Late CSCO gains evaporating after their outlook: From Briefing.com: 5:26PM Cisco Systems gives fiscal Q2 guidance below consensus (CSCO) 12.96 +0.27: -- Update -- On call, says its own visibility has tightened, and hence, it is being conservative with its guidance... for fiscal Q2 (Mar), it is projecting revenue to be sequentially flat to down 3-4%, which implies revenues in range of $4.66-4.85 bln; Multex consensus is $4.92 bln... gross margin projected in 66-68% range; opex to be down slightly from fiscal Q1... CSCO +0.33 at 13.29
5:21PM Cisco Systems comments on fiscal Q2 outlook (CSCO) 12.96 +0.27: -- Update -- On call, Chambers says that in areas where CSCO can control, and influence, he is more optimistic heading into fiscal Q2 (Jan) than he was heading into fiscal Q1 (Oct)... but with respect to external factors, he is more cautious heading into fiscal Q2 than fiscal Q1 because customers' visbility has tightened even further
5:13PM Cisco Systems comments on promising markets (CSCO) 12.96 +0.27: -- Update -- On call, says that, over the short-term, the most promising areas among its 9 growth markets are Security, IP Telephony, Storage, Wireless LAN, and Data, Voice and Video Convergence... CSCO +0.76 at 13.72
5:01PM Cisco Systems looks for continued challenges in service provider spending (CSCO) 12.96 +0.27: -- Update -- On call, says it thinks the downward trend in global service provider capex spending will remain challenging for next several quarters... thinks there is a good chance of more waves of capex reductions by service providers... CSCO +0.63 at 13.59
4:55PM Cisco Systems to remain active with share buyback (CSCO) 12.96 +0.27: -- Update -- On call, notes that it has approximately $5 bln remaining under its $8 bln share buyback plan... says it will remain active in the market with share buybacks going forward... CSCO +0.71 at 13.67
4:39PM Cisco Systems book-to-bill below 1.0 (CSCO) 12.96 +0.27: -- Update -- On call, says book-to-bill in fiscal Q1 (Oct) was below 1.0... reminds listeners that, on its last earnings call, it indicated it wouldn't be surprised if Q1 book-to-bill was below 1.0... CSCO +0.53 at 13.49
4:09PM Cisco Systems beats by a penny (CSCO) 12.96 +0.27: -- Update -- Reports Q1 (Oct) earnings of $0.14 per share, $0.01 better than the Multex consensus of $0.13; revenues rose 8.0% year/year to $4.85 bln vs the $4.81 bln consensus.
4:08PM Coherent misses estimates (COHR) 18.21 -0.08: Reports Q4 (Sep) earnings of $0.08 per share, $0.03 worse than the Multex consensus of $0.11; revenues fell 8.1% year/year to $106.1 mln vs the $98.6 mln consensus.
Close Dow +92.74 at 8771.01, S&P +8.36 at 923.76, Nasdaq +17.82 at 1418.99: The stock market opened the session on a bullish note with the Republican sweep of Congress and the resignation of the SEC Chairman providing the early session fuel. The general view is that with Congress and the White House aligned, the logjam that stymied previous attempts to push through pro-growth policies, has been washed away. Sectors considered to be biggest beneficiaries of election results performed well today: drugs (+2.2%); defense (+4%); oil service (+4.1%); and healthcare (+3.9%). The resignation at the SEC was considered a step toward rebuilding investor confidence in the equity markets. Despite these favorable developments, much of the day was spent vacillating within limited ranges as market participants awaited the Fed announcement. The FOMC did not disappoint as they did indeed come through with an easing. However, the 50 bp cut to the Fed Funds rate was a surprise with volatile but still generally confined trade dominating. It took some time to digest the news but the market did put together a late run lifting the Dow and the S&P 500 to new recovery highs. The Nasdaq Composite outperformed on a percentage basis but was unable to push above the early week highs related to MSFT. The final results were encouraging but considering the extent of the easing and the potential for fiscal stimulus, the advance was somewhat subdued. Over the near term the market will attempt to factor in these positives vs the weak economic environment, the timing of an earnings recovery and the possibility of war with Iraq. Volume was on the heavier side with market internals favorable.DJTA +2.9%, DJUA +1.2%, Nasdaq 100 +1.4%, Russell 2000 +1.7%, SOX +3.8%, S&P Midcap 400 +1.1%, NYSE Adv/Dec 2178/1083, Nasdaq Adv/Dec 2096/1200
3:55PM Thomas Weisel on Wireless : As North American and European markets mature, firm looks to Indian wireless market to present significant growth opportunity; projects it to become 3rd largest in Asia within 5 years. Beneficiaries of new market would include QCOM, NOK, MOT, ERICD, NT, and LU. In infrastructure, LU and NT are leveraged to grow in new CDMA builds; NOK, ERICD, and MOT likely to benefit from capacity expansion by GSM operators. In handsets, QCOM will benefit from early traction in CDMA handsets, as NOK leads charge in existing GSM handsets.
