So much for pulling back. After a two day, six-point correction, the Nasdaq rebounded on the strength of software, semiconductor and biotech stocks. That's right biotechs. Don't normally spend much time talking about biotechs on this page, but BTK index has rallied by 26% since 4/11. Sector is also fast approaching its 52-wk high of 435.69.
Pacing today's 2.1% rally in biotechs were Amgen (AMGN), Chiron (CHIR), Genentech (DNA), Genzyme (GENZ), Gilead Sciences (GILD), ICOS (ICOS), Idec Pharmaceuticals (IDPH) and Medimmune (MEDI). With the obvious exception of DNA, all of these stocks are components of the Nasdaq 100.
Like tech, biotech stocks have benefitted from generally upbeat earnings news, technical buying, short-covering and an increased appetite for risk. Recent clinical news has also been (on balance) positive, suggesting a more accommodating FDA. While many of these stocks are short-term overextended, the bullish technical tone and the apparent thawing out at the FDA suggests that group will continue to underpin Nasdaq in the weeks to come.
Strength in software group came on heels of decent earnings news out of Intuit (INTU +7.3%) and Computer Associates (CA +11.4%)... Chips were driven by Intel (INTC +1.7%), which reaffirmed guidance at its analyst meeting.
Overall, sector and market continue to exhibit resilience in the face of overbought indicators. Rotation and short-covering are two key factors. However, short squeeze should have about run its course, making additional gains more difficult to come by - at least in the absence of a new catalyst.
Robert Walberg, Briefing.com
5:58PM Thursday After Hours price changes vs 4pm ET levels: Not much enthusiasm in the after hours trade as the S&P futures, at 946, are in line with fair value while the Nasdaq 100 futures, at 1163, are 1 point below fair value.
Per usual, Dell (DELL 31.53 -0.65) had plenty to brag about in the way of market share gains and its ability to outperform industry peers when reporting earnings tonight. To be exact, Dell posted (Apr) earnings of $0.23 per share that were in line with the Reuters Research consensus estimate and up 35% from the yr-ago period. Revenues rose 18.2% year/year to $9.53 bln and Dell's Q2 (Jul) EPS guidance of $0.24 was in line with the current consensus estimate. One item, though, that may have tempered the market's response was an awareness that Dell's Q2 revenue guidance for 15% growth, which equates to $9.73 bln, is a bit below the current consensus estimate of $9.76 bln.
11:27AM Earnings Preview - Dell Computer (DELL) 32.50 +0.25: Ever shown up to a party just as it's winding down? Well, Dell's earnings report, due after today's close, is likely to be the equivalent of last call at the bar. Anticipating a strong report, investors have bid DELL up by 14% in just the last two weeks. The stock, which established a new 52-wk high again this morning, is up 22% year-to-date.
The market's enthusiasm for DELL is not without merit. During extremely difficult industry conditions, the company's low-cost model has enabled it to keep prices down and steal share from its competitors. Company is also making significant headway in the enterprise and printer markets -- areas of considerable growth for the PC giant.
Just how good will the numbers be? If the company meets the consensus estimates for sales and earnings of $9.5 bln and $0.23, we're looking at year-over-year gains of 18% and 35%, respectively. In today's tech environment, those numbers are huge. Briefiing.com also notes that it would also represent DELL's biggest percentage revenue gain in more than two years. Strong notebook and enterprise growth are seen to be behind the big jump in revenues.
However, in light of the stock's recent advance it will gain little from the headline numbers. Guidance will be the key, and that could be sobering. Street looking for EPS of $0.24 on sales of $9.76 bln. Also expecting company to note that while it continues to win share in all markets, it remains vulnerable to the sluggish economy and the lackluster IT spending environment. SARS might even get a mention as a potential hurdle.
The biggest obstacle to future growth, especially in Q2, is DELL's relatively large exposure (15%-20% of US sales) to the government/education market. Anybody paying attention to their local political scene knows that states across the country are suffering from severe budgetary shortfalls. The budget crises could threaten DELL's ability to hit the Q2 revenue consensus.
