From Briefing.com: Updated: 08-Apr-03 - General Commentary - As we've come to expect over the past couple of weeks, war news dictated the market's direction. Given that the news over the weekend was relatively positive, with US tanks rolling into Baghdad, stocks gapped higher off the open.
That was the easy part. Building on that opening gain was the harder part, and the sector/market didn't prove up to the challenge. Stocks drifted lower for the remainder of the day, with the major market indices relinquishing all but a fraction of their big opening gains.
Nevertheless, the indices ended with gains and the intermediate- to long-term technical tone continued to improve. Though there's still the possibility of a negative news shock from the Gulf, market is convinced that the war will be won and won in short order. Consequently, geopolitical concerns will begin to move to the back burner.
Moving into the spotlight - earnings. Handful of companies due to report later this week, with slew of firms scheduled over the following two weeks (see Briefing.com's Earnings Calendar for specifics). We speculated on this page yesterday that earnings season shaping up as a win/win proposition for investors.
If the market's response to recent economic data is any indication, investors are discounting bad Q1 news due to the war effect. Consequently, negative news isn't likely to have much impact on broader market. On the other hand, positive surprises likely to bolster sentiment further, as investors view good news as sign of things to come in a post-war environment.
Under this scenario, investors can expect the recovery rally to persist for at least another couple of weeks. Additional upside might not be tremendous, but overall bias should be positive. Important resistance levels in the Nasdaq are at 1461 and 1521.
In order for tech-heavy index to climb much further than the 1521 area, however, would need to see more consistent and compelling evidence of a turn in end-user demand. Hope can only take the sector/market so far -- at some point earnings growth needs to accelerate or sentiment will shift and the bears will be heard from yet again.
Robert Walberg, Briefing.com
6:21PM Monday After Hours price changes vs 4pm ET levels: Maybe the focus is on Iraq, maybe it is on the fact that this morning's rally effort was vanquished, or maybe traders have cleared out to get a good seat at the local watering hole for tonight's Kansas-Syracuse game. Whatever the case may be, it is apparent that there is little conviction in the after hours trade as the S&P futures, at 878, are 1 point below fair value while the Nasdaq 100 futures, at 1053, are 2 points below fair value.
Frankly, there just isn't much compelling news in extended action to get the market's juices flowing as the headlines have been generated by companies that lack market-moving influence.
Among the more notable items are Q1 earnings warnings from the likes of software company Manhattan Associates (MANH 18.65 -1.36), and semiconductor companies, Microchip Technology (MCHP 18.76 -1.77) and RF Micro Devices (00C0 6.05). Aside from being in the technology sector, the common thread between those companies is that they talked of decreased demand, or delayed purchase decisions by customers, at the end of the quarter.
4:35PM Microchip guides Q4 lower (MCHP) 20.53 -0.23: Co. says Q4 net sales are expected to be approximately $159 to $160 mln; Q4 EPS are expected to be approximately $0.16; -- Multex consensus estimates are $0.17 per share and $165.1 mln respectively. Says it has "continued to see a sharp drop off in business, which we attribute to the impact of the war in Iraq."
4:05PM RF Micro Device updates March qtr guidance (RFMD) 6.05 +0.05: Co. says revenues for the March quarter are expected to be approximately $138.3 mln, and the loss for the quarter is expected to be in the range of or $(0.05) to $(0.07) per share -- Multex consensus estimates are $0.00 per share and $135.1 mln respectively. Says despite exceeding its original revenue estimate, the company attributes the increase in its expected net loss for the quarter primarily to a shift in product mix.
2:23PM Dell Computer cut to Hold at AG Edwards (DELL) 29.32 +0.45: AG Edwards downgrades to Hold from Buy based on valuation; firm believes DELL shares are now fairly valued at about 30x their 2003 est of $0.99 and about 25x their 2004 est of $1.17 given the current geopolitical environment and their belief that IT spending will likely remain muted throughout 2003.
