Close Dow +140.88 at 10574.29, S&P +16.63 at 1162.77, Nasdaq +24.10 at 1890.39: The market averages embarked on different paths during the morning with the Nasdaq Composite underperforming. However, the indices re-coupled in the afternoon with minor new highs for the month established. Substantial early session pressure was noted in the storage sector in the wake of the warning last night from McDATA (MCDT -26.8%) and the EMC (-2.1%) estimate cuts this morning. The losses were across the group and heavy (EMLX -8%, QLGC -3.1%, NTAP -8%, BRCD -4.3%) . Also on the defensive early were semi (SOX -0.9%), software (GSO +0.7%) and Internet (DOT -0.3%). The latter group was hurt early by AMZN (+2.2%)--CFO quits, stock downgraded by RBC Capital but it staged a solid recovery as the Street came out in defense. Providing a strong lift for the Dow were banking (BKX +2.1%) and cyclical (CYC +1.5%). Top moving sectors included wireless (YLS +5.8%)-- Sprint (PCS +20.1%) was downgraded by SoundView prior to the open but the company subsequently reaffirmed guidance which comes on the heels of Nextel (NXTL +14.5%) reaffirming guidance yesterday; and airline (XAL +4.7%)-- UAL (+2.1%) averts strike as mechanics agree to contract, NWAC (+4.7%) load factor rises 3.6%. Biotech (BTK +5.4%) was also of interest-- UBS Warburg issued positive comments on DNA (+2.6%) with BGEN (+4.1%) gaining after one of the company's drugs (Avonex) received a favorable review from EU scientists. Additional positive economic news, this time the Fed's Beige Book, helped to trigger the late run. Highlights included: signs that the recession is or has passed; positive results seen in manufacturing as well as modest improvements in retail sales; labor markets remain slack but the worst appears to be past as some firms are no longer cutting back on employment. Volume was active with market internals firmly positive thanks to the afternoon advance. DJTA +1.1%, DJUA +1.7%, DOT -0.3%, Nasdaq 100 +1.4%, Russell 2000 +1.4%, SOX -0.9%, XOI +1.9%, NYSE Adv/Dec 2307/869, Nasdaq Adv/Dec 2261/1281
1:12PM Lam Research: Solly says biz may be picking up (LRCX) 26.00 -0.08: We are hearing from sources at Salomon Smith Barney that they believe business momentum is picking up at LRCX, especially from foundries TSM and UMC as well as MU, INTC, andAMD.
1:12PM Nasdaq Composite Intraday : -- Technical -- Index continues to hold towards its best levels of the session on bullish market internals and solid volume. On an intraday basis it appears to be holding support at 1872 which could set up a run at resistance of 1879/1882. Note that this area around 1879/1882 has served as a ceiling for the index four times counting both yesterday and today. On a clean break higher, look for subsequent overhead in the range of 1898/1908 which brackets the index' 50 and 200-day simple moving averages. To the downside, look for intraday support at 1872 followed by additional support points at 1866 and 1860.
11:10AM Transmeta defended by Pac Growth (TMTA) 3.32 +0.03: Pacific Growth is defending TMTA against an article in this morning's DigiTimes out of Taiwan, which alleges that the co may have lost some of its traction with customers; firm says article is false and unfounded as co is actively engaged with all of its pre-existing customers and firm anticipates further announcements from other customers as TMTA introduces products throughout 1H02. Reiterates Buy rating.
11:00AM Sector Watch: Semiconductor Intraday : -- Technical -- Currently trading at 602, the SOX has edged back above support at 600. To the upside, look for initial resistance at 613/616 which represents the top of the current leg higher. To the downside, watch for initial support at 600 followed by a subsequent floor at today's intraday low of 592.
9:15AM Zoran Corp initiated with Buy rating at TWP (ZRAN) 39.00: Thomas Weisel initiates with a BUY rating and a $60 price target; co has the heaviest concentration in consumer electronics in firm's universe, and represents a unique play on DVD players and digital cameras;2003 rev growth is likely understated in firm's model.
