From Briefing.com: Whatever reservations participants had about the FOMC meeting on Monday were set aside before the start of trading on Tuesday, as the market enjoyed a broad-based rally led by none other than the technology sector.
Merrill Lynch got things rolling with an upgrade of the semiconductor sector to Overweight from Equal Weight. Meanwhile, Qualcomm (QCOM 44.89 +1.44), despite a downward revision to its quarterly estimate for sales of new CDMA subscriber units, helped out matters with an acknowledgment that it expects fiscal Q4 (Sep) and full-year EPS and revenues at the high end of prior guidance.
Driven by this news, it didn't take long for the tech sector to bounce back from Monday's modest losses as the semiconductor stocks assumed a familiar leadership position. In doing so, the stocks piqued the interest of the momentum crowd that spilled over to other areas and kept the tech sector planted firmly in positive territory ahead of the FOMC decision at 14:15 ET.
The latter was uneventful in terms of its outcome as the FOMC did what the market expected it to do: leave the fed funds rate unchanged at 1.00% and issue a policy directive that said the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal, that the risk of inflation becoming undesirably low remains the predominant concern for the foreseeable future, and that the Committee believes policy accommodation can be maintained for a considerable period.
The directive was essentially a reiteration of the August 12 directive with the only notable difference being the affirmation that spending is firming and that the labor market has been weakening. To that end, there were few differences in the market's response to the FOMC announcement on Tuesday and its response on August 12. In each instance, the market rallied and the major indices closed at or near their best levels of the day.
With respect to Tuesday's activity, there was a notable updraft following the FOMC decision that sprung the indices from the range-bound trade that took place ahead of the announcement. Program trading, short-covering, and perhaps some options expiration-related buying interest fueled the breakout that left the Dow, Nasdaq, and S&P just shy of reaching new 52-wk closing highs.
Although bullish momentum continues to rule, we maintain the view that one should look to lighten positions in highflying technology names. Mind you, we're not suggesting shorting those stocks, but rather, simply taking some money off the table while the getting is good.-- Patrick J. O'Hare, Briefing.com
6:04PM Tuesday After Hours price levels vs. 4pm ET: After the late-day buying drive that was rooted in the FOMC's decision to leave interest rates unchanged, the trading action has slowed down in the extended session. Presently, the S&P futures, at 1027, are 1 point below fair value, while the Nasdaq 100 futures, at 1385, are also 1 point below fair value. A slow night from a corporate news perspective has quelled activity.
TIBCO Software (TIBX 5.60 -0.01) was one of the few companies to release quarterly numbers. The leading independent business integration software provider met the Reuters Research Q2 (Aug) consensus EPS estimate of $0.02, and reported revenues that rose 4% from year-ago levels to $66.1 mln. Investors have used the in-line report as an excuse to sell into the stock's 40% run since March.
KB Home (KBH 59.00 -0.50), one of the largest homebuilders in the United States and France, also announced its Q3 (Aug) results. Revenues reached $1.44 bln, an all-time Q3 high, up 12% from the previous high posted in 2002. EPS also established a new Q3 record, rising 19% to $2.33 and exceeding the consensus estimate by $0.19. Strikingly, Q3 backlog, in terms of both units and dollars, was the highest of any quarter-end in the company's history.
Elsewhere, Watson Pharmaceutical (00C 44.92 +0.45) announced that it received final approval from the FDA on its Abbreviated New Drug Application (ANDA) for nefazodone hydrochloride tablets in the 100 mg, 150 mg, 200 mg and 250 mg strengths. Nefazodone hydrochloride is the generic equivalent of Bristol-Myers's (BMY) Serzone® and is indicated for the treatment of depression. Watson's nefazodone hydrochloride product will be launched immediately, making it the Company's 21st product launched in 2003.
General Dynamics (GD 86.34 -0.02) also announced that the US Navy has awarded it a $34 mln contract to plan and facilitate the conversion of Trident SSBN submarines to Trident SSGNs, multimission submarines optimized for covert strike and special- operations support. The award modifies a five-year, $443 mln contract announced in September 2002 for design and related support work to convert the first four Ohio-class ballistic-missile submarines to an SSGN configuration. If all options are exercised and funded, the contract will be worth a total of $654 mln.
Turning to tomorrow's action, the market will digest two economic reports - August Housing Starts and Building Permits - that pertain to the housing sector, in addition to two quarterly reports from electronic retailers Best Buy (BBY 52.80 +0.14) and Circuit City (CC 11.20 unch).
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar, Guidance, and Economic Calendar pages. -- Heather Smith, Briefing.com
4:45PM Microchip revises Q2 outlook (MCHP) 28.10 +1.30: Company announces Q2 EPS will be at high end of previous estimates and that net sales should increase 2-5% from previous quarter, compared with a previous forecast of 1-6% growth. The Reuters Research consensus is $0.17.
Close Dow +118.53 at 9567.34, S&P +14.51 at 1029.32, Nasdaq +41.56 at 1887.26: Following a spurt at the open, the indices stabilized and spent the bulk of the session range-bound within roughly 8, 2, and 3 points for the Dow, S&P 500, and the Nasdaq, respectively, as investors were in a wait-and-see mode, unwilling to commit to the market ahead of the FOMC announcement scheduled for 14:15ET... The announcement came in largely as expected... As such, the Fed decided to keep the federal funds rate unchanged at 1.0%...
The policy directive was largely a reiteration of the August 12 directive, with the only significant difference being the Fed's mention that spending is heating up while the labor market remains weak and pricing power is muted... Otherwise, the Committee noted that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal, while the probability, though minor, of an unwelcome fall in inflation exceeds that of a rise in inflation from its already low level... Speaking of inflation and its low levels, the Consumer Price Index report was released pre-open...
The report checked in at 0.3% (consensus 0.4%) and ex-food and energy at 0.1% (consensus 0.2%), leaving the annual growth at just 1.3%, a 38-year low... Back to the FOMC, although the announcement was largely a non-event, it was used by investors as an excuse to bid the indices higher and the market spent the last hour of the session climbing higher in a steady fashion... In roughly an hour, the Dow, S&P 500, and Nasdaq tacked on roughly 76, 8, and 19 points to their totals and closed the day with gains of 1.3-2.3%...
As a result, the vast majority of the sectors closed the session in the green, with the only laggard of note being the food retailing group following an earnings miss by Kroger (KR 17.80 -0.85) this morning... Elsewhere, the bond market closed the session little changed, with the 10-year note up +1/32, bringing its yield down to 4.26%...NYSE Adv/Dec 2358/902, Nasdaq Adv/Dec 2200/1009 |
