Great day Don. I can't say I have not been expecting the market to move back to the upper end of the trading range. Of course I never thought we would go this far in one day. The volume was healthy and the market closed well. 1900 on the NASDAQ now seems likely but warnings from stocks like ORCL will not help. More from Briefing.com:
6:00PM Weekly Wrap :
For several weeks now Briefing.com has argued that once the market shifted its focus from accounting/debt concerns to the recovering US economy, stocks would regain their footing... Well, after the largest jump in construction spending in over a year; the first positive reading from the manufacturing sector in 18 months; a big upward revision in the Q4 GDP number; another sizable jump in durable goods orders; and continued strength in personal consumption; the DJIA roared to its highest level in nearly 6-months.
As you might expect, money flowed into economically sensitive groups... Among the industries posting the biggest weekly gains were Home Construction (Briefing.com initiated coverage of this group earlier this week with an outperform rating -- see Sector Ratings page for details), Household Appliances, Semiconductor Equipment, Hotels, Auto Parts, Heavy Machinery and Tires... Groups that lagged included Healthcare Providers, Packaged Foods, Medical Products and Networking Equipment.
Though the market remains vulnerable to accounting/debt scares, especially while the economy is in the early stages of recovery, this week's action provided a glimpse into how much pent-up demand there is for stocks... As long as the data continue to show strength, money will come off the sidelines and back into the market... Industrial, Basic Material, Financial and Retail among the sectors that typically outperform during early stages of recovery... With the exception of the financials, we're seeing much the same this time around... Energy and Technology sectors tend to lag a bit, so traders who may have missed out on the "easy money" in the aforementioned sectors might want to be looking in the financial, energy and tech groups for bargain opportunities.
Looking ahead to next week, earnings news should remain positive as it is dominated by retail companies such as Kohls (KSS), Staples (SPLS), American Eagle (AEOS), Michaels Stores (MIK), AnnTaylor (ANN) and Gymboree (GYMB)... However, the economic news could be a bit disappointing, especially Friday's jobs data which is expected to show a 0.2% jump in the unemployment rate... Though the jobs data could deflate optimisim a bit, it's important to remember that it is a lagging indicator.
Close Dow +262.73 at 10368.86, S&P +25.05 at 1131.78, Nasdaq +71.26 at 1802.75: The major averages started the month with a bang. The Dow exploded for a 2.6% gain to close at its best levels since August 27th. At the same time, the Nasdaq also advanced solidly putting in a 4.1% gain and closing just over 1,800. Buy interest was driven by a batch of economic releases with mixed implications. The most significant report was the February ISM index which rose to a strong 54.7% from 49.9% in January. Note that any reading above 50.0% represents growth and the index has spent the prior 18 months below 50.0% and in contraction. Also note that one of the more forward-looking components of the ISM, the orders index, showed impressive strength in February, rising to 62.8% from 55.3%. The ISM Index (Institute for Supply Management) was formerly called the National Purchasing Manager's Index and is viewed as a read on general health in the manufacturing sector. All in all, the ISM numbers make it clear that a need to rebuild inventories has helped pull the manufacturing sector out of recession. The key now will be whether this rebound can be sustained after the initial inventory rebuild has been completed...
In a separate economic report, the final February reading on the University of Michigan consumer sentiment index came in at 90.7 -- this was just below the preliminary February reading of 90.9. The number also represents a downtick from the January level at 93.0, though the modest downward revision did not come as a surprise. Note that earlier this week, the Conference Board's consumer confidence index for February came in at 94.1, well under the consensus expectation for a reading of 97.0. Taken together, the two numbers are consistent and indicate that consumer confidence has edged lower in the month of February. Yet also note that the overall Michigan Sentiment index stands 11% higher than the September low as gains were seen from October through January despite the depths of the recession and the 9/11 attacks...
