From Briefing.com: General Commentary
After holding out for weeks, the DJIA is finally starting to play catch up with the other indices... Brutalized by a sharp declines in the already battered drug and utility groups, the bellwether index made a decisive break of the 9000 floor... The adverse psychological impact of the DJIA's capitulation was readily apparent, as weakness quickly spread throughout the market... Energy, Financial, Industrial and Technology sectors all took a beating... Not sure how much lower the market needs to go over the short-term, but this certainly has the look and smell of capitulation.
If the DJIA follows the lead set by the other major market indices and moves to a new, post-9/11 low, then we're looking at a drop of another 10% or so in that index... Such a move would almost certainly depress the rest of the market... So if you're thinking about bargain hunting, you might want to wait a little longer -- the general market risk is just too high.
Tech sector continues to be led lower by the Semiconductor industry (SOX 348.56 -3.8%), as investors give up hopes of a strong second half earnings recovery... Wednesday's notable chip losers included Zoran (ZRAN 16.81 -12.7%), ESS Tech (ESST 16.40 -6.2%), Intel (INTC 16.81 -6.4%), Micron (MU 21.25 -5.3%), Applied Materials (AMAT 16.67 -5.9%), Texas Instruments (TXN 22.28 -4.4%) and Analog Devices (ADI 26.39 -4.76%).
Chips weren't the only losers, far from it... The beleaguered GSTI Software index (GSO 99.39 -2.5%), while managing to outperform a few of the other groups yesterday, posted a new 52-wk low... Meanwhile, the Hardware and Telecom industries were down by 2.4% and 2.8%, respectively.
Though the ugly technical/fundamental backdrop argues against trying to play a rebound, the historically high volatility readings, oversold technical tone and the beginning of earnings season (starts next week), suggest that a relief rally could be just around the corner... Mere threat of such, combined with the big losses registered already this week, could prompt some short-covering either today or tomorrow... Just don't mistake gains for anything meaningful.
Robert Walberg, Briefing.com
4:56PM Numerical Tech issues Q3, 2002 guidance (NMTC) : -- Update -- Co expects Q3 rev of $11.0 mln and breakeven pro forma EPS, in line with the Multex consensus; for 2002, the co expects rev of $46.2 mln and pro forma EPS of $0.05, vs consensus of 46.1 mln and $0.04.
4:54PM Yahoo! updates guidance for Q3, full year (YHOO) 12.19 -0.51: -- Update -- Sees Q3 revs between $225 and $250 million vs current consensus estimate of $231.8 mln, and sees FY02 revs between $900 and $940 million vs current Multex consensus estimate of $899.6 million.
4:45PM Yahoo! reports GAAP Q2 income of $0.03 per share -- beats by a penny (YHOO) 12.19 -0.51: Company reports Q2 GAAP earnings of $0.03 per share, $0.01 better than the consensus estimate; Q2 revs of $225.8 mln vs the Multex consensus estimate of $214.4 mln.
4:09PM Numerical Tech beats by a penny (NMTC) 4.75 +0.14: Reports Q2 (Jun) earnings of $0.01 per share, $0.01 better than the Multex consensus of $0.00; revenues fell 5.1% year/year to $11.1 mln vs the $11.0 mln consensus.
3:28PM Communication ICs : Amidst on-going mkt/group weakness, Salomon Smith Barney cuts the price targets on AMCC (to $9 from $17), BRCM (to $24 from $38), CTLM (to $10 from $15), LSI (to $9 from $20), PMCS (to $11 from $25), TUNE (to $13 from $30), and VTSS (to $5 from $15); identifies risks to stocks as cash preservation for AMCC, competition and maturation of digital cable industry for BRCM, dependence on Japanese DSL mkt for CTLM, cable exposure and assumption in of steep H2 Bluetooth ramp for TUNE, competitive positioning for BMC, failure to demonstrate a path to positive EPS (could imply 50% downside to valuation) for PMCS, and cash preservation for VTSS.