10:16AM Technical Levels : The Nasdaq has added 64 points or 3.6% since we last reviewed it. The activity has matched relatively well with our expectations. Last time, we summed up our view by stating, if the Nasdaq can hold 1800 on a closing basis, the groundwork will likely be in place for a decent move higher. To the upside, look for initial resistance at 1816/1818 followed by notable levels at 1830 and 1844. Yet the real test will be around 1863/1866 which approximates the level at which it topped out on the last leg higher as well as the index' 100-day simple moving average. So the Nasdaq finished yesterday's session at 1866 which was our final resistance point -- what now? The easy answer (though not necessarily the correct one) is that the Nasdaq is due for a break -- it has climbed 7.8% in a matter of three trading days and is now facing notable resistance at 1866. To the downside, look for initial support at 1850 followed additional levels at 1844 and 1834. A good candidate for final support appears to be 1817 which represents the index' 20-day exponential moving average and also matches up with chart congestion. Yet the counter argument is that the recent advance was driven by two consecutive 2 billion shares sessions and the index exploded past what had looked like formidable resistance around 1800. The markets haven't seen moves like this for some time. If the Nasdaq should build on recent gains, look for initial resistance at 1879/1882 followed by an especially notable area at 1898/1908 which brackets the index' 50-day and 200-day simple moving averages. While a few days of consolidation appears to be the more likely outcome, don't be surprised if any dip is relatively shallow. In the attached table, we touch on several individual issues in addition to key levels on which traders will focus. -- Mike Ashbaugh, Briefing.com
2:59PM Morgan Stanley Semi Conf (Day 2) : -- Before Open -- SUNW reiterated internal goal to reach profitability in FQ4. AMD is aggressively trying to use its high-performance and small-die size Athlon processor to profitably gain mkt share in the PC mkt; mgmt suggested that Q1 PC demand appears to be seasonally normal, and ASPs appear to be holding up. ATML believes business conditions are bottoming; mgmt has been extremely focused on restructuring operations and lowering its expense structure. XLNX has now shipped more than $1 bln in revenue within the various members of the Virtex architecture. Business conditions at CY are generally tracking to expectations and suggest that CY's fundamentals should continue to steadily improve.
12:40PM Thomas Weisel Semi Initiations : -- Before Open -- Thomas Weisel initiates on ESS Tech (ESST) with a Buy, saysing it is leading beneficiary of China's focus on consumer electronics and DVD player market in particular... Firm starts Zoran (ZRAN) with a Buy rating and $60 price target, citing its technology leadership in DVD players and digital cameras and heavy concentration in consumer electronics... Also, Weisel initiates with Attractive on the following: LSI Logic (LSI), saying strong communications and consumer focus should allow LSI to outgrow industry; STMicroelectronics (STM), calling it a strong general play on communications and consumer electronics; Microchip (MCHP), citing broad play on likely '02 semi recovery; and Atmel (ATML), saying diversified product offering should drive 2H'02 growth.
11:44AM Novellus (NVLS) 49.85 -1.29: -- Before Open -- USB Piper Jaffray initiates coverage with an Outperform. Firm cites: (1) NVLS is a leading provider of thin film deposition and surface preparation equipment for integrated circuit manufacturing; (2) purest play on the emergence of copper/low-k interconnect technology; (3) new semiconductor investment cycle expected to develop during 2002 with acceleration into 2003.
11:40AM FSI Intl (FSII) 10.18 +0.19: -- Before Open -- USB Piper Jaffray initiates coverage with an Outperform. Firm says FSII's estimated addressable market of $3 bln is expected to experience CAGR of 15% over the next few years, driven by a recovery in capital spending in the semiconductor industry, as well as new applications for cleaning and microlithography equipment. Firm notes that, under the leadership of new management, FSII is pursuing a number of initiatives that are expected to increase its market share in the next few years; fundamentals are recovering as semiconductor manufacturers increase capital expenditures sequentially throughout the year.
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