Next week, investors will be looking towards potential catalysts from economic reports as well as corporate earnings releases. On the economic front, look for ISM Services data to be reported on Monday while the marquee February Employment Report is due out next Friday. On the corporate earnings calendar, next week is retail week as a number of notable retailers are scheduled to report. On Tuesday, look for reports from OfficeMax (OMX), Staples (SPLS), Kohl's (KSS) and Hot Topic (HOTT). Those are followed by American Eagle (AEOS) and Ann Taylor (ANN) on Wednesday and Saks Inc. (SKS) on Thursday. Outside of the retail group, notable reports include Ballard Power (BLDP) on Monday, Genzyme (GENZ) and National Semiconductor (NSM) on Thursday, and Krispy Kreme (KKD) which is set to report on Friday.DJTA +3.1%, DJUA +1.6%, Nasdaq 100 +5.6%, Russell 2000 +1.9%, SOX +11.1%, S&P Midcap 400 +2.0%, XOI +1.7%, NYSE Adv/Dec 2221/925, Nasdaq Adv/Dec 2304/1224
5:58PM U.S. SEMIndex fell 0.46% in Feb : U.S. SEMIndex, equity index of 47 N Amer manufacturers of semiconductor equipment and materials, lost 0.46 percent in Feb, Global SEMIndex rose 5.70 percent in same period, according to Semiconductor Equipment and Materials International (SEMI).
5:14PM ORCL guides down for Q3 (ORCL) 15.99 -0.63: Company guides down for Q3 earnings $0.09 vs. Multex consensus of $0.10, cites slow down in Asia.
3:37PM The Week Ahead : Intel will provide its Mid-Qtr Update on Thursday... On the earnings front, a host of retailers scheduled to release earnings next week: PSUN, CHS, HOTT, AEOS, MIK, ANN. Other earnings notables include KKD, PNRA, GENZ, BLDP... Major conferences include CSFB Global Telecom CEO Conference and Morgan Stanley Semiconductors & Systems Conference... ADSK and CTXS scheduled to host Analyst Meetings.
3:31PM Alpha Ind defended by CIBC (AHAA) 15.47 +0.06: -- Update -- CIBC is defending AHAA against this morning's CFRA report, which highlighted increases in DSOs and "soft" assets, a deterioration of cash flows, a cash obligation related to the CNXT merger, and AHAA's dependence on MOT; firm says these criticisms should not be cause for concern, and would buy on weakness. Price target is $44.
3:10PM Maxwell Tech downgraded at CIBC (MXWL) 9.75 +0.95: CIBC downgrades to HOLD from Buy; despite reporting in-line Q4 results, visibility for MXWL's businesses still remains limited, and it appears that a significant rev contribution from large ultracapacitors will not surface until at least 2003. Stock has limited upside potential over the next 12 months compared to peers
2:01PM Tellabs: beating Ciena, Nortel, and Lucent in switches? (TLAB) 10.90 +0.64: Salomon Smith Barney maintains their cautious stance on TLAB, saying that conditions remain difficult and the firm has concerns as to whether to co can hit its quarterly targets; however, one interesting point was that TLAB mgmt believes its offerings are winning the battle with optical switches such as CIEN's CoreDirector, NT's HDX, and LU's Lamda Unite due to TLAB's ability to handle low speed electrical interfaces.
12:12AM Nasdaq Composite Intraday : -- Technical -- On a very short term basis there is potential for further choppy to lower action as index takes a little breather in the wake of this morning's solid advance. Initial support is in the 1767/1764 area followed by 1757/1754. Next resistance is at 1790/1793 which marks a trendline off the Jan/Feb highs and this week's recovery high.
11:22AM Semiconductor HOLDRs Intraday (SMH) 43.09 +2.7%: -- Technical -- Breaks back above its 200 day simple ma (42.9) and is edging back toward the top of its week long range (43.3/43.4). If able to penetrate, initial resistance is at 43.6 (50 day simple ma) followed by 44/44.2 (retrace of Feb slide and top of Feb 19 gap).
