Updated: 10-Jan-03 - General Commentary - Didn't take long for Nasdaq to go back up and test its 200-day moving average, as investors used yesterday's modest retreat as a buying opportunity. Gains were widespread and in the end, the Nasdaq closed above its long-term moving average by a few points. It was the first time the index closed above its 200-day moving average since March of last year.
Though technical traders like to see a decisive breakout (a few points doesn't qualify) and/or multiple closes above/below the 200-day moving average before signal of trend change is confirmed, today's penetration of the 200-day moving average was certainly a step in the right direction toward reversing the Nasdaq's long bear trend.
Investors will want to keep a close eye on how the index/sector performs in the days just ahead. In particular, Briefing.com suggests looking to see if the 50-day moving average confirms the bullish move by following the index back above the 200-day moving average. Have to go back to last February for last time 50-day was above 200-day moving average.
Technical mumbo jumbo aside, reason for the rush of buying coming from an unlikely source - preannouncement season. Foundry Networks (FDRY) most recent example of tech company guiding estimates higher. EMC (EMC), Kronos (KRON), Mercury Interactive (MERQ), Storage Tech (STK) and WebMethods (WEBM) among the firms that have already done just that earlier this week. Though still relatively small in number, the steady diet of positive surprises is being well received by a market hungry for good earnings news.
Is it premature to say the sector has turned the corner on earnings? Probably. But volume and moving average trends suggest that traders are increasingly confident that the rebound in IT demand has indeed begun and that earnings growth is soon to follow.
Briefing.com remains skeptical, but there's no denying that sentiment has improved considerably and that sector momentum is building.
Robert Walberg, Briefing.com
4:57PM Silicon Labs appoints Pres/COO (SLAB) 21.01 +0.14: Company appoints Dan Artusi to post of president and chief operating officer, effective immediately.
4:23PM Advanced Micro upgraded at UBS (AMD) 6.91 +0.22: UBS Warburg upgrades to Hold from Reduce, citing the removal of near-term liquidity risk after a successful convertible as well as aggressive cost cutting.
Close Dow +180.87 at 8776.18, S&P +17.65 at 927.58, Nasdaq +37.40 at 1438.47: Aided by a number of helpful influences, the equity market got back on a bullish track today, reclaiming the entirety of yesterday's losses and then some... Spearheading the advance was the tech sector, but it had plenty of company from other key groups such as the financial, transportation, basic materials, and retail sectors... The latter was a highlight throughout the day as it got a boost from a sense of relief that December same-store sales results were more, or less, in line with expectations...
That consideration, frankly, provided a lift for the broader market, which was also cheered by an appeasing initial claims report for the week of Jan. 4, positive earnings pre-announcements across an array of industries, and talk of an asset re-allocation trade that centered around rumors of a $5 bln European shift out of 5-yr notes and into equities... Whatever the case may have been, there was certainly plenty of damage seen in the Treasury market where sizable losses were suffered across the yield curve... The 5-yr note, in fact, dropped 24 ticks, pushing its yield up to 3.17%-- a 17 basis points change from its previous close...
As for the equity market, there were pockets of weakness but they were limited mostly to individual issues... In fact, gold was the only real laggard of note from an industry perspective as its safe-haven appeal was diminished in the wake of the broader market rally... Separately, we would add that the market took some solace in the contention from the chief UN arms monitor that no "smoking guns" have been found during the inspection process in Iraq...
Even so, the unsettled nature of the issue was on display in a subsequent press conference in which it was noted that arms inspectors aren't satisfied with Iraq's weapons declaration and that more proactive support from Iraq is needed... That acknowledgment took some wind out of the market's sails in the early afternoon trade and fueled another rise in oil prices (+$1.43 at $31.90/bbl), but it wasn't long before the bullish bias took over again... To that end, the major indices mounted a late charge and finished near their best levels of the day... Strikingly, the late buying efforts left the Nasdaq Composite trading above its 200-day simple moving average (i.e. 1436)...
