From Briefing.com: The hungry bears came out in force Friday, shooing away the well-fed cattle, leaving only the staunchest of bulls in the field. The bulls, who had nudged tech shares higher at the open and gave ground in the face of the bear charge, tried to regroup mid-morning but only to head south in a slow exodus. Unwilling to cede ground completely, the bulls regrouped late afternoon to test the bears' mettle and managed to stem the mass migration. By day's end, bears outnumbered bulls just 1.4:1. Tech shares were down, on average, 1.7%, with laggards dropping, 3.9% and advancers edging higher 1.4%.
The coming weeks will be one of this butting of heads over feeding grounds. The bulls are well fed without much incentive to fight while the bears are desperate for a good meal but none too strong after starving through the year. January effects can just be brutal and the bears will want to store up for the winter. The bears will be looking for fodder in Kulicke & Soffa (KLIC 15.94 -0.47), reporting results on Monday, Analog Devices (ADI 46.15 -1.30) and Network Appliance (NTAP 25.08 -0.89) on Tuesday, Intuit (INTU 48.10 -2.26) and Marvell Technology Group (MRVL 43.99 -0.13) on Wednesday, and Autodesk (ADSK 20.42 -0.41) on Thursday. With the bulls closing ranks, the best the bears can hope for is a mild winter, and to limit their losses to a small number come Spring.
Unfortunately for the bears, Uncle Sam has been seeding the ground for green pastures and the landscape come Spring looks like it will once again be good cattle territory: Business Inventories, due on Monday, CPI on Tuesday, Housing Starts and Building Permits on Wednesday, Initial Claims on Thursday, and Leading Indicators and the Philly Fed on Friday are just first growths of the good grazing to come. But graze carefully--it's a big field with lots of sandy patches and old roots.--Ping Yu, Briefing.com
6:15PM Weekly Wrap :
This week, there were no shining stars as collective selling efforts knocked each of the major indices for a loss. The Nasdaq Composite, which was an upside leader in the prior week, maintained a leadership position, only this time it was a leader to the downside as its technology components fell prone to profit taking activity and sector rotation.
Semiconductor shares paced the pullback, but had a peculiarly volatile week with a favorable research report from Gartner Group on the prospect for 2004 chip sales inviting a number cheers on Wednesday that were soon replaced by a number of sighs when the sector sold off in the wake of generally encouraging earnings reports from Applied Materials (AMAT) after Wednesday's close and from Dell (DELL) after Thursday's close.
Considering that the SOX Index was up 82.0% for the year prior to this week's action, a 3.1% decline shouldn't elicit too many tears. The market's other laggards of note included the advertising, airline, biotech, paper, brokerage and asset management stocks. Ongoing allegations of improper mutual fund trading continued to cast a pall on the financial sector. Charles Schwab (SCH) was among the latest firms to divulge that it is responding to inquiries from regulators regarding improper trading practices.
The broader market's losses were held in check, though, as gains in a number of influential groups provided an effective offset. In particular, the energy, drug, and health care stocks flexed some muscle this week, helped by sector rotation that was driven by valuation considerations and some fortuitous political happenings. The latter included word from Capitol Hill that progress is being made on passage of an energy bill, a declaration from the government that it would not rule out legal action against cities or states that import cheaper drugs from Canada, and the President applying pressure on Congress to pass Medicare legislation.
The retail sector had its time in the spotlight as a number of companies reported their quarterly earnings results. Wal-Mart's (WMT) report was the biggest of the week. On balance, the company had a good report, but it disappointed the market by coming up a penny shy of Wall Street's lofty earnings forecast and issuing a conservative outlook for the holiday selling season that it deemed would be more competitive than normal.
In other developments, the dollar weakened against both the yen and the euro as a few Fed officials chimed in with the party line that monetary policy can remain accomodative for a considerable period of time. The Treasury market, for the first time in a while, seemed to be buying what Fed officials have been trying to sell in that respect as the yield on the 10-yr note dropped 22 basis points to 4.22%.
Dollar weakness and escalating concerns about events in Iraq proved to be a boon to gold prices, which shot up $14.60, or 3.8%, to $398/oz. Not surprisingly, gold stocks also comprised one of the S&P's best performing sectors for the week. Oil was another commodity that enjoyed a notable increase in price as crude futures advanced 4.9% amid supply concerns to $32.37/bbl. Crude prices, incidentally, are up 11.2% since the end of October. Higher energy prices contributed to a surprising 0.8% increase in the October Producer Price Index that was reported on Friday.
The economic data reported this week were generally favorable and non-disruptive in terms of holding to the belief that economic activity is improving. Nevertheless, with the exception of a Wednesday rally, the market was essentially non-responsive this week to good news as the weight of the mutual fund inquiries, the quagmire in Iraq, rising energy prices, and Wal-Mart's conservative outlook all served as reasonable excuses to take some money off the table. -- Patrick J. O'Hare, Briefing.com
YTD chart of major stock indexes
Index Started Week Ended Week Change % Change YTD
DJIA 9809.79 9768.68 -41.11 -0.4 % 17.1 %
Nasdaq 1970.74 1930.26 -40.48 -2.1 % 44.5 %
S&P 500 1053.21 1050.35 -2.86 -0.3 % 19.5 %
Russell 2000 542.96 532.96 -10.00 -1.8 % 39.1 %
3:11PM Kulicke & Soffa Earnings Preview (KLIC) 15.86 -0.55: Kulicke & Soffa is scheduled to report Q4 results Monday morning, with consensus ests standing at ($0.11) in EPS and $131.3 mln in sales. Soundview expects the co to release stronger than expected numbers of ($0.06) in EPS and $134 mln in sales, and reminds investors that KLIC's main competitor in the equipment biz, ASM Pacific, reported continued strength in back-end equipment orders, which should bode well for KLIC; also, with the continued under-investment in backend equipment, firm believes quarterly bookings will continue to improve going into 2004. On the other hand, Morgan Stanley estimates the co will report ($0.14) and $128 mln; despite robust demand, firm believes the co is constrained by shortages of several key parts, and thus upside to rev guidance will be limited (although the co is likely to guide to positive growth in Q1); regarding bookings, firm is concerned that customers may decide to take a breather in Dec and Jan after the recent surge of orders, and as such the strength in Q4 bookings may not continue into Q1 (demand should pick up again after the Chinese New Year in Jan, however).
10:32AM Intel faces challenge winning back market share -- JMP Sec (INTC) 33.37 -0.41: JMP Sec is maintaining its Outperform rating and $35 tgt following cautious optimism on rebound for its flash memory unit during its Wireless Group Analyst Day. Intel's Flash memory/Wireless Communications Group, at its Analyst day in Sacramento yesterday, painted a cautiously optimistic picture for a return to growth and potentially sustained profitability for the Group in 2004 and beyond. While flash memory pricing has stabilized due likely to strong unit demand and seasonal strength in color-screen, camera/web-enabled cell phones, firm believes that Intel faces a tough challenge in winning back market share against resurgent competition from A.M.D., Samsung, ST Microelectronics, and emerging Taiwan players such as Winbond, Macronix, etc.
9:02AM Benchmark Elec downgraded at McDonald (BHE) 54.95: McDonald Investments downgrades Benchmark Electronics to Hold from Buy, saying recent conversations with mgmt suggest that the co's business will not grow substantially above their ests, and they now believe that their prior FY04 rev growth assumptions are slightly aggressive; also, firm does not see any catalysts that would enable them to raise their target again or propel the stock far above current levels.
Tower Semi (TSEM) 7.19 -0.31: Filed to offer 12 mln shares.
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