From Briefing.com: 4:30 pm : A negative response to the Fed's "Operation Twist," so labeled by market participants, stirred sellers to action today. Their conviction made it impossible for tech stocks to provide leadership after trading with strength for so much of the session.
The FOMC announced this afternoon that in order to support a stronger economic recovery it intends to purchase $400 billion of Treasuries with maturities of six years to 30 years, while selling an equal amount of Treasuries with remaining maturities of three years or less, by the end of June 2012. Many market pundits had anticipated such a plan, and had already designated it "Operation Twist" to reflect the Fed's focus on selling shorter term Treasuries and buying longer term issues.
To little surprise, the FOMC also reiterated that it expects economic conditions to warrant exceptionally low levels of the federal funds rate at least through mid-2013.
A knee-jerk response to the Policy Statement made for some whipsaw action among stocks, but the major equity averages eventually broke down and descended deep into negative territory. The Dow, S&P 500, and Nasdaq Composite all closed at session lows.
Although nothing slight, the Nasdaq's loss wasn't quite as severe as that of its counterparts. The Nasdaq had been propped up for the better part of the session by tech plays following better-than-expected quarterly reports and forecasts from Oracle (ORCL 29.82, +1.47) and Adobe (ADBE 24.93, +0.29). Autodesk (ADSK 28.71, +0.60) also attracted buyers after analysts at JPMorgan upgraded the stock.
Although not a member of the Nasdaq, software products, solutions, and services outfit Hewlett-Packard (HPQ 23.96, +1.49) staged an impressive performance as participants applauded the idea that the company may be considering the removal of its current Chief Executive.
Tech giant Microsoft (MSFT 26.11, -0.86) announced a 25% hike to its quarterly dividend, but that actually induced a negative reaction as investors regarded it as another sign that the firm continues to struggle to find investment-worthy growth opportunities.
Tech stocks ended the day with a 1.3% loss near its 50-day moving average after the group had been up more than 1% at their session high. Still, their loss was the least severe of any major sector.
Financials fell the hardest. The sector slumped to a 4.9% loss as banking plays and diversified financial services stocks tumbled. Analysts at Moody's announced today that they have downgraded the debt on Bank of America (BAC 6.38, -0.52), Citigroup (C 25.52, -1.41), and Wells Fargo (WFC 23.71, -0.96).
Treasuries rallied in response to the Fed's plan and the stock market's weakness, such that the yield on the benchmark 10-year Note fell back below 1.90% to flirt with record lows.
Advancing Sectors: (None)
Declining Sectors: Tech -1.3%, Utilities -1.7%, Consumer Staples -1.8%, Telecom -2.1%, Health Care -2.6%, Consumer Discretionary -3.0%, Industrials -4.0%, Energy -4.0%, Materials -4.5%, Financials -4.9%DJ30 -283.82 NASDAQ -52.05 NQ100 -1.6% R2K -3.7% SP400 -3.4% SP500 -35.33 NASDAQ Adv/Vol/Dec 444/2.16 bln/2132 NYSE Adv/Vol/Dec 442/1.21 bln/2593
5:00PM CalAmp awarded US patent # 8,001,174 B2 (CAMP) 2.92 -0.02 : Co has been awarded United States Patent # 8,001,174 B2 for techniques related to managing efficient and reliable data exchanges between a central processor and independent on board or remote mobile processors. The invention originated from R&D activities within CalAmp's Wireless Networks business.
4:12PM Red Hat beats by $0.03, beats on revs (RHT) 40.32 +0.32 : Reports Q2 (Aug) earnings of $0.28 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $0.25; revenues rose 28.0% year/year to $281.3 mln vs the $271.2 mln consensus. GAAP operating income for the second quarter was $52.5 mln, or 18.7% operating margin. After adjusting for stock compensation and amortization expenses as detailed in the tables below, non-GAAP operating income for the second quarter was $76.4 mln, up 41% year-over-year. Non-GAAP operating margin was 27.2%, up 250 basis points from the year ago quarter. Both GAAP and non-GAAP net income for the quarter included a discrete tax benefit of $2.1 mln, ~$0.01 per diluted share. Excluding this tax benefit, GAAP earnings per share would have been $0.19 and non-GAAP earnings per share would have been $0.28 for the quarter.
