From Briefing.com: Two weeks ago, it was General Cable (BGC 7.60 +0.45) that lowered guidance as a result of higher than expected materials costs. On Friday, it was Smurfit-Stone Container (SSCC 17.50 +0.00). The integrated manufacturer of paperboard and paper-based packaging products, including containerboard and corrugated containers, forecasted a wider loss for Q1 due to higher-than-expected energy, fiber and benefits costs.
As noted in Tuesday's Tech Stocks page, rising price pressures are creeping up in pockets of the economy, notably in oil and metals. Spot prices have increased over 20% for crude oil, 20% for aluminum, 65% for copper and 30% for silver since September and even higher on a Y/Y basis.
Fears that rising materials costs / commodities prices may force the Fed to take pre-emptive measures to forestall inflation despite an anemic job market are likely to continue to pressure equities near-tern. As a result, trading over the coming weeks is likely to mirror Friday's action, when investors picked at stocks at the opening but found equities almost uniformly unappetizing, steadily selling shares from 11:30am ET into the close. The sell-off knocked approximately 1% off the major averages.
The Dow (DJI 10186.60 -109.18) fell 1.1%, the S&P (SPX 1109.78 -12.54) dropped 1.0% and the Nasdaq Composite (IXIC 1940.47 -21.97) slumped 1.1%. For the week, the averages closed down 0.5%, 1.0% and 2.2% respectively.
Tech shares, on average, held up relatively well under the pressure on Friday. The Briefing.com Tech Index (BTI) slipped 0.5% with decliners leading advancers 1.9:1. Advancers gained 2.7% while decliners lost 2.3%. The action was much more volatile among large cap semiconductor shares, where valuations remain stretched. The Philadelphia Semiconductor Index (SOXX 463.35 -17.31) got shellacked for 3.6%, bringing the weekly loss to 4.5%. There were no advancers.
Concerns over inflation notwithstanding, equities, and tech shares in particular, continue to offer some of the best opportunities for above average returns over the long term, supported by: 1) revenue growth as companies benefit from a broad economic recovery/expansion that continues to unfold around the globe and across industries; and 2) margins expansion fueled by improving demand and pricing, scale and operating efficiencies, and cost reductions.
Dampen near-term volatility by diversifying holdings across sub-sectors and structuring portfolios around companies that have strong competitive profiles, high operating leverage business models, are positioned in markets that enable/directly benefit from global secular trends including mobility and voice/data network convergence, and trade at attractive levels vs. industry comps and addressable market opportunities.
We would continue to focus on the names highlighted in Story Stocks, and Relative Value Ideas--Performance Update and Relative Value Ideas--New Focus List (Story Stocks, March 1, 2004).
Among Friday's movers: Adobe Systems (ADBE 39.85 +3.58) gained 9.9% after posting Q1 results ahead of consensus and raised guidance; and Avici Systems (AVCI 12.93 -3.50) dropped 21.5% after guiding below expectations. Visit Story Stocks for our review of ADBE's Q1 results and investment summary.
Looking to the week ahead, palmOne (PLMO 14.54 -0.81) reports after the close Monday, Red Hat (RHAT 19.22 +0.35) after the close on Tuesday, Micron Technology (MU 15.69 -0.12) after the close on Wednesday and Cognos (COGN 28.69 -0.37) after the close on Thursday.
Visit the Ahead of the Curve, Story Stocks and Daily Sector Wrap pages for the latest thinking on investment opportunities across market sectors, and the Page One, Looking Ahead and Economic Briefing pages for broad market perspective and outlook. For active investors and traders, visit the In Play, Swing Trader, and The Technical Take pages for actionable ideas.
Refer to the bottom of the Tech Stocks page for performance by sub-sector.
Have a good weekend.--Ping Yu, Briefing.com
5:58PM Weekly Wrap :
If you didn't count Monday and Friday, it would have been a pretty good week for the market. However, when those two days are thrown into the mix, the balance of power quickly shifts back in favor of the bears. On those two days alone, the Dow, Nasdaq and S&P were down approximately 250, 70, and 30 points, respectively.
The retreat on Monday was attributed to concerns over al-Qaeda's reported responsibility for the Madrid bombings. Meanwhile, the retreat on Friday, which was a quadruple witching options expiration day, occurred largely in the afternoon trade. Presumably, the expiration activity contributed to the late sell-off, along with some frustration on the part of speculative accounts that were banking on confirmation that Osama bin Laden's right-hand man, Ayman al-Zawahri, had been captured. Reports on Thursday indicated that it was likely that al-Zawahri had been cornered by Pakistani troops.
