc - - 50 Day Alert (SMTL) 12.45 - 1.05: -- Technical -- The stock has drifted almost 8% lower for most of the morning and is currently hovering above its 50-day simple moving average at 12.29.
9:33AM SEMI Book-to-Bill Color : Oppenheimer comments that strong order momentum could produce another trading rally in these stocks. However, with stocks selling at levels, which discount their estimated earnings potential of the upcoming cycle, firm believes that the group could be vulnerable to any deceleration of year-to-year growth.
9:29AM August Tech files 10b5-1 program (AUGT) 18.41: Wayne Hubin, an officer of AUGT, on February 18, 2004, adopted a trading plan to provide for an orderly disposition of a portion of his holdings of the Common Stock. Under the Plan, Mr. Hubin plans to sell shares or exercise stock options and sell the underlying shares at pre-determined price thresholds. The Plan permits sales of up to 35,867 shares through Dec. 31, 2004, beginning March 3rd.
9:23AM Semitool registers 4 mln shares for sale by CEO (SMTL) 13.50:
Operating performance shows management is effectively steering company through a challenging economic and pricing environment to improving profitability. The company is holding its position against competitors across business groups. HPQ maintained its lead as the largest information technology vendor in Europe, ahead of both International Business Machines (IBM 97.73 -0.07) and Dell (DELL 33.87 -0.06) and extended its leadership in the notebook arena.
Personal Systems Group unit shipments increased 23% Y/Y and revenue increased 20% Y/Y to $6.187B (32% of revenue). Extended lead in notebooks and achieved leadership in PCs.
Imaging and Printing Group unit shipments increased 12% Y/Y and revenue increased 6% Y/Y to $5.910B (30% of revenue).
Enterprise Systems Group unit shipments increased 23% Y/Y and revenue increased 5% Y/Y to $3.917B (20% of revenue).
HP Services revenue increased 6% Y/Y to $3.161B (16% of revenue).
HP Financial Services revenue declined 15% Y/Y to $0.441B (2% of revenue).
Americas revenue increased 3% Y/Y. EMEA revenue increased 17% Y/Y. Asia-Pacific revenue increased 9% Y/Y. Japan revenue increased 4% Y/Y.
Gross margin declined 113 bps Y/Y to 25.4%.
Operating margin improved 78 bps Y/Y to 6.9% on firm expense control. Operating expenses declined 1.1% Y/Y despite mild negative impact from a weaker dollar.
Guided for Q2 EPS of $0.34 on revenue of $19.2-$19.6B (+9.0% Y/Y) vs. consensus at $0.34 on $19.219B.
On an inverted EVA / DCF basis, shares are priced for sustained upper single digit annual revenue growth assuming steady Y/Y improvement to low teens operating margin. These expectations are in-line with industry comps, and are reasonable in view of the unfolding global recovery, emerging country and new product market opportunities, and firm expense control. HPQ is one of the more attractively priced names within tech but we would slowly accumulate shares until management takes a harder line on reducing operating expenses or net revenue growth accelerates into the low teens.--Ping Yu, Briefing.com
9:22AM Micron (MU) 16.14: CSFB downgraded semiconductor maker Micron (MU 16.14) from "outperform" to "neutral" with an $18 price target. Several fundamental reasons were given, such as overly optimistic expectations for pricing in the quarters ahead, as well as a concern about valuation. However, CSFB also suggested the best time to take profits was when MU was receiving a lot of upgrades from analysts. With that in mind, we decided to review the analyst view on MU.
According to Zacks, Micron has 5 Strong Buy (or equivalent) ratings, 4 Buys, 8 Holds, 0 Sells, and 2 Strong Sells. That is not overly impressive. For comparison, Intel has 16 Strong Buys, 8 Buys, 6 Holds, and no sell ratings.
The trend indeed has been to upgrade MU, however. This year, the only three ratings changes have been to upgrade the stock. On January 26, Bernstein upgraded the stock to "Market Perform" (hold). On January 27, UBS and Smith Barney Citigroup upgraded the stock to "buy". Still, that isn't exactly a stampede.
The six ratings changes prior to that, all in late 2003, were actually downgrades. So, in fact, the trend has been to upgrade the stock lately, although there have only been a couple of noteworthy moves. As the chart at the bottom of the page shows, MU has benefited from the overall rally, but can't really be described as having been a Wall Street favorite.
What It Means:
A downgrade from a major firm never helps, but MU probably won't take a big hit here. The rating change was only to "neutral", and the price target is still above the current price.
It does not appear to us as if the argument that it is time to downgrade the stock because everyone else is upgrading has a great deal of validity. It is not as if MU everyone has been jumping on the stock.
There are certainly valid fundamental reasons to question whether MU is currently highly valued, perhaps overvalued. Revenue is up sharply, but the company still barely made a profit last quarter, and has lost money for years. Betting on higher prices and demand in this industry is risky. In our view, CSFB could have easily made the argument for a "neutral" rating based solely on fundamentals.
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