1:37PM Qualcomm (QCOM) 35.24 -0.39: Thomas Weisel's analysis and checks indicate global CDMA handset market continues to post strong growth driving QCOM's top line through royalty and chipset sales; expects company to post revenues and EPS above previous guidance and Steet consensus of $810 mln and $0.27 per share in Q402 earnings report expected tomorrow after close of market; looks for company to increase Q103 and Y03 guidance. Despite strong fundamentals and optimistic view of company, believes premium valuation fully reflects company's strongest-in-group near-term prospects; thinks upside is limited from current levels.
2:40PM Fed funds futures : After the surprise 50 bp cut, the fed funds futures are no longer discounting additional rate cuts. The probability of cuts at the December and early 2003 meetings is zero at present.
2:36PM Market reversal : It wouldn't be a Fed day if there weren't at least one reversal of the initial reaction; Dow now -87 and Nasdaq -13; dollar loses a half figure against yen and euro; Treasuries rallying with the 10-year up nearly a point. It's not unusual to see several sharp market reversals on a Fed day, so it's not over yet.
2:24PM Fed outlook : The Fed's shift back to neutral after the half point cut suggests that the Fed is still optimistic that the economy can avoid a double dip; this move buys them some cheap insurance given that inflation risks are minimal, but doesn't necessarily indicate that more cuts are in store.
2:18PM Surprisingly dull response to Fed action : Both Dow and Nasdaq were near unchanged before the Fed's announcement; they have rallied, but not dramatically: Dow +34, Nasdaq +10.
2:16PM Fed cuts half point, moves to neutral directive : Fed says that "incoming economic data have tended to confirm that greater uncertainty, in part attributable to heightened geopolitical risks, is currently inhibiting spending, production, and employment". Vote was unanimous, and Fed moved back to a neutral directive after taking this aggressive action. The Fed also cut the discount rate by 50 bp.
2:14PM Fed cuts funds rate 50 bp to 1.25%:
9:44AM Technical Levels : When we reviewed the Nasdaq yesterday, we pointed to Monday's candlestick configuration as an indecisive doji. As it turns out, the index actually followed up Monday's session with a modest move higher. In fact, the index closed just above the 1,400 level which happened to be near its best levels of the day. So while the markets have been ignoring fundamental excuses to sell off, it looks as if they may be oblivious to the technical caution flags as well.
Now outside of the straight technicals, note that the Fed's decision on interest rates is due out at 2:15 ET this afternoon. This means you should expect drier than normal trading conditions for the front half of the session. Yet it also means that if anything unusual would come out of this Fed meeting, the technicals are likely to take a back seat for a day or two.
So while we all wait on the Fed, there continue to be several interesting points worth locking away for future reference. Note that at the finish of Monday's powerful rally, the index had edged above the upper end of its 10-day Bollinger bands. This marked the second consecutive session in which the index closed above its 10-day bands. Outside of those two instances, the most recent occurrence of an upside break was on October 15th, with a close at 1,282. You can see the index subsequently got hammered the following day -- on October 16th -- partly as a consequence of Intel's earnings warning. After that, the bias has been largely higher leading us to the more recent Friday and Monday breaks above those bands.