Whatever the motivation might have been, Friday's pullback ensured yet another down week for the market. The losses were most pronounced among the big-cap technology issues and small-cap stocks. With the market in corrective mode, their underperformance stands to reason as they had the biggest gains last year, and thus, have greater vulnerablility to profit taking activity.
Comparatively speaking, the Dow fared the best among the major indices for the week as it declined just 0.5%. Gains in 3M (MMM 79.76), which increased its Q1 and FY04 guidance, Caterpillar (CAT 76.30), AT&T (T 19.65), and SBC Comm. (SBC 24.62) underpinned the blue chip average. Microsoft (MSFT 24.63) was a notable drag, though, as it withered in the wake of reports that it failed to reach an agreement in settlement talks with the EU. Shares of MSFT now stand just a little more than a dollar above their 52-wk low.
From an industry perspective, the employment services, Internet software, steel, home entertainment, gold, household appliances, machinery, footwear, managed health care, and oil & gas equipment were your relative strength leaders. On the other end of the spectrum, the department store, systems software, computer & electronics, health care equipment, home furnishings, commercial printing, semiconductor, and semiconductor equipment groups were the notable laggards. Semis were particularly weak, as evidenced by the 4.5% decline in the SOX Index and the utterly disappointing IPO of Semiconductor Manufacturing International, which fell 17% from its offering price.
Commodities, once again, had a strong showing as the CRB Index was up 3.2% for the week, driven by ongoing supply concerns. Oil prices, which are the most watched of any commodity, tacked on another 5.2% and ended the week at $38.08/bbl. Gold prices, meanwhile, posted their biggest weekly gain this year, shooting up 4.3% to $412.70/oz on persistent safe-haven buying interest following the Madrid bombings.
The yen was a star performer on the week, too, as it gained 3.7% against the dollar with Japan making waves with its declaration that it will be backing off its intervention efforts to weaken its currency.
The Treasury market was pretty much flat for the week with the yield on the 10-yr note at 3.77% by Friday's close. That was off its best closing level of 3.68% earlier in the week as traders booked some profits from the overbought market. A stronger than expected PPI report for January facilitated their efforts as did the speculation that al-Zawahri might soon be captured.
The FOMC meeting on Tuesday was largely a non-event as the fed funds rate was maintained at 1.00% while the directive repeated the stance that the Fed can be patient with its accommodative policy. Some added attention was given to the slight change in wording of the directive with respect to the lag in hiring activity, but for all intents and purposes, there was little that was new in the Fed's stance. Economic data this week was mixed, but generally supportive of a rebounding economy.
There was nothing in the way of substantive earnings warnings and the earnings news itself was solid with Lehman Bros. (LEH 85.19), Bear Stearns (BSC 86.86) and Morgan Stanley (MWD 59.61) highlighting the action with blowout reports. General Electric (GE 30.14) announced it was acquiring InVision, but more importantly, indicated Q1 and Q2 earnings should be at the high end of its target ranges.
The encouraging trend in earnings is a major factor for why Briefing.com believes the market's recent struggles are nothing more than a normal correction within a bull market. That correction arguably has more room to run, but even so, we remain grounded in our moderately bullish long-term outlook and forecast for a mid- single digit gain in the market this year.-- Patrick J. O'Hare, Briefing.com
Index Started Week Ended Week Change %Change YTD
DJIA 10240.08 10186.89 -53.19 -0.5 % -2.6 %
Nasdaq 1984.73 1940.47 -44.26 -2.2 % -3.1 %
S&P 500 1120.57 1109.78 -10.79 -1.0 % -0.2 %
Russell 2000 582.84 570.69 -12.15 -2.1 % 2.5 %
3:09PM Maxim Integrated - - 200 Day Alert (MXIM) 45.39 -1.24: -- Technical -- After notching a 5-month low (45.36), the stock is hovering near its 200-day simple moving average (45.34).
3:08PM Semi Index --SOX -- slips to minor new five month low : Sector Index (SOX 467.80, -2.6%) pushes to its lowest level since late Oct in recent action. The next support for the SOX is at its 200 day exp mov avg at 465.83 (simple at 462.51).
3:02PM NVE Corp spikes to highs of day amid short-squeeze (NVEC) 41.80 +0.40: Stock has rallied almost 2 pts over just a two minute period, following press release providing update on the status of its MRAM partnerships. The press release has caught traders short following a negative research report on the name yesterday.
2:19PM O2Micro likely was already pricing in miss - FBW (OIIM) 14.07 -0.93: -- Update -- Ferris Baker Watts says that OIIM's stock appears to have been pricing in this morning's negative preannouncement, which resulted from previously released negative Jan and Feb sales figures from major Taiwanese notebook ODMs, beginning in mid-Feb. Accordingly, firm notes that the