Updated: 05-Mar-02
General Commentary
Traders turned a deaf ear to Oracle's (ORCL 13.67 -2.32) warning, listening instead to the sounds of economic recovery. The result -- a second straight day of eye-popping gains, with the Nasdaq adding 56.6 points, or 3.1%... Internet, networking and chip stocks paced the advance, though gains were broad based... Advancers led decliners by nearly 2-to-1, and the spread between the number of stocks setting new 52-wk lows and those setting new 52-wk lows continued to expand (171 to 28).
Improvement in market breadth underscores investor enthusiasm for stocks in general, and techs in particular... While there are some that will argue that this is just another sucker's rally - Briefing.com inclined to disagree... Admittedly the market/sector was oversold coming into the month, but the foundation of the current advance is the strongest in a over a year.
Rates are low; monetary/fiscal policies are accommodating; consumers continue to spend; inventories have been drawn down dramatically; and the manufacturing sector is on the mend. About the only piece missing from the equation is business investment, or corporate spending.
However, with the profit picture expected to brighten considerably from this point forward, we should begin to see increases in corporate spending in the second half of the year... This will be particularly good news to the tech sector, where IT spending has fallen off a cliff... Not suggesting a return to the high double-digit increases in IT spending, but downward trend will start to reverse itself.
Possibly in anticipation of this fact, investors bid up many of the battered telecom, storage and networking stocks... Among the winners in these groups were Tellabs (TLAB 12.62 +14%), Digital Lightwave (DIGL 5.62 +19%), Ciena (CIEN 8.71 +7%), Newport (NEWP 23.96 +12%), Redback Networks (RBAK 3.47 +8%), Corning (GLW 7.40 +10%), JDS Uniphase (JDSU 5.77 +16%), Brocade (BRCD 26.74 +7%), QLogic (QLGC 46.05 +7%), McData (MCDTA 17.50 +8%), Network Appliance (NTAP 20.52 +10%), Cisco (CSCO 16.48 +10%), Foundry (FDRY 7.06 +18%), F5 (FFIV 24.08 +12%) and Extreme Networks (EXT 8.02 +11%).
Another clear sign that traders are betting on a recovery in the tech sector -- strength in chip stocks... Semiconductor group tends to lead the rest of the sector and yesterday's 34 point gain (+5.9%) lifted the influential Philadelphia Semiconductor (SOX) index to 600.91 - or the top of a 4-mo range... Micron (MU 38.70 +7%), National Semi (NSM 31.20 +10%), Cirrus Logic (CRUS 18.86 +15%), Texas Instruments (TXN 33.99 +8%), Broadcom (BRCM 38 +8%), Vitesse (VTSS 8.75 +11%), TriQuint (TQNT 10.46 +10%), Lam Research (LRCX 25.85 +6%), Credence (CMOS 19.20 +7%), Applied Materials (AMAT 50.06 +4%) and PRI Automation (PRIA 26.05 +6%) led the sector advance.
While stubborn resistance in the 600 area could cap gains in the SOX over next several days (many component issues s/t overextended), a decisive break of this ceiling in the days to come would send a strong bullish signal for group/sector, with next important resistance in the 700-711 area (congestion/52-wk high)... Traders should watch this group closely for near-term directional clues.
Not looking for the Nasdaq to stage any breakouts over the near-term, but a return to 2000+ area looks increasingly likely, as investors rotate out of leading groups like paper, rail, home construction, etc. into some of the laggards such as the tech, energy and financial industries.
Industry Briefs
Computer Systems & Peripherals | Networking | Internet | Semiconductor | Semi Equipment | Software | Telecom Equip | Telecom Services
Computer Systems & Peripherals
Industry Members
EMC (EMC) 12.05 +0.63: Goldman Sachs analyst Laura Conigliaro cuts estimates on EMC; now sees loss of $0.03 for FY02 from breakeven previously; cites constrained IT spending, intense competition and pricing; would avoid EMC going into Q1 earnings.
IBM (IBM) 105.90 +2.88: Merrill Lynch maintains their near-term Neutral rating following a meeting with mgmt to discuss accounting issues; firm learned that the optical transceiver gain was $290 mln ($0.12 per share); IBM says such gains are recurring and a normal part of business (sale had been in process for some time). Merrill is "not too concerned about how the gain was recognized, but thinks disclosure could have been better;" IBM promises more details when it releases its 10K in Mar. Merrill remains concerned about revenue; firm will watch services bookings to support expected double-digit H2 growth.
Research In Motion (RIMM) 25.72 +1.85: SWS Securities reiterates its Strong Buy rating on news that co will soon begin shipping Blackberry 5810 units to customers of Voicestream and AT&T Wireless networks.
Sun Microsystems (SUNW) 8.67 -0.26: Merrill Lynch believes that SUNW may be experiencing a soft qtr; no change to estimates or rating.
[Harry: Given the downgrades in EMC and SUNW, it appears that this Q will be weaker than expected. As a result more
pressure will be applied to stocks as the month goes on and more companies pre-announce. There should be some rallies during the month, but a sustained up trend is still in double. Given the poor performance last year for stocks and fact many people have been concentrating on putting money into homes, I have some doubts about the amount of money to truly invest in the market.] |
