From Briefing.com: So the markets resumed this current leg higher Wednesday, once again underpinned by massive total volume. The Nasdaq turned nearly 2.5 billion total shares in a session that rivaled Monday's record for the year.
From a technical perspective, there were two significant levels coming into the session, both of which were cleared on a closing basis. The Dow edged above the 9,000 level, closing at 9,038, and the Nasdaq placed distance on the 1619 level, with its close at 1634. So based on the price action Wednesday, it almost goes without saying the straight technical read remains bullish.
Looking towards Thursday, data on Initial Unemployment Claims is set for release at 8:30 ET, while Factory Orders data are due out at 10:00 ET. As a rule, neither of these reports is conventionally that notable, though in this recent climate, traders have responded favorably to data of all sorts.
Of the two reports scheduled tomorrow, the Claims data may get the edge from the standpoint of impact. Nonetheless, this is recognized as a volatile number, and the market is capable of shrugging it off if it doesn't fit with alternate data points. Be aware that last week, claims dropped to 424K, and the four-week moving average currently rests at 427K. Also note the consensus estimate for tomorrow's number is 421K.
Now Friday morning marks the real point of interest, as the May Employment Report is set for release -- note the May data could very well could serve as headline economic report for the entire week. For a more detailed look at the remainder of this week, please visit Briefing.com's Earnings Calendar and Economic Calendar. -- Mike Ashbaugh -- Briefing.com
6:02PM Wednesday After Hours Price levels are as of 4 pm EST: After a day and another rally, making this the fourth consectuive day of increases for the Dow Jones Industrail Average. The psychological 9000 barrier was also taken out as Dow closed at 9,038.98. After the close same store sales figures were released by several retailers and the intial signs were pretty positive. S&P 500 futures were at 985, one point below fair value. NASDAQ 100 futures were down three points from fair value at 1222.
Close Dow +116.03 at 9038.98, S&P +14.68 at 986.24, Nasdaq +31.09 at 1634.65: The market was on a one-way street heading north today and finished the session with gains spanning 1.3-1.9% for the major indices... After a lackluster start to the session, the better-than-expected ISM Services Index report for May (at 54.5 vs. consensus of 52.0) acted as a catalyst for the market's advance, which catapulted the Dow above the psychological level of 9000...
The blue-chip's ability to stay above that level and to even peek above the December high of 9043, boded well for the bulls and encouraged broad-based gains and a parade of new session highs in the major indices on relatively heavy volume... The advance was supported by the majority of sectors, including the likes of technology, biotech, financial, drug, retail, and transportation... As a matter of fact, the only laggards of note were the S&P 500 health care facility and auto manufacturing sectors...
The latter was under pressure following comments by General Motors' (GM 35.81 -0.14) CEO suggesting that the company's troubles won't disappear once the economy improves and Daimler-Chrysler's (DCX 30.85 -0.80) cautious Q2 outlook and the associated downgrade to Neutral from Overweight by JP Morgan citing, among other factors, the shares' potential for significant downside from current levels... Elsewhere, Treasuries did not budge in the face of the rallying equities and the 10-yr note closed the day up 8/32, bringing its yield to 3.30%... NYSE Adv/Dec 2561/771, Nasdaq Adv/Dec 2230/1009
5:38PM Maxim Integrated guides below consensus (MXIM) 39.15 +0.13: Company sees Q4 (June) revenues of approximately $295 mln vs Reuters Research consensus of $301 mln, reaffirms EPS guidance of $0.24. MXIM also announces it is extending its stock repurchase program.
5:33PM Fairchild Semi reaffirms (00C) 13.84 -0.49: Company backs previous guidance calling for revenues to be flat compared to Q1 03, when FCS reported $353 mln. Consensus is $353 mln.
4:24PM XLNX slips 0.35 in after hours trading :
4:18PM Xilinx updates June qtr guidance (XLNX) 30.00 +0.46: Revenues expected to be up 1% to 5% sequentially, describes guidance as "consistent with prior guidance provided during earnings release conference call on April 17, 2003."
2:55PM Ahead of the Curve: PALM (PALM) 14.50 +2.35 The prodigal son comes home. Handspring, which was the brainchild of Jeff Hawkins, an original founder of Palm who left in 1998 to start Handspring, will be acquired by Palm in a stock swap of 0.09 shares of PALM for each share of HAND. There are two observations on this deal.
