From Briefing.com: Close Dow +38.75 at 10611.24, S&P +3.95 at 1168.26, Nasdaq -0.18 at 1929.49: A generally weaker bias was evident in early session dealings with the averages pressured by several pre-market developments including: storage estimate cuts (EMLX -8%, EMC +3.8%-did not participate in recent surge); downgrades (IBM +0.1%, MACR +0.4%, BRW -6.5%, TEVA -4.4%, TRW -0.2%); negative commentary/articles from Barron's (CC -6.6%, EBAY -0.04%, ADRX +1.2%); report that the SEC is holding a formal inquiry regarding accounting records on Qwest (Q -2.5%); Goldman downgraded Asian DRAM companies; and Banc of America equity allocation and Nasdaq price target cuts (suggests technology and telecoms still have full valuations and are not likely to recover in 2002). Despite the negative developments, the losses for the major market averages was relatively limited in scope with confined trading ranges a just modestly weaker levels dominating for several hours. Both the S&P 500 and the Nasdaq Composite held near support levels (200 day ma) and actually pushed to new recovery highs off their Feb lows during afternoon action. Impressive turnaround in software, Internet, networking, Internet security along with steady gains in banking (BofA upgraded AXP +2.6% and COF +4.1%) helped to underpin the advance. Although the recent rally and solid intraday reversal are encouraging, a somewhat cautious tone did make itself evident in late action as the averages slipped during the last hour of trade. In other news of interest: countries largest pension fund said it will not support the HWP (+1.9%)/CPQ (-4.4%) merger; in retail, speculation surfaced of a merger between FD (+0.5%) and MAY (-0.4%); K Mart (KM +12.4%) CEO leaving the company; and energy was broadly higher following the news that Iraq will block the return of UN weapons inspectors (also provided a lift to defense sector). On the day volume was moderate with market internals slightly positive. DJTA +0.2%, DJUA +0.5%, DOT +2.9%, Russell 2000 +0.2%, SOX -2.4%, XOI +1.4%, NYSE Adv/Dec 1612/1535, Nasdaq Adv/Dec 1920/1683
10:18AM Technical Levels : Over the prior six sessions, the Nasdaq has climbed about 199 points or approximately 11.5%. The last time we reviewed the index we were watching for how it would respond to its 50-day and 200-day simple moving averages. Despite being notably extended, the index managed to push through each of these technical levels. So from current levels those two will be the first to watch to the downside. The index' 50-day simple moving average rests at 1896 while 1905 represents its 200-day simple moving average. Look for notable support initially at 1896/1905 followed by an additional floor at 1779/1882 which represents chart congestion as well as the index' 100-day simple-moving average. If the Nasdaq should continue with its incredible run, watch for initial resistance in the area of 1942/1945 which matches up with chart congestion and also approximates a 62% retracement of the January/February sell wave. That area is followed by additional overhead at chart congestion around 1976/1982. In the attached table, we touch on several individual issues in addition to key levels on which traders will focus. -- Mike Ashbaugh, Briefing.com
4:26PM Infineon/Nanya deal positive for semi equipment makers-- Pru : Prudential sees the IFX/Nanya cross-licensing agreement (where Nanya would receive IFX's 0.13 micron process technology at 300mm) as quite positive for the semi equipment co's, as Nanya could begin placing orders for tools in the next few months; firm believes that NVLS in particular could benefit, while other beneficiaries may include AMAT, KLAC, and RTEC.
2:34PM Intersil pays up for Elantec; CEO plans hit stock (ISIL) 32.50 -4.15: -- Update -- Merrill Lynch discusses the Elantec (ELNT +15%) acquisition announced this morning. Says the deal values ELNT at about 15x trailing earnings. While this appears expensive, it is in line with ELNT's comparables such as Micrel (MCRL -3.3%). In spite of high price, preliminarily it appears the deal will be net neutral to ISIL's EPS in 2nd-half 2002 and slightly accretive in 2003. Believes decision to have Elantec's CEO eventually lead the combined company could be contributing to the weakness in ISIL today.
9:25AM BofA cuts equity weighting, Nasdaq price target : -- Update -- Banc of America reduces their equity weighting to 50% from 55% and cuts 12 month price target on Nasdaq to 2250 from 2350; recent runup in stock mkt is due to better-than-feared economic news, short-squeeze in Japan, and widespread anxiety of missing out on a new bull mkt; however, firm says this is not the dawn of a new bull mkt (just the extension of the old one) and suggests that investors remain patient and look for more rewarding entry points. In addition, technology and telecoms still have full valuations and are not likely to recover in 2002.
3:43PM Robbie on Semi Cap Equip : -- Before Open -- Robertson Stephens is more bullish on group and expects seq. increases in spending through the year resulting in a flat-10% decline for 2002; firm also predicts a pick up in the back end, which in past cycles has led the recovery. Names AMKR, KLIC, and CMOS as well-positioned to benefit in the next upcycle; upgrades CMOS to BUY from Mkt Perform (see In-Play for comment) and reiterates their Buy rating on both AMKR and KLIC.
2:16PM Pru on Semi Cap Equip : -- Before Open -- Prudential analyzes the impact of the fiscal stimulus package on group; notes that bill includes a 30% depreciation bonus for certain capital spending, including semi cap equipment, for a period of 3 years beginning 9/10/01 to 9/11/04. Estimates that bonus depreciation could have a tax benefit of about $700 mln and cumulative 3-year tax benefit of about $2.5 bln. Prudential believes package could increase some spending plans on the margin and sees the positive impact focused on leading edge tools, for 0.13 micron technology with copper interconnects; names AMAT, NVLS, KLAC, LRCX, FEIC, and RTEC as beneficiaries.
12:28PM United Micro (UMC) 9.93 +0.04: --Before Open-- Goldman Sachs reaffirms Market Outperformer stock rating. Even though company reported February sales 10% down m/m, firm starting to see more demand at advanced nodes and is watching to see if demand at these nodes will push ahead of forecasts; thinks Q2Y02 should be strong.
8:59AM Goldman downgrades Asian DRAM companies : Goldman Sachs downgrades Asian DRAM stocks including Samsung, Nanya, Powerchip, and Winbond due to expected weakness in DRAM pricing caused by: growth in supply of 0.15 micron chips as yields improve, inventory build-up by spot dealers, and psychological risk that Micron/Hynix deal will fail. Micron (MU) could come under pressure due to this Goldman call, though MU isn't mentioned with the downgrades.
8:26AM Fairchild Semi files to offer up to 24.15 mln shares (FCS) 30.35: Files follow-on registration statement with the SEC that would be available for one or more follow-on public offerings of its Class A stock. Up to a total of 24.15 mln shares may be offered, including 14.175 mln newly issued shares by the company and 9.575 mln outstanding shares by an existing stockholder.
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