10:57AM Nasdaq testing support at 1419 to 1423 : -- Technical -- Index is currently testing notable support in the range of 1419 to 1423 -- this is an important longer-term area that brackets 1) the September 11th-induced reaction lows, which bottomed at 1423, and 2) the reaction lows back at October 1998, which bottomed at 1419. If this support point should fail, look for a subsequent floor at 1411. To the upside, continue to look for that 1423 area to serve as a near-term pivot point, followed by subsequent overhead at 1431. For a more detailed account of the current technical outlook, please click here.
9:59AM SARS impact on semiconductor industry larger than war with Iraq-- First Albany : First Albany is cutting its growth estimates for the Semiconductor industry from 8% for 2003 to -5% (plus or minus 10%), with a point est of 0% growth. Firm believes the impact of SARS on the semiconductor economy is going to be larger than that of the war with Iraq; thinks that SARS is likely to have an incremental negative impact over the next couple of qtrs that is not comprehended in Wall Street models; notes that roughly 70-90% of all PCs are assembled in Asia. Firm recommends reducing exposure to the group... (SOX currently trading 4.7% higher on the day).
9:31AM Linear Tech, Maxim cut to Underperform at JMP : JMP Securities downgrades LLTC and MXIM to Mkt Underperform from Mkt Perform based on rich valuation as well as their long-term concerns regarding a slowdown in secular growth rates in the high-end analog mkt and intensified competition; LLTC target is $22, MXIM target is $28.
9:30AM Nasdaq technical levels : -- Technical -- From current levels, look for modest overhead at 1431 followed by additional resistance at 1442. To the downside, the Nasdaq faces substantial initial support in the range of 1419 to 1423 followed by a more modest floor at 1411.
9:27AM S&P 500 and Dow levels of interest : -- Technical -- The March high for the S&P 500 is at 895.90 with next resistances in the 898/900 congestion area followed by 903/904 with a swing target, trendline and the 200 day ema near 907 (not above the latter average since March 2002). Resistance for the Dow is in the 8470/8480 area with its 200 day ema and high from March not coming into play until 8500 and 8522, respectively.
8:41AM Broadcom will allow employees to exchange under-water options (BRCM) 13.13: Under the program, eligible employees holding options to purchase Broadcom common stock with exercise prices per share of $23.58 or more will be given the opportunity to exchange those options for a number of new shares or new options based on formulas set forth in the Offer. A total of 57 million options are eligible for participation in this program. BRCM expects to take a $238 mln charge in connection with the offer.
8:34AM Jabil Circuit upgraded at Needham (JBL) 18.70: Needham upgrades to Strong Buy from Buy due to increased confidence that their FY03-04 EPS ests can be achieved as well as their belief that industry diversification, especially in the medical sector, will be successful. Target is $29.
8:11AM Vitesse Semi IC products deployed by Lucent (VTSS) 2.34: Announces that its Timestream family of products (VSC9186, VSC9187 and VSC9188) has been deployed in Lucent's Metropolis DMX Access Multiplexer.
7:53AM Standard Micro beats by $0.01, guides full yr below consensus (SMSC) 14.57: Reports Q4 net of $0.06 a share, $0.01 better than the Multex consensus. Revenues rose 27% to $42.6 mln (consensus $42.15 mln). For Q1, co sees EPS of $0.04 on revs of $42 mln (consensus $0.03/$42.16 mln). Projects 2004 net of approx. $0.20 (consensus $0.34).
7:50AM Qualcomm cut to Sector Perform at RBC (QCOM) 34.29: RBC Capital downgrades to Sector Perform from Sector Outperform due to heightened concerns regarding CDMA handset unit growth in China and Korea, as well as their expectation of improved traction of NOK's CDMA products; therefore, firm believes slower near-term growth may reduce the premium multiple in which QCOM shares trade; cuts price target to $38 from $45.
7:44AM JP Morgan cuts Western Digital, Maxtor to Neutral : JP Morgan downgrades WDC to Neutral from Overweight, citing seasonally weakening PC demand, a fragile pricing environment, and high valuation. Firm downgrades MXO to Neutral from Overweight based on their belief that the co continues to suffer lingering effects from its transition to 80GB/platter technology. Firm also downgrades RDRT to Underweight from Neutral.
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