7:03AM National Semi: Texas Instruments (TXN) acquisition of National Semiconductor clears regulatory reviews (NSM) 24.92 -0.01 : The companies expect the transaction to be complete on September 23, just slightly ahead of the six- to nine-month timeframe originally anticipated when the acquisition was announced on April 4.
10:55 am S&P Tech Sector Shows Modest Gains
The tech sector is trading higher today, ahead of slight losses the broader market. Semiconductors are trading in line with strength in the tech space with the Philly Semi Index trading 0.4% higher. Among chips in the index, CREE (+3.3%) is a notable leader. Among other major indices, the S&P 500 is trading 0.2% lower, while the NASDAQ and the QQQ are trading 0.4% higher. Among tech bellwethers, ORCL (+6.5%) is a notable leader, while MSFT (-1.7%) under pressure.
In earnings last night, ORCL (+6.5%) posted a slightly better-than-expected Q1 and guided earnings inline with consensus and revs just below the Street ests. ADBE (+2.9%), on the other hand, reported a slight miss for its Q3, but offered upside guidance. This morning, MPWR (-1.1%) lowered its Q3 guidance.
In news, MSFT (-1.7%) raised its quarterly dividend by 25% to $0.20/share. In rumors, we are hearing JDSU (-0.2%) takeover chatter making the rounds.
Among notable analyst upgrades this morning, ADSK (+6.8%) and ROVI (+5.2%) were upgraded to Overweight at JP Morgan. Also of note, Goldman raised its tgt on AAPL (+1.2%) to $520 from $480. In downgrades, VRSN (0.0%) and DOX (-0.5%) were downgraded to Neutral at JP Morgan.
RHT (+0.6%) is the notable name in tech set to report results today after the close.
09:40 am Oracle Guides Fourth Quarter Earnings In-line With Consensus (ORCL)
Oracle (ORCL $30.30 +1.95) reported first quarter earnings of $0.48 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.47.
Non-GAAP revenues rose 10.7% year/year to $8.40 billion versus the $8.35 billion consensus.
Non-GAAP new software license revenues were up 17% to $1.5 billion; non-GAAP software license updates and product support revenues were up 16% to $4.0 billion. Non-GAAP hardware systems products revenues were down 5% to $1.0 billion. Non-GAAP operating income was up 21% to $3.6 billion, and non-GAAP operating margin was 42%.
"Our high-end server business -- Exadata, Exalogic, and SPARC M-Series -- delivered solid double digit revenue growth in Q1. In contrast, revenue declined in our low-end server business. By moving away from low-margin commodity hardware and focusing on high-end servers, we increased our hardware gross margins from 48% to 54%. Our strategy to grow the profitable parts of our hardware business is paying off."
On the conference call after hours yesterday, the company guided Non-GAAP EPS in the range of $0.56 to $0.58, Capital IQ consensus $0.56; revenues expected to rise 4% to 8%, Capital IQ consensus $9.34 billion or approx +8.2% year/year.
09:34 am Adobe Guides Fourth Quarter Revenue Expectations Above Consensus (ADBE)
Adobe (ADBE $25.93 +1.29) reported third quarter earnings of $0.55 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.54.
Revenues rose 2.3% year/year to $1.01 billion versus the $1.03 billion consensus.
For the fourth quarter, the company expects to see earnings of $0.57 to $0.64, excluding non-recurring items, versus the $0.58 Capital IQ Consensus Estimate; sees upside revs guidance of $1.08 billion to $1.13 billion versus the $1.06 billion Capital IQ Consensus Estimate.
The Company's operating margin is targeted to be 26.5% to 29.5% on a GAAP basis, and 36% to 38% on a non-GAAP basis. In addition, the co is targeting its share count to be between 497-499 million shares, and it is targeting non-operating expense between $17 million to $21 million. Adobe's GAAP and non-GAAP tax rates are expected to be ~22%.
"We delivered strong earnings in the third quarter. At the high end of our financial targets for our fourth quarter, we will achieve our 10% annual revenue growth target as well as earnings growth of 20% for the fiscal year."
Monolithic Power (MPWR $11.36 -0.18) issued downside guidance for the third quarter with revenues of $52-54 million versus the $57.39 million Capital IQ consensus and below prior guidance of $56-60 million. The company states: "The economy is slowing down considerably. We are slowing down channel inventory to reflect the uncertain business climate." |