Tomorrow, traders will take their cue from the December employment report, which is scheduled for release at 08:30 ET... Briefing.com expects nonfarm payrolls to increase 10K (consensus is +20K) and the unemployment rate to hold steady at 6.0%, which is in line with the consensus estimate...DJTA +1.7%, Nasdaq 100 +3.2%, Russell 2000 +1.8%, SOX +2.7%, S&P Midcap 400 +1.7%, NYSE Adv/Dec 2343/988, Nasdaq Adv/Dec 2292/1001
3:37PM SOX giving back ground; SNDK -11%, MU -1.6% and TXN -1% lead decline; hearing that negative AMAT rumor in the market :
2:59PM Skyworks reaffirms fiscal Q1, Q2 guidance (SWKS) 8.90 +1.08: Sources listening to SWKS's presentation at the Needham conference tell us that the co reaffirmed both their Dec and March qtr guidance; however, we have not been able to confirm this with the co.
12:38PM Texas Instruments excluded from Semi rally; SOX up 3.7% as TXN slips to lows of day (TXN) 16.05 +0.05:
11:54AM Nasdaq Composite breaks 200 day average : -- Technical -- The index has surged on the back of strength in the networking, semi, wireless, software and telecom sectors with the 200 day sma (1436) and the Jan recovery high (1442) recently penetrated. Initial resistance in the 1445/1448 area has held for the time being with some intraday consolidation possible. However, a continued stabilization near, and a clean closing break above the moving average turns the intermediate term bias decidedly bullish. Short term resistances are at 1463 and 1468 followed by 1475/1478.
11:36AM SanDisk slips back toward support (SNDK) 21.39 -0.53: -- Technical -- The issue has faltered after a favorable start and it is currently vacillating near the session low and yesterday's low at 21.32/21.30. If a break is seen, the next chart level of interest is in the 21.11/21.02 area. Takes a push back through resistances at 21.55 and 21.80 to improve the very short term bias.
10:41AM FEI Company (FEIC) 18.57 +2.32: Prudential upgrades Hold to BUY. Target $24. After termination of merger agreement with VECO; thinks co could guide March quarter revenues upward due to contributions from data storage business.
10:29AM STMicroelectronics (STM) 21.58 +0.78: Salomon Smth Brny upgrades In-line to OUTPERFORM. Cites co's exposure to wireless.
10:26AM Foundry Ntwks (FDRY) 9.47 +1.32: Deutsche Securities upgrades Hold to BUY. Target $12. Following company's preannouncement last night of significant top line upside for Q4.
10:20AM S&P 500 intraday levels : -- Technical -- Solid bounce off support tested yesterday at 908 (38% retrace of recent run) with the index approaching resistance at 924/925. There is relatively little of significance thereafter other than a minor ceiling near 929 standing in the way of the recent high at 931.77. Intraday supports are at 921/920 and 917.
9:36AM FEI Company upped to Buy at Pru after merger termination (FEIC) 17.05 +0.80: In pre-market note, Prudential upgrades issue to BUY from Hold after company and Veco (VECO) terminate merger agreement. Firm maintains its $24 price target, which is based on 2.5x book value. Sees potential for FEIC to guide MarQ revs higher.
8:40AM Foundry Ntwks: Fulcrum reiterates Sell rating (FDRY) 8.15: -- Update -- In contrast to Deutsche's upgrade (7:08), Fulcrum reiterates their Sell rating and $5.50 price target on FDRY, saying at current levels the shares are priced to perfection; firm also believes that increased competition from CSCO, EXTR, ETS, and even NT will ultimately impact the co's operating results.
7:42AM STMicroelectronics upgraded at Solly (STM) 20.80: Salomon Smith Barney out of Europe upgrades STM to Outperform from In-Line due to the co's exposure to wireless (and NOK in particular); firm forecasts higher silicon content and end-mkt growth in wireless, and STM derives 25% of revs from that area; moreover, STM could potentially increase its silicon per cellphone by 50% during 2003 due to its relationship with NOK. Target is $28.
7:08AM Foundry Ntwks upgraded at Deutsche (FDRY) 8.15: Deutsche Securities upgrades to Buy from Hold following its preannouncement last night of significant top line upside for Q4; product cycle continues to pay off with mkt share gains, results should help lay to rest concern about near-term sustainability of the top line, and firm expects Street ests to be revised up meaningfully when the co reports the qtr on Jan 29; raises 2002-04 ests and raises price target to $12 from $8.
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