From Briefing.com: 4:49PM Weekly Wrap:
For one brief shining moment it looked like the indices might reverse course and start heading higher, as a positive earnings report from Cisco sent the Nasdaq, S&P 500 and DJIA soaring on Wednesday (+122, +39 and +305 points, respectively)... But it was not to be... More negative news from the tech sector (WCOM debt rating cut to junk), an anthrax scare at the Fed, renewed hostilities in the Middle East and disappointing same-store sales figures from the retail sector combined to undercut the rally try... In the end, the indices ended the volatile week with modest losses.
What's most interesting about the week's decline, other than the complete lack of buying interest in the beleaguered tech sector, was the weakness seen in the once resilient mid- and small-cap groups... Seems like the ripple effects from the major large-cap declines are finally being felt marketwide... Considering the dispair created by the market's inability to build on Wednesday's advance, indices could be facing a tough week ahead.
Look for indices to take directional clues from the retail sector next week... Not only do we get the retail sales numbers early in the week, but Wal-Mart (WMT), Tiffany (TIF), TJX Co. (TJX), Abercrombie & Fitch (ANF), AnnTaylor (ANN), Kohl's (KSS), Lands' End (LE), Gap (GPS), The Children's Place (PLCE) and JC Penney (JCP) are among the many retailers to report their quarterly results (see Briefing.com earnings calendar for details)... Traders will be looking more at the forward guidance than the Q1 numbers for signs that consumers remain in a spending mood... Generally upbeat guidance could alleviate some of this week's angst... On the other hand, if the retail sector sounds a cautionary note, the tone could get even uglier.
Speaking of ugly, a number of tech companies also scheduled to release earnings next week... Among the more notable names are Hewlett-Packard (HPQ), Applied Materials (AMAT), BEA Systems (BEAS), Computer Associates (CA), Network Appliance (NTAP), Brocade (BRCD), Intuit (INTU), Analog Devices (ADI), Agilent (A) and Dell (DELL). Hard to imagine the tone in the tech sector getting much worse, but disappointing results/guidance from the likes of AMAT, BRCD and DELL certainly wouldn't bode well... Traders will also be monitoring midweek analyst meetings held by IBM and Texas Instruments (TXN).
6:06PM Credence acquires California facility (CMOS) 19.44 -0.21: Company acquires a facility in Milpitas, CA, for $22 mln that will serve as company's new corporate headquarters; transaction expected to close in August 2002, with employees relocating to new facility in early 2003.
3:45PM Earnings Calendar : Next week, notable names scheduled to report include Hewlett-Packard (HPQ), Applied Materials (AMAT) and Dell Computer (DELL). A number of retailers are also scheduled to report including: Wal-Mart (WMT), Abercrombie (ANF), Nordstrom (JWN) and Gap Inc (GPS).
3:41PM Cabot Micro defended by Robbie (CCMP) 44.25 -4.54: Robertson Stephens say they have confirmed that CCMP has not lost any business at TSM, and recommend using today's weakness resulting from such concerns to add to positions; a rumor had been circulating today that CCMP had lost some business at TSM to a competitor, which knocked the shares down in afternoon trading.
11:03AM Sector Watch: Semiconductor : Sector posting sizeable losses for the second session in a row led by: AMD -2.8%, AMAT -3.6%, TER -3.4%, KLAC -2.5%, LSCC -2.2%, ALTR -2.2%, and NSM -2.4%. The index (SOX at 492) has held at retracement support (490) of this week's rally but will need to see follow through gains beyond 502/504 to improve tone (similar resistance levels for the Semi HOLDRs at 40.26/40.40). Next support for the SOX at 482 and 477.
8:19AM Micron could be hurt by 25% DRAM price drop (MU) 22.85: -- Update -- Bear Stearns' Ripple Effect notes that DRAM prices fell another 7.7% to $2.03 on Friday in Taiwan, bringing the week's total decline to 25%; notes that lack of PC OEMbuyers and dumping of excess inventory have been weighing on prices.
7:41AM Micron Tech estimates cut by Merrill Lynch (MU) 22.85: Merrill Lynch says that checks indicate MU is tracking towards a slight sequential decline in bit shipments; also, near-term picture for DRAM pricing looks tough, with inventory rebuilding and MU and Samsung preparing to inflict additional pricing pain on Hynix. Cuts May qtr est to $0.21 from $0.32 and August FY02 est to ($0.13) from $0.21. Reiterates Near-Term Strong Buy rating.
7:28AM Intersil upgraded at UBS (ISIL) 24.24: UBS Warburg upgrades to BUY from Hold, saying that checks at the Networld Interop conference suggest the co is benefiting from stronger than expected wireless LAN trends and some abatement to competitive concerns; believes the co has the potential to deliver upside to CY02-03 ests and sees valuation as attractive; also, believes ISIL-ELNT vote may be an opportunity for mgmt to raise guidance. Raises June qtr est to $0.16 from $0.15 and raises price target to $33 from $28.
2:21PM Anadigics (ANAD) 10.21 +0.01: After raising their Q2 guidance on Wed (co. now expects to post a Q2 loss of $0.29 on revs of approx. $23 mln), mgmt hosted an analyst meeting yesterday; ANAD announced it has seen increased order activity from Kyocera and is beginning initial shipments to another tier 1 OEM. Goldman Sachs believes the stock should outperform as investors gain comfort in the sustainability of the improvements and visibility on its path towards profitability. Wachovia is less positive on the name: firm admits that at current production volumes, ANAD should have the highest gross market leverage of any of the RFIC cos they follow, but stresses that without substantial mkt share capture, they have some trouble seeing the co. break-even anytime soon.
1:47PM JP Morgan Tech Conf : Takeaway is that cos displayed a relatively upbeat tone: most talked of seq. growth in Q2, while some talked of seq. growth for the remainder of the year. Firm stresses that product cycles, silicon content stories and technology transitions become all the more pronounced and noticeable in a flat spending environment, and would be most contructive in those areas; top pick remains MRVL with JP Morgan turning more positive on NVDA.
1:34PM SSB Semi Conf (Day 2) : INTC made no changes to Q2 guidance, of revs of $6.4-7.0 bln, with the midpoint around 1%. MRVL is very comfortable with its guidance for Q1, with backlog coverage for Q2 (Jul) much higher as a percent than past qtrs. Solly believes order trends at NSM remain solid, with the co. building backlog for Q1 (Aug); orders are sufficient enough to support a q/q rev gain vs what is usually a seasonally weak qtr with revs flat to down. KLAC indicated orders will be above 10% growth in Q4 (Jun), in line with guidance. LRCX expects Q2 order strength to persist into Q3. QCOM reiterated guidance of 10 mln units of 1X chips in Q3 (Jun) and indicated it doesn't believe there's a 1X chip inventory situation. BRCM repeated its q/q growth guidance of up mid-single digits for Q2 and up low double-digits for Q3. AMCC has seen no inflection in order trends and biz remains slow.
August Tech (AUGT) 13.59 -1.09: Announced the resignation of CFO Tom Velin effective immediately as he leaves to attend to personal and family matters that require his full attention; Corporate Controller Scott Gabbard will serve as acting CFO.
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