2:26PM Zoran upped to Buy from Outperform at Salomon Smith Barney -- valuation (ZRAN) 15.50 -3.75:
2:20PM Cabot Micro sets up for test of $36.76 one-yr low set June 26 (CCMP) 37.05 -0.75:
2:11PM Yahoo! may beat estimates and raise targets, but stock rich-- Merrill Lynch (YHOO) 12.32 -0.38: Merrill Lynch believes that YHOO may report results tonight ahead of ests and at the high end of the co's target range; firm also thinks YHOO will raise targets for 2H02 due to the extension of the OVER deal; however, even after the likely est increases, stock remains richly valued. Maintains Neutral rating.
12:37PM Nasdaq holds near session lows : -- Technical -- Index continues to hold towards its worst levels of the session. Currently testing previously identified support at 1370 (see 10:36 ET comment) -- on a clean break lower, look for subsequent support at 1357 which represents the index' July 2nd closing low (its worst close in five years) followed by an additional floor at 1337. Note that the intraday tone would improve on a break back above very near-term resistance at 1380.
11:07AM CSFB cautious on semi capex : We are hearing that a recent trip to Asia has reinforced CSFB's cautious stance on semi capex; during today's conference call, firm says that capex is under review across the board with a downward bias, as TSM and UMC are at risk of underspending, and the switch to 300mm is going slower than expected; also, firm is cautious regarding Q3, and says inventories are increasing and Days Sales Outstanding at the co's are rising. Firm favors TER and KLAC in the semi equipment group.
10:40AM Microchip defended by BofA (MCHP) 22.86 -2.70: -- Update -- Banc of America is defending MCHP following Avalon's "Trading Sell" initiation (see 9:55 comment), saying the sell-off is unwarranted and represents a buying opportunity; believes a premium is justified and does not think the stock is expensive at current levels, and says $25 is a reasonable short-term price.
10:14AM Technical Levels : So yesterday, the Nasdaq erased the remainder of Friday's 4.9% rally. This places the index in a similar situation -- or at least at essentially the same level -- as its July 3rd close of 1,380. It's also worth noting that the Volatility Index (VIX) finished yesterday at its highest closing level since November 1, 2001. By that measure, it looks as if market uncertainty has reached its highest levels in over eight months. Now for those of you thinking ahead, the Nasdaq Volatility Index (VXN) is not quite at its peak levels of 64.1 reached last week. Nonetheless, it remains in the ballpark of its November highs. With yesterday's close just over 62.00, the VXN is also comfortably above its 200-day simple moving average just under 51.00. So it doesn't take a rocket scientist to assess the current market. The contrary indicators are at notable highs while the Nasdaq itself is trading at its worst levels since May 1997. The support points are generally solid for intraday activity, but it tends to be a crap shoot as to whether any given level might hold on the close. From the standpoint of strict technical levels, keep an eye on support at 1380 -- this approximates the July 3rd and July 9th closing levels, and served as the launching pad for that fleeting July 5th mania. If 1380 should fail to hold, then the recent low at 1357 will become the next target. To the upside, watch for straight-line resistance at 1400 followed by additional overhead in the area of 1420. Now outside the Nasdaq, there is one point of interest on the Dow Industrials worth mentioning. Through all of the recent carnage, the index has managed to hold closing support at 9,000. The closest the index came to failure was its July 7th close at 9,007. We've commented on support at 9,000 in the past, and if there is a silver lining to the broad market picture, it may be that the technicals on the Dow remain intact. Unfortunately, that silver lining also comes as something of a double-edged sword. If the index should fail to hold 9,000 on a closing basis, that may be the trigger for those reaction lows -- the panic selling or capitulation -- that so many technicians are seeking. Certainly worth keeping an eye on regardless of what or where you trade. -- Mike Ashbaugh, Briefing.com
9:42AM Zoran and ESST fall on Pacific Crest comments (ZRAN) 18.27 -0.98: Pacific Crest is concerned that ASP erosion at 15% or more makes it challenging for co to achieve firm's estimated 2002 DVD volume shipments. Believes that ZRAN is less exposed to these ASP declines than ESS due to its strength in Japan.
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