From Briefing.com: A message to our friends on Wall Street: if you're the last one out, don't forget to turn off the lights. Suffice it to say, no one wants the electric system transmitting electricity to the Northeast and Great Lakes regions to get overloaded again. Not only did it lead to a tremendous amount of inconvenience on Thursday night, and Friday morning, it was the root cause of an absolutely anemic day of trading on Friday.
How anemic was it? Well, volume at the NYSE and Nasdaq totalled 563 mln shares and 700 mln shares, respectively, and that included the added boost of a triple witching options expiration day. On July 3, which was an abbreviated session, 761 mln shares exchanged hands at the NYSE while 946 mln shares traded at the Nasdaq.
The light volume notwithstanding, the bullish bias seen throughout the week prevailed again on Friday as the indices eked out the slimmest of gains. The Dow, for its part, closed at 9321.69 - less than 2 points shy of a new 52-wk closing high.
There was little to say about the tech sector -or any sector for that matter - on Friday, because the lack of involvement by traders diminished the credibility of any move. For the most part, those participants that did make it in played their cards close to their vest and refrained from making any meaningful moves. Accordingly, stocks moving more than a point were very much the exception.
It should be back to business as usual on Monday, but at this time of year, that's not saying much as this is a popular vacation period. The inability (or unwillingness) to participate on Friday, though, is likely to generate some heavier than expected volume on Monday. Whatever the case may be, the tech sector made an impressive stand in the just completed week. Granted, it is still range-bound, but the recent earnings and economic news, in aggregate, suggests the long-term outlook for stocks remains bright.-- Patrick J. O'Hare, Briefing.com
4:19PM Weekly Wrap :
We'd like to say the trading action on Wall Street was so hot this week that it caused the power outage Thursday night that affected New York, several other states, and Canada. The truth of the matter is that the trading action was anemic throughout the week. Nevertheless, a bullish bias prevailed and the market enjoyed an updraft that was led by the cyclical and technology issues.
Aside from the power outage, the week's main event was the FOMC meeting. Out of that meeting came a decision to leave the fed funds rate unchanged at 1.00% and a policy directive that characterized the upside and downside risks to the attainment of sustainable growth for the next few quarters as roughly equal. Additionally, it was noted that the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level. Altogether, the translation for the equity market was that the economy is improving and the Fed isn't going to be raising rates anytime soon because inflation is not a problem.
Armed with that understanding, and cheered by another week of encouraging economic data, market participants found little reason to bail out of stocks. By the same token, their buying efforts were held in check by the backup in Treasury rates that followed in the wake of the good data. The yield on the 10-yr note, which stood at 4.27% entering the week, bumped up to 4.52% by the end of the week.
Equity investors' growing confidence in the economic acceleration was evident in the week's leadership groups, many of which are economically-sensitive like paper, aluminum, steel, department store, employment services, and oil & gas exploration and production. Similarly, the rebound in the tech sector after its recent retreat reflected a bullish propensity to view dips as a buying opportunity. The earnings report from Applied Materials (AMAT), while not above reproach, was ultimately seen as encouraging by the market as the company contended a major investment period for 300mm tools awaits in 2004. Briefing.com expressed its reservations about the timing of a pickup in spending on chip equipment, and the valuations of chip equipment stocks, in a Stock Brief on Thursday.
To be sure, the volume totals this week didn't exactly convey a great deal of conviction behind the buying efforts. Friday, frankly, was a throw-away day as the difficulties getting out of, and into, New York City following the power outage led to volume totals that more closely resembled totals you'd see on a half day of trading. One can only imagine what volume might have been had Friday not been a triple-witching options expiration day.
Looking ahead, it is our expectation that trading volume will remain relatively light. The light volume notwithstanding, Briefing.com believes there is reason to be encouraged by the stock market's resilience.
Let's face it, the market was overdue for a period of consolidation whether interest rates backed up or not. The fact that the indices are still within close proximity to the top end of their respective trading ranges, despite taking the hardest of hits from the bond market they are going to take, suggests investors are indeed feeling better about economic, and earnings, prospects. To that end, it is telling that money continues to rotate among different sectors rather than leaving the stock market outright. While we have felt a defensive mindset has been appropriate the past few months given the expeditious run-up in stock prices since March, we are not surprised by the continued interest in owning equities as the recent earnings, and economic, news suggests the long-term outlook for stocks remains bright.-- Patrick J. O'Hare, Briefing.com
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 9191.09 9321.69 130.60 1.4 % 11.7 %
Nasdaq 1644.03 1702.00 57.97 3.5 % 27.4 %
S&P 500 977.59 990.67 13.08 1.3 % 12.7 %
Russell 2000 453.94 471.92 17.98 4.0 % 23.2 %
3:36PM Implications from Dell (DELL) 32.30 +0.91: Dell is trading nicely today on the heels of its earnings announcement last night. The Co provided another "shock and awe" report to Wall Street by increasing year/year revenues, units and earnings growth while continuing to the outpaced market. This recent announcement represents the eighth consecutive qtr meeting GAAP guidance. Some general takes from the earnings call would suggest a mixed bag of encouraging data points going forward.
