From Briefing.com: Headed into Thursday's session, we had reason to believe the trading action would be lackluster. After all, several economic reports and a plethora of earnings news in the past couple of weeks proved to be as inspiring to traders as a discourse on the Paleozoic Era by Alan Greenspan might be. In other words, a state of ennui had hit the market and the indices weren't going anywhere fast.
That changed Thursday morning, however, as a series of economic reports got the market's pulse racing. Specifically, Q2 GDP, initial claims, and the Chicago PMI all checked in stronger than expected, validating the burgeoning belief that economic activity is/will be getting stronger. Market participants finally responded in kind and drove the indices sharply higher in a broad-based buying effort that saw the tech sector assume a leadership position.
At their best levels of the day the Dow, Nasdaq, and S&P sported gains of 161, 37, and 17 points, respectively. The bulk of those gains were achieved by 11:00 ET... and then, the buyers went away. For a long while, the indices trended sideways, but ultimately came spiraling downward amid a torrent of late selling interest that left the indices with only modest gains by the closing bell. The obvious question for the reversal of fortune was: what the heck happened?
Briefing.com heard talk of there being a large seller of S&P futures, month-end maneuverings with managers cognizant that the market is entering a typically weak seasonal period, and despite Thursday's round of encouraging data, renewed anxiety ahead of Friday's batch of data that is highlighted by the July employment report and ISM Index. For a preview of Briefing.com's, and the market's, expectations on each, be sure to visit our Economic Calendar.
What the equity market's loss of momentum means is really anyone's guess. Our take is that it is consistent with underlying concerns about the backup in interest rates and a sense that the bulk of the good economic and earnings news seen of late has largely been discounted in stock prices already. For the record, the 10-yr note hit 4.56% in the mid-afternoon before paring its losses as the stock market went into retreat mode.
In light of Thursday's early rally and late sell-off, making a prediction on how the market will react on Friday with so much data to digest is futile. We have preached caution for a while now with respect to the tech sector and the broader market. At this point, we're going to preach on.-- Patrick J. O'Hare, Briefing.com
5:54PM Thursday After Hours Price levels are as of 4 pm EST: A very popular song proclaims that what goes up, must come down. The market was up over 150 points midway through the day, but then came back to earth and ended with a modest gain. The Dow closed higher by more than 33 points and stands at 9233, the S&P 500 added 2 points and closed at 990. S&P 500 futures were at 989, in-line with fair value. NASDAQ 100 futures were up one point from fair value at 1280.
Media giant Walt Disney (DIS 22.50 +0.58) announced Q3 (Jun) earnings of $0.19 per share, excludes multiple items, $0.03 better than the Reuters Research consensus of $0.16. Revenues rose 6.6% yr/yr to $6.18 bln and were ahead of the $6.08 bln consensus.
PacifiCare (PHS 57.69 +1.79) released Q2 (Jun) earnings of $1.70 per share, excluding a $0.22 charge, $0.38 better than the Reuters Research consensus of $1.32. Revenues for the healthcare company fell 1.4% yr/yr to $2.73 bln and were below the $2.74 bln consensus. The Company also issued guidance for Y03 EPS of $5.56 - $5.66, excluding $0.89 in charges, vs consensus of $5.50.
Financial services firm John Hancock (00C 33.34 +0.69) reported Q2 (Jun) earnings of $0.82 per share, ex-items, $0.07 better than the Reuters Research consensus of $0.75. Revenues rose 1.0% yr/yr to $2.37 bln and were above the $2.35 bln consensus.
The garbage must not have been taken out on a timely basis as Allied Waste (AW 12.12 +0.00) announced Q2 (Jun) earnings of $0.13 per share which was calculated as follows: Net income from continuing operations was $0.00, which includes the ($0.13) per share dilutive impact for the write-off of deferred debt issue costs and the de-designated interest rate swap contracts. The resulting profit of $0.13 is $0.07 worse than the Reuters Research consensus of $0.20; revenues rose 1.5% yr/yr to $1.39 bln and was better than the $1.36 bln consensus.
In news other than earnings, Starbucks (SBUX 27.60 +0.27) reported a 9% increase for the July same store sales.