11:14AM Novellus Intraday -- Technical -- (NVLS) 46.04 +3.45: -- Update -- Pushes to a new session high amid above average volume. The very strong run today has triggered an overextended short term posture but ability to hold above support at 45.5/45.2 leaves NVLS well positioned. There is little other than a minor barrier at 46.25 standing in the way of the Jan high at 46.95. If taken out, initial resistance is in the 47.50/47.80 area.
10:30AM Micron Tech estimats raised amid strong pricing outlook (MU) 34.64 +2.49: -- Update -- Stock benefiting from Thomas Weisel Partners positive comments on contract prices. In pre-market note, firm dramatically increased earnings. FebQ est raised to ($0.04) from ($0.15), 2002 to $1.55 from ($0.05), and 2003 to $4.00 from $1.35. Firm increases its 12-month price target to $60 from $45.
9:39AM Intel (INTC) 29 +0.45: -- Technical -- Stock on the move in early trade but thus far holding below a solid short term resistance at 29.15/29.25 (bottom of its recent trading and its 200 day simple ma). Is oversold but need to see sustained action above to argue for an improved bias. Next resistance is at 30/30.15 with an important ceiling thereafter at 31.50. Intraday support at 28.85 and roughly 28.50.
9:27AM Silicon Labs: could be one of "greatest growth storiesof all time" in semi group (SLAB) 26.02: Morgan Stanley says that they "are more convinced then ever that SLAB will be viewed as one of the greatest growth stories of all time in the semi industry during the next several years." Believes SLAB has the potential to increase revenue by a factor of 10 during the next 5 years due to the co's strong mgmt team, technology leadership, and explosive growth opportunities in numerous wireless, wireline, and optical mkt segments; says $50 price target should have meaningful upside over time.
8:42AM Integrated Device upped at CIBC (IDTI) 25.57: CIBC upgrades to BUY from Hold after the co raised fiscal Q4 guidance last night; firm says the co's better than expected bookings environment, near-term upside to rev, and the prospects of building backlog give more confidence in their earnings model. Price target is $30.
10:04AM Novellus Systems (NVLS) 45.00 +2.41: The semiconductor equipment stocks are up strongly in early trading thanks to a bullish mid-quarter update from Novellus. Specifically, management said that there are signs that the downturn is going away. Also, February followed January with more signs of a recovery. The company was still cautious, but decidedly more optimistic than it was in January's conference call. Bookings are improving in the US and Asia, but not Japan. In fact, the company upped Q1 guidance on bookings to $130-$150 mln, a good bit higher than the $130 mln estimate from the company five weeks ago. Importantly, the company said it could reach break-even in Q2, much better than the Multex consensus of $(0.04). The bullish comments has prompted Robertson Stephens to upgrade the stock to Buy. Improved quote activity for both advanced DRAM and copper-based logic applications at 200 mm and 300 mm is a precursor to a broadening industry recovery....Clearly, the optimism from Novellus is great news for the chip equipment sector. In January, the company seemed to add a caveat to every positive comment it made. However, last night the company's tone was much more forceful. Briefing.com has been cautious in recent Story Stocks about too much of a recovery has already been priced into the sector. Unfortunately, even this news from Novellus does not cause us to change our basic position. We believe many of these names already reflect a rebound in the next 6-9 months. Bottom line, this is positive news for the group, but investors should remain cautious. -- Robert J. Reid, Briefing.com
9:11AM Stocks To Watch : The pre-market bias is firmly bullish with one of the positives coming from Novellus (NVLS +4%). The company reaffirmed Q1 EPS and indicated that bookings will be above previous estimates. Could provide a boost for the important semiconductor sector
From the Street: Marvell Tech (MRVL +8.9%) topped estimates last night and has been upgraded by Merrill Lynch and CIBC World Markets.
finance.yahoo.com
Hey thanks for the kind words Don and Bob. I think that we might get some more mileage after a big day like today but it's still too early in the recovery for me to believe we breakout to the upside from this trading range.
We will have to see!
RtS |