Now stepping back to look at the bigger picture, note that prior to the closing upside breaks just covered -- on October 15th, November 1st and November 4th -- you have to go back to March 4th, 2002 to find the last break above its 10-day Bollinger bands. For those who are wondering, on March 4th the Nasdaq closed at 1,859. Yet what's more notable is that two consecutive closing breaks higher, as we experienced with the Friday and Monday sessions, is exceptionally rare. In fact, there is not a single occurrence of two consecutive breaks going back to the March 10th, 2000 peak at Nasdaq 5,132.
Now looking at these breaks outside the bands conventionally suggests two alternate dynamics looking ahead. First, it suggests that in the very near-term the index may be somewhat extended as it has edged outside the trading range which encompasses two standard deviations of its 10-day volatility. Yet while consolidation might be in order, the underlying strength in the index is significant -- it might be asking too much to expect a significant pullback from current levels. Yet this leads us to our second, and more important, point. Namely, on an intermediate-term time frame, the underlying strength which pushed the Nasdaq through that upper band should follow through leading to additional upside.
For the time being, the straight technical levels are little changed versus yesterday. Look for the 1,394 to 1,401 range to serve as a near-term pivot point. To the downside, watch for initial support at congestion in the area of 1,380 to 1,382. That area is followed by additional support at chart congestion around 1,360 and a more important floor in the range of 1,347 to 1,350. To the upside, keep an eye on notable resistance in the range of 1,419 to 1,423 -- this area brackets the September 11th-induced reaction lows which bottomed at 1,423, as well as the reaction lows of October 1998 which bottomed at 1,419. -- Mike Ashbaugh, Briefing.com
9:45AM China to disallow cellphone/video camera: CSFB : CSFB's Asian Tech Daily note says that China will disallow distribution of cell phones with built-in video cameras because it is considered spy equipment; CSFB says this could hurt MOT and NOK, and delay the recovery of the handset industry. The source of this news is not clear, nor is it clear if this would affect phones with built-in cameras of any kind (or just video). Reuters reported yesterday that 9.5 mln camera phones were sold in the first nine months of 2002, with Japanese makers such as Sharp, NEC, and Panasonic dominating the market; NOK and ERICY lagged far behind the leaders.
8:49AM IBM files to sell 19.3 mln shares (IBM) 81.68
7:49AM Telecom leaders to support modest royalty rates for W-CDMA : Industry leaders NTT DoCoMo, Ericsson, Nokia and Siemens today reached a mutual understanding to introduce licensing arrangements whereby essential patents for W-CDMA are licensed at rates that are proportional to the number of essential patents owned by each company. The intention is to set a benchmark for all patent holders of the W-CDMA technology to achieve fair and reasonable royalty rates.
7:43AM Conexant upgraded at Goldman Sachs (CNXT) 1.79: Goldman Sachs upgrades to IN-LINE from Underperform, saying SWKS's convertible deal and payback plan significantly improves CNXT's balance sheet and eliminates an overhang on the stock; also, firm has increased confidence in current qtr assumptions as recent datapoints in the PC components chain have been modestly more constructive; says stock could trade to mid-$2 range.
7:36AM Marvell cut to Neutral at Merrill Lynch on valuation (MRVL) 19.25:
7:13AM Brocade downgraded at Bear Stearns, Deutsche (BRCD) 7.41: Bear Stearns downgrades to PEER PERFORM from Outperform based on concerns about potential for intensifying competition in the SAN switch mkt, the potential for margin erosion from heightened competition, and lack of valuation catalysts; cuts FY03 rev/EPS ests. Separately, Deutsche Bank downgrades to HOLD from Buy and cuts price target to $8 from $12, citing valuation, a tough outlook, and the dilutive impact from the Rhapsody acquisition; cuts FY03 est.
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