First, an odd thing is happening. Normally, on an acquisition, the acquiring company stock goes down. The acquired stock goes up. The arbitrage guys short the acquirer and buy the acquired in order to capture the discrepancy in value on the deal. Here, the arbitrage players appear to be giving up on this deal. Normally, shorting the acquirer and buying the acquirer in "equal" share amounts, based on the conversion ratio give you the arbitrage profit. Using prices from approximately 2:15 EST, shorting 900 shares of PALM would net you $13,167 in proceeds. Buying 10,000 shares of HAND gives you $12,800. The difference is your profit of just $367, or 1.4% on the total required capital commitment of more than $25,000. You collect the profit when your 10,000 shares of HAND convert to 900 shares of PALM and you use that to close the short position. Often arbitraged plays reward better than 1.4%.
But even worse, the spin-off of the software company, PalmSource, will occur before the conversion of the Handspring shares. If you are holding a short position on PALM, you will have to make the dividend payment (share issue) to the original holder of the PALM shares you borrowed to sell short. It is almost certain to cost you more than $367 to acquire those shares and deliver them to the owner of the borrowed PALM shares. This means there is no arbitrage play here, in our opinion, which probably explains why the stock of PALM is rising. No one knows how to calculate the value of the PalmSource shares.
The second point is that PalmSource is the only part of this deal that has any appeal for us - and you don't get any if you own Hand shares now. You only get them if you hold Palm shares. The ex-dividend date for the spin-off is unknown. There will not be much value in the Palm shares that will be left. As a hardware manufacturer in a maturing industry with declining sales, it does not matter much - to us - that they will be the major supplier of these devices. PalmSource will be free to license to anyone else - they will. Palm will just be another hardware vendor of PDAs in a year or so, with a non-scalable business model in a mature market. Through in a negative operating margin, negative operating cash flow of $-32 million at Palm (TTM) and $-29 million at Handspring (TTM), and a stock that pays no dividend, it is really hard to construct a meaningful investment premise. There might be one for PalmSource, but there aren't any details yet on what you would buy.
Palm will now make the greatest PDAs you can find, but it may well be a "last-buggy-whip" situation. - Robert V. Green, Briefing.com
1:27PM Diodes Inc poised for break of multi-year high (DIOD) 19.98 +0.34: -- Technical -- The semiconductor company surged early in the week after issuing guidance and paused after a downgrade yesterday but in today's action it has edged to a minor new weekly high and its highest level since Sep 2000. Volume is above its 65 day average; float 4 mln shares.
9:42AM Westell Tech moves to a new 52-week high (WSTL) 8.02 +0.30:
9:34AM Intersil defended by Legg Mason (ISIL) 22.21 -0.73: Legg Mason reiterates their Buy rating on ISIL; late yesterday, ISIL shares appeared to be weak on a rumor that one of its customers in the WLAN segment, D-Link, was replacing ISIL's product with one from BRCM because of performance issues; firm believes that this rumor is untrue and that ISIL is actually getting more design wins in the 802.11g mkt.
9:32AM Genesis Microchip defended by Pac Growth (GNSS) 17.10 -1.55: -- Update -- Pacific Growth reiterates their Overweight rating on GNSS following the co's warning, saying the rev shortfall should be more than offset by the increase in gross margins and reduction in operating expenses; in addition, firm thinks GNSS is undervalued on a combined basis following its merger with PXLW (expected to close mid-Aug), and believes the fundamental investment thesis remains intact.
9:08AM RF Micro Device quarter may be tracking near low-end of guidance - Soundview (RFMD) 5.47: Soundview believes that slower demand from China is causing RFMD's June qtr to track toward the lower end of guidance; in addition, regardless of short-term changes in handset demand, their primary concern regarding the co is profitability, and they expect the shares to remain in their trading range until the profitability issues are addressed; maintains Neutral rating and $5 price target.
8:54AM JP Morgan reits Underweight on Intel (INTC) 21.10: JP Morgan reiterates their Underweight rating on INTC in advance of the co's mid-qtr update on Thursday; although firm expects INTC to maintain its Q2 guidance during the call, they believe the co will have to lower guidance at some point given the extremely back-end loaded nature of the qtr, inventory build, SARS-related weakness, and weaker-than-expected motherboard order rates; in addition, the stock remains overvalued at about 34x their CY04 EPS est of $0.63 and a PEG ratio of 5, well above its 1990-98 range of 10-25x forward 12-month EPS.
9:40AM Kopin (KOPN) 6.20 +0.69: CIBC Wrld Mkts upgrades Sector Perform to SECTOR OUTPERFORM. Target $7. Cites improving fundamentals in two key growth mkts: CyberLite LEDs and CyberDisplays.
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