With the stock currently trading at 32.6x FY04 estimated earnings of $1.00, there's no room for disappointment of any kind. By comparison, the tech sector as a whole trades at roughly 21x FY04 earnings. Quite simply, DELL is priced for perfection. Consequently, even if the company delivers strong Q1 earnings and manages to reaffirm its Q2 and FY04 targets, Briefing.com contends there's little upside left in the stock.
If you are thinking about buying DELL on the heels of a good Q1 report, think again. Investors have already celebrated this report -- the party's all but over. And should guidance for Q2 disappoint in any way, the hangover is apt to be nasty. -- Robert Walberg, Briefing.com
6:06PM Semi Equip book-to-bill falls to 0.86 : The semiconductor capital equipment industry book-to-bill ratio falls to 0.86 in April, down from a revised ratio of 0.91 in Mar. Bookings figure of $737 mln is 5% below the revised March level of $777 mln. The book-to-bill figure also comes in well below the Fulcrum est of 1.01 and Fahnestock's est of 1.00.
4:06PM Dell Computer reports in line; guides for Q2 (DELL) 32.02 -0.23: Reports Q1 (Apr) earnings of $0.23 per share, in line with the Reuters Research consensus of $0.23; revenues rose 18.2% year/year to $9.53 bln vs the $9.52 bln consensus. Company sees Q2 (Jul) earnings of $0.24, in line with. R.R. consensus of $0.24 and Q2 (Jul) revenues of $9.7 bln, also in line with R.R. consensus of $9.7 bln.
2:35PM Relative Weakness: MRVL breaks down to lows of day 27.55 -0.04:
EMKR Short-Squeeze Alert -- EMCORE (2.40 +0.19) May begin to see interest develop in name as shares of semiconductor stock clear the 200-day moving avg. Today's 8.6% advance is occurring on 1.6x avg volume of 120k. Specifically, EMKR is a provider of compound semiconductor products for the broadband and wireless communications markets. Short-interest represents 6.5% of the 28 mln share float.
12:43PM Motherboard supply comments seen as potential negative for ICST 23.05 +0.79: Intel data could be deemed negative for ICST in light of ICST's clock chip business being directly tied to motherboard volumes. (If trading for downside action here would be cognizant of the relative strength in ICST intraday, and high short-interest of 14%).
12:17PM Takeaways from motherboard conference call : We are hearing that Smith Barney is out with cautious comments on PC chip vendors in light of motherboard conference call. In addition, supply chain building inventory at the request of customers also deemed as negative from chip-level point of view.
12:11PM INTC: Hearing tier-one firm out with cautious comments intraday 19.69 +0.03:
10:59AM INTC turns lower intraday on talk that website raising inventory concerns 19.69 +0.03:
12:08PM Economic Data : Philly Fed softer than expected at -4.8. Employment inched higher to -10.9, inventories sank to -7.3, shipments rose to -2.3, outlook fell to 45.2 and capital spending fell to 8.4. Both prices paid and received fell to 8.9 and 2.1, respectively. Market averages extend pullback with the Dow and S&P 500 slipping into the red, Nasdaq Comp just above unchanged.
12:03PM Philadelphia Fed Index for May at -4.8 : Initial reaction in the market is slight disappointment given the earlier strength in the Empire State Index.
9:56AM SanDisk follow-up: Stock blows through its 52-wk high (SNDK) 29.39 +0.59: Stock was highlighted on this page yesterday as traders positioned in the stock late in the day for a breakout to a new 52-wk high. After slipping in early action, stock has exploded off its lows to take out the $29.20 high. As noted yesterday, short-interest in this name is roughly 25%.
8:05AM Plexus Corp cut to Sector Perform from Outperform at RBC (PLXS) 11.63: The downgrade follows a 46% surge in price over the past 3-4 months vs 13% for the NASDAQ. Price target $12.50
7:16AM Lam Research cut to Reduce from Neutral at UBS -- valuation (LRCX) 16.62:
Texas Instruments (TXN) 19.60 +0.18: TI and STMicroelectronics (STM) announce that they will offer ICs based on technology developed jointly with Nokia that together compose standard CDMA chipsets. This technology has been incorporated in the Nokia-specific chipset used in its cdma2000 1X phones, and following generations of this technology will be used in Nokia-specific chipsets for future 1xEV-DV handsets.
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