Some comments from Briefing.com on Friday: 3:59PM Chart Watch : The divergence between tech and the larger cap indices continued. While the Dow and S&P 500 underperformed during the slide into this week's low, they have outperformed during the recovery rally. The semi sector provides a good example as it pushed to a new low for the move (lowest level since Dec 1998) while the Dow is roughly 9.5% above this week's low. Although the overall performance of the market is not ideal, the tech sector in general did lag during the recovery off of the Sep low. Last week we highlighted the 7650 and 7400 supports. The index split the difference and bounced near the closing lows established during the late 1998 bottom (7539).
The case for at least a trading bottom or only a short lived recovery off of this support will be made next week. Like last Sep when the Dow merely retraced 38% of the initial move, will look for limited pullbacks (38% at 8012, 50% at 7921) and an acceleration of the rally that shows improved breadth readings and stronger volume during advances. The next resistances of interest are at 8400 (congestion), 8471 (50% retracement off the July high) and 8550 (20 day ema). -- Jim Schroeder, Briefing.com
2:43PM Motorola (MOT) 10.79 -1.42: The announcement of COO Ed Breen's departure to become CEO of TYC prompted mixed analyst opinions on the impact of COO's departure on MOT's restructuring plan. Morgan Stanley admits mgmt changes may increase the risk to co's turnaround, but notes successor Mike Zafirovski (head of the PCS sector) has driven PCS to profitability and share gains; maintains their Overweight rating. Raymond James upgrades MOT to STRONG BUY from Mkt Perform citing excellent buying opportunity; stresses investors have exaggerated Breen's influence in co's strategic change .. on a more pessimistic take, Bear Stearns views Breen's departure as likely to be disruptive and believes Breen was viewed as a potential successor to CEO Chris Galvin and maintains their Neutral rating. CIBC downgrades to HOLD from Buy (see In-Play).
11:06AM Fairchild Semi (FCS) 17.70 -0.70: On 7/23, company posted slightly higher than expected Q2 results and said Q3 revs would be largely in-line, but stock declined following the news. Today, FCS slipping another 3.8% after Salomon Smth Brny initiated with a Neutral rating and price target of $19. In recent months, orders have slowed and lead times have contracted, reducing firm's confidence in near and medium-term EPS estimates. Firm would likely become more constructive on shares should FCS see re-acceleration of orders later this fall.
4:11PM Palm board approves reverse stock split (PALM) 1.37 -0.07: Co's Board of Directors unanimously approved and recommended to shareholders a proposal to effect a reverse stock split; the proposed split would be within the range from 1-for-10 to 1-for-20 and could be implemented at any time prior to April 1, 2003.
2:45PM New 52-Week Lows: A host of chip stocks join list : Additions to the new 52-Week low list since this morning's update include NVIDIA (NVDA 14.50 -0.56), Cypress Semi (CY 10.78 -0.71), Analog Devices (ADI 21.31 -1.72), National Semi (NSM 17.83 -0.94).
1:20PM Cisco Systems nears yesterday's low (CSCO) 11.53 -0.08: Stock is in the process of testing yesterday's intraday low of $11.49. A failure here would leave stock vulnerable to a probe of the 52-week low of $11.04 (Sept 27) in the days ahead.
1:08PM Semi Equipment stocks remain on defensive : After gapping up in reaction to Goldman Sachs upgrades, semiconductor equipment stocks AMAT (-0.1%), NVLS (-0.35%), LRCX (-0.75%) have slipped into the red. Intraday reversal in group has caused the SOX (312 -6.03, -1.9%) to pull back 4% from its highs of the morning...Yesterday's low on the SOX was 305.75.
12:49PM IBM retests support zone (IBM) 66.52 -2.83: -- Technical -- Issue came under more concerted selling pressure this afternoon (hit 66.20) but has rebounded after testing support at its June/July lows (66.10/65.70). A sustained push back through 67.30/67.50 would help improve the intraday tone. Failure leaves the door open to a retest/breach over the near term.
9:46AM Michigan Sentiment index 88.1; better than expected : The final reading for the July Univ of Michigan consumer sentiment index was 88.1; a slight improvement from the mid-month preliminary reading of 86.5 and better than expected. This will come as a modest relief to the market given that this uptick occurred despite a pummeling of stocks during the survey period.
8:34AM Western Digital upgraded at Soundview (WDC) 3.09: Soundview upgrades to NEUTRAL from Underperform based on greater confidence in the co's gross margin outlook and signs that pricing is stabilizing; raises 2003 EPS est to $0.32 from $0.19, and maintains year-end price target of $5.
8:21AM Atmel financial guidance remains unchanged (ATML) 2.36: A week after its quarterly conference, ATML comments that financial guidance remains unchanged, and that the co is executing on its restructuring plan to bring costs down and return to profitability.
8:18AM Sanmina-SCI puts some liquidity questions to rest -- CIBC (SANM) 3.52: CIBC World Mkts believes SANM's conference call last night put to rest many questions surrounding liquidity. On the call, SANM covered liquidity, previously unannounced debt covenants, cash sources and uses over the coming qtrs; SANM also reiterated guidance for the SeptQ.
8:08AM Goldman Sachs upgrades semi equipment group : Goldman Sachs upgrades the semi equipment group as company and investor capitulation that orders have turned down drove a sell-off in the stocks; while fundamentals are not likely to improve in the near-term, firm believes that funds flow and seasonality may drive a meaningful move in the stocks. Upgrades AMAT, KLAC, and ATMI to TRADING BUY from Mkt Outperform, NVLS, LRCX, and AEIS to TRADING BUY from Mkt Perform, ACLS to MKT OUTPERFORM from Mkt Perform, MKSI to MKT OUTPERFORM from Mkt Underperform, and CMOS to MKT PERFORM from Mkt Underperform.
Deutsche Securities cautious on semi equipment names (BRKS) : In contrast to Goldman's semi equipment upgrade this morning, Deutsche Securities issued a more cautious outlook before the open; firm said stocks have moved from "expensive" to "reasonably valued", but still not "washed out"; analysis suggested 30-40% more downside until "back up the truck" levels that are irrespective of fundamentals (exceptions are BRKS and CMOS, which are trading below trough levels); also, checks suggest substantial falloff in month of July and capex cuts seem to be accelerating and coming in larger chunks.
General Commentary
While much of the market managed to build on last Wednesday's dramatic gains, the tech sector struggled to keep its head above water... Weakness in the semiconductor sector was principally to blame, as a cautionary outlook from Taiwan Semiconductor (TSM) sent the group reeling... The announcement from TSM seemed to dash whatever hopes remained for a second half recovery in technology.
Though Briefing.com beginning to find some value in the tech sector, we generally agree with the notion that the hardware, networking, chip and telecom stocks will struggle to live up to current growth expectations... That's not to say that techs won't climb from here, especially if Briefing.com's overall market forecast is accurate... However, the pace of growth is likely to be erratic and the depth of any advance relatively shallow.
The demand for IT (information technology) simply hasn't picked up enough to justify much optimism... We saw some improvement in weeks past, but recent tone of conference calls suggests that there's been another downturn... Might be that corporate leaders were waiting to see how the corporate accountability issues would play out before making any future purchase decisions... With President Bush expected to sign legislation this week, it's possible that businesses will put the issue behind them and once again start making investments... Until investors see evidence of such, however, they're likely to view the sector's second half prospects with a healthy dose of skepticism.
In other words, don't look for tech to pace the current rebound -- especially as long as the influential Philadelphia Semiconductor (SOX) index remains on the defensive.
Robert Walberg
finance.yahoo.com |
