12:12 Floor Talk: Semiconductor stocks
As we've noted in numerous technical comments in the past 2 days, Semiconductor stocks have shown notable outperformance, although it looks as though some profit-taking has now started. What's interesting is that there has been no identifiable catalyst that sparked the group yesterday morning, at least in terms of news or broker research. The most likely explanation that we've been hearing for the sudden momentum in the group starts with the rally in CSCO (see yesterday's comment). Once CSCO started to rally to new 52-week highs, money managers -- afraid of missing the move -- started buying the CSCO food chain to participate in the momentum, paricularly BRCM, MRVL, PMCS, NETL, CY, IDTI, AMCC and VTSS. Thus, as large-cap semis rallied, this broadened out to the whole group and technical factors spurred further buying... It's also worth noting that semi equipment co NVLS has their mid-qtr update tonight, although we're hearing that no one is expecting blow-out guidance. However, the semi cap equipment space has been on a tear as a capacity buildout continues into 2006. Note that NVLS guided Q1 bookings to be up 10-20% on its last call and noted the industry to be strong, primarily driven by flash. The co's mid-qtr guidance should provide some more color on bookings momentum... So to sum up, CSCO seemed to have sparked the rally in semis, but then technical factors took over as the stocks started to break out. |
