From Briefing.com: If it was true that the weakness in the dollar was to blame for the stock market's losses on Monday, then there should have been a similar sell-off on Tuesday. After all, there wasn't any notable improvement in the dollar on Tuesday, yet lo and behold, the equity market traded with a bullish bias. What that says is that the reports blaming the dollar's weakness for Monday's losses were hogwash.
In all likelihood, fund managers who have underperformed this quarter were loving the action on Monday, because it afforded them the opportunity to play catch up with the quarter's best performers at lower prices. Considering that the technology sector has been a superstar throughout Q3 (and since last October for that matter), it may come as little surprise to hear that the sector outperformed on Tuesday.
Gains were broad-based with the hardware, software, semiconductor, and Internet stocks leading the way. Volume wasn't remarkably heavy, but it was a bit heavier than it was on Monday with 1.30 bln shares traded at the NYSE and 1.86 bln shares traded at the Nasdaq.
After the close on Tuesday, Cisco (CSCO 21.15 +0.37) announced that its Board of Directors authorized up to $7 bln in repurchases of its common stock. This comes on top of an existing $13.0 bln share buyback program, of which $7.8 bln has been spent. There are no guarantees, of course, as to when the repurchases will occur. Nonetheless, buyback announcements are typically viewed in a favorable light as they are taken to mean that the company sees value in its own stock and is keen on using its cash to bolster shareholder value. With nearly $50 bln in cash on its balance sheet, Microsoft (MSFT 29.60 +0.53), which is now in the business of paying a dividend, is sure to be under the microscope again with respect to having the resources to step up its repurchases.
Knowing that end of quarter posturing on the part of fund managers could very well keep the tech stocks moving higher over the near-term, we continue to subscribe to the view that, as the rally persists, participants should look to lighten positions in highflying names.-- Patrick J. O'Hare, Briefing.com
6:05PM Tuesday After Hours price levels vs. 4pm ET: The late-day buying spree in the regular session has fizzled out, leaving the after hours indications below fair value. Presently, the S&P futures, at 1025, are 2 points below fair value, and the Nasdaq 100 futures, at 1389, are also 2 points below fair value. A dearth of market-moving quarterly reports has contributed to the extended session's ennui.
To begin, Scholastic (SCHL 32.30 +1.42) posted a 1Q04 net loss of $0.60 per share, excluding a $0.03 charge, which was $0.07 ahead of the Reuters Research consensus estimate and $0.51 ahead of last year's result. Q1 is the company's seasonally weakest period with schools out for the summer, and thus the period usually results in a loss. Revenues, however, rose 55% to $475.4 mln thanks to the record-setting results of Harry Potter and The Order of The Phoenix. Briefing.com anticipated a likely upside surprise due to the latter influence in an earlier Story Stock today.
Paychex (PAYX 35.30 +0.71) is another stock that has received a bid following a better than expected report. The provider of payroll and human resource products delivered a 1Q04 EPS increase of 6% to $0.21, which was a penny ahead of the consensus expectation, on revenues that rose 22% to $309.3 mln.
Turning to the retail space, shares of Christopher Banks (00C 26.48 -0.61) have weakened following the company's Q2 (Aug) report and 2H03 (Feb) outlook. The specialty retailer of middle-aged women's clothing reported a 22% increase in net income to $0.22 per diluted share (consensus of $0.21), a 21% to jump in total revenues to $89.7 mln, and a 3% rise in same store sales. The market's disappointment, however, rests in the company's 2H03 (Feb) guidance. Christopher Banks said it expects an EPS increase in excess of 20%, which puts the figure at roughly $0.67. The Reuters Research consensus estimate stands at about $0.70, and thus traders have used the in-line outlook as an excuse to book profits from the stock's 107% run since April.
Elsewhere, Lennar Corp (LEN 74.51 +0.38) has joined the growing list of companies that have increased their dividends. The company's board voted to increase the annual dividend rate $1.00 per share per year from $0.05 earlier. The annual dividend yield comes to about 1.3%, and is above the yield paid out by most homebuilders.
Finally, a host of paper companies have agreed to settle an antitrust class action suit filed in 1999 in federal court in the Eastern District of Pennsylvania. International Paper (IP 40.43 +0.06), Weyerhaeuser (WY 60.36 +0.06) and Georgia-Pacific (GP 24.52 -0.11) agreed to pay a total of $68 mln to settle class members' claims that allege that these three companies, along with other integrated manufacturers, had conspired to increase prices.
For more detail on these, and other after hours developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages. -- Heather Smith, Briefing.com
Close Dow +40.63 at 9,576.04, S&P +6.22 at 1,029.04, Nasdaq +27.11 at 1,901.73: A fairly quiet, yet solid day for the market...the indices opened higher despite a weaker dollar...this minor bounce after yesterday's significant losses showed no followthrough in early trading, as anxiety over the dollar persisted, along with concerns about earnings warnings that might arise in these final weeks of September...but as the day wore on, the steady buying led to what has been a recurring theme on many recent Tuesdays - a light drift upward in the afternoon...
there were signs of speculative fever, as Amazon.com (AMZN 55.44 +2.97) caught fire, and other Internet stocks posted gains as well...techs in general outperformed as usual on days like this, but there were broad gains as advancers led decliners by over 3 to 2...it was a light news day, with no economic releases and the only big corporate news an earnings warning from Verizon (VZ 33.13 -1.58)...so, the general upward drift in the market may be a good indication of underlying sentiment...Morgan Stanley (MWD 52.33 +1.18) and Lehman Brothers (LEH 70.90 +0.69) were down early despite blowout earnings reports, but recovered in the afternoon...Goldman Sachs (GS 89.06 -3.60) remained lower despite good earnings...NYSE Adv/Dec 1995/1264, Nasdaq Adv/Dec 2012/1198
Marvell (MRVL) 39.75 +0.46: ThinkEquity reiterated its Overweight rating and $45 target, saying channel checks indicate that MRVL is already tapping into new rev sources, including WLAN and consumer hard disk drives; firm also believes that the co will have to raise its operating margin guidance above its current 18% target (though likely not until it reports its Jan qtr).
Zarlink Semi (ZL) 5.09 +0.07: After the close, company said it sees Q2 EPS of a loss of $0.09, excluding $0.06 in charges, Reuters Research consensus is a loss of $0.07. Also sees revenues of $47 mln, estimate is for $51 mln.
Axcelis Tech (ACLS) 9.50 +0.31: Co announced that reductions in the its workforce made in Q3 will reduce operating expenses by about $18.5 mln annually starting in Q4 of 2003; co will incur a restructuring charge of about $5 mln ($0.05 per share) in Q3 for severance payments and related benefits.
ON Semiconductor (ONNN) 4.56 +0.01: After the close, said it refinanced approx $100 mln of bank debt
Agere Systems (AGR.A) 3.38 +0.19: Thomas Weisel upgraded to Outperform from Peer Perform, saying recent data points and channel checks indicate that the co's HDD and wireless terminal businesses could post strong growth in Sept; firm is also confident that AGR.A can post a break-even qtr and could potentially deliver profitability, and believes that the co's extensive restructuring actions are on track to be completed by the end of the year.
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