As mentioned in a "Ratings Briefing - Dell" on the site earlier, the co's numbers essentially speak for themselves. The co's impeccable business model and virtually impregnable market share in the PC sector all contributed to its solid earnings announcement. The Co. guided ahead of expectations with shipments increasing and volumes projected to jump more than 25%. Typically, Q3 is driven by revenues from its government customers and the perennial uptick in the PC cycle known as the "holiday season." The prevalent theme on the call was "IT spending has stabilized." The significance of the call contributes to the general theme of recovery, which the market is holding very close to the vest at this point in the summer. Another aspect of the Dell call is the implications for the technology sector as well.
Briefing.com believes the momentum displayed by Dell also has further implications down the technology food chain. There are a myriad of names that participate in the PC cycle. It is as simple as taking a look at co's website to find current friends of Dell include: Intel (INTC) for the microprocessors, ATI Technologies (00C0) and Nvidia (NVDA) for the graphics chips. In addition, we have the hard drive co's such as Western Digital (WDC), Seagate (STX) and Maxtor (MXO). PC's also need dynamic random access memory or DRAM from memory makers such as Infineon (IFX) and Micron (MU). Finally, Flextronics (FLEX) and Sanmina-SCI (SANM) both have Dell as a key customer in providing the electronics manufacturing services component of the production process.
Dell's report suggests two particular tidbits of information, which provides somewhat of a mixed message. It is no mystery that the PC sector has been rather challenged and is beginning to see growth, especially in notebooks. However, suggesting we are in full-blown recovery in this sector due to the Dell call would be somewhat inaccurate. As mentioned in yesterday's stock brief entitled "Applied Materials Material Announcement", Briefing.com believes the lack of visibility in the semi cap equipment sector continues to be a significant variable when investing in these stocks as the street continues to looks for signs of recovery. Dell's business model, which continues to outpace the industry and rile up competitors in light of its efficiency, is company specific and not the norm in the PC industry. PC's use chips and chips still continue to be somewhat cloudy as industry observers look for signs signaling the coming out of the industry cycle. While the co's figures are encouraging, the real test will be the Q3 earnings season as the street looks to leading companies in the technology sector to exceed expectations. In light of yesterday's announcement, Dell should continue to trade to the upside as the co goes into Q3 given its enviable operating metrics, strong market share and product revenue diversification.
For any questions, comments or concerns, please send your inquiries to -- John Meza, Briefing.com
7:27AM MRVL estimates and price target raised at ThinkEquity ahead of earnings (MRVL) 35.59: ThinkEquity Partner's Charlie Glavin believes concerns over GbE and HDD associated with the stock are "overblown" citing similar fears occurring in last Oct, Jan and Apr. The analyst is raising his price target to $40 and modestly boosting estimates for FY04 and FY05 ahead of earnings. Firm notes current valuation would still put it at a 35-40% discount to Intel's 1.8 PEG based off of its CY03 numbers and over a 25-50% discount vs. more direct communications IC competitors. Marvell reports August 21, 2003 after the close.
7:23AM Bond Market Update : Treasuries surged late yesterday afternoon (about a point and a half on the ten-year) on a flight-to-quality trade concurrent with the massive power outage crippling eastern U.S. and Canada; impact of trade was exacerbated, too, by thin volume as (1) outage occurred following futures market close and after many traders had closed their books; and (2) the outage itself precluded many from trading electronically. Market has retraced part of late yesterday's increase overnight and early this morning as (1) traders finding lower (post-surge) yields attractive for selling; (2) whole premise of flight-to-quality trade diminished by assurances that outage not terrorism-related. Presently, ten-year Treasury note down almost half a point to yield 4.55%. Bond Market Association says that trading will follow normal business hours today. So it's back to business -- Empire State Index, CPI @ 08:30 ET; industrial production/capacity utilization @ 09:15 ET; U. of Mich prelim. consumer sentiment @ 09:45. Might be kind of a strange day today -- volatility still a hot topic -- please see Wednesday's Bond Brief for how to benefit from it.
Analog Devices (ADI) 36.35 -0.74: Smith Barney downgraded to In-Line from Outperform, saying that while it fundamentally likes the company, the stock is too expensive for the firm's tastes. The price target rose to $35 from $32.
Microtune was awarded double damages in Broadcom case : Microtune (TUNE) announces that on Aug 12, a federal judge awarded its company double its compensatory damages and all of its attorney's fees against Broadcom (BRCM) in Microtune's patent infringement suit against Broadcom. Microtune estimates that the total judgment against Broadcom will be between $7-10 mln.
Xilinx (XLNX) 26.70 +0.35: Merrill Lynch resumed coverage with a Buy rating, saying that XLNX is well positioned to benefit from a demand recovery. Firm also believes that valuation is reasonable at 32x the firm's CY04 estimate. Price target was set at $35.
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