Tomorrow is the official end to earnings season, as only a few companies report before the bell.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar and Guidance pages..--Brian Bolan, Briefing.com
4:58PM Adobe Systems issues Q3 guidance in line with consensus (ADBE) 32.73 +0.65: Company guides Q3, sees GAAP EPS $0.22-0.25, vs Reuters Research consensus of $0.25 and First Call consensus of $0.25; sees revenues of $300-315 mln vs R.R. estimate of $312.3 mln and First Call rev estimate of $311 mln.
4:35PM Intl Rectifier beats consensus by a penny. (IRF) 27.60 +0.37: Reports Q4 (Jun) earnings of $0.24 per share, $0.01 better than the Reuters Research consensus of $0.23; revenues rose 13.6% year/year to $228.4 mln vs the $230.4 mln consensus.
4:11PM American Power reports in line (APCC) 17.21 +0.43: Reports Q2 (Jun) earnings of $0.17 per share, in line with the Reuters Research consensus of $0.17; revenues rose 7.6% year/year to $331.5 mln vs the $323.8 mln consensus.
4:03PM ChipPAC misses by a penny, guides below consensus (CHPC) 6.06: Reports Q2 (Jun) loss of $0.03 per share, $0.01 worse than the Reuters Research consensus of ($0.02); revenues rose 10.0% year/year to $106.8 mln vs the $101.3 mln consensus. Company sees Q3 coming in at a loss of $0.05-0.08 vs consensus of a $0.01 profit.
Close Dow +33.75 at 9233.80, S&P +2.82 at 990.31, Nasdaq +14.23 at 1735.14: A well-known song states, "What goes up, must come down" and today's trading action could not be described more accurately... The indices got off to a very strong start and had accomplished gains ranging 1.6-2.0% by roughly 11ET... The bullish bias was incited by a batch of better-than-expected economic reports, which spoke well for the strengthening economy and the improving employment market... Specifically, Q2 GDP rose a stronger than expected 2.4% (consensus 1.5%) as final sales rose 3.2%.... The chain weight deflator fell to +1.0% (consensus 1.4%)....
The Q2 Employment Cost Index rose 0.9% (consensus 1.0%)... Jul 26 Initial Claims for unemployment benefits fell for a third consecutive week to 388K (consensus 400K)... Furthermore, the Chicago PMI manufacturing index rose to 55.9 in July (consensus 53.8), boding well for tomorrow's ISM Index report... Separately, the Help Wanted Index rose to 38, the strongest level since March... While the index excludes Internet ads, the upturn is encouraging, as it suggests increasing demand rather than simply a decline in layoffs seen in Initial Claims...
Buying interest was exacerbated by clearance of important near-term resistance levels, including the 1737/1740 resistance band in the Nasdaq and resistances at 993/994 and 998 in the S&P 500... As a result, the market's rally was broad-based and supported by the majority of sectors, with the sole exception being the healthcare sector, which was weak following a warning by Cardinal Health (CAH 55.38 -9.08)... The indices kept to relatively tight ranges near their session highs for most of the day, until the last hour of trade, when the market came under tremendous selling pressure, forcing the indices lower and closing with gains of only 0.3-0.8%...
Like the advance, the decline was broad-based and, especially apparent in the drug, financial, and homebuilding sectors, which finished the day underwater after being positive for most of the day... Among the reasons cited for the market's decline was apprehension regarding the skyrocketing 10-year yield, which went over 4.5% intra-day... The 10-year note closed the day well off its session lows, down 22/32, with its yield at 4.40%...NYSE Adv/Dec 1572/1725, Nasdaq Adv/Dec 1878/1315
10:27AM Axcelis Tech (ACLS) 7.73 +0.34: CIBC Wrld Mkts upgrades Sector Perform to SECTOR OUTPERFORM. Cites valuation and believes cost restructuring and outsourcing of subassembiles are accelerating into 2H03.
10:04AM Terayon Comm (TERN) 4.86 +0.78: Needham & Co upgrades Buy to STRONG BUY. Target $4 to $7. Firm believes that TERN has a shot at CMTS mkt leadership within next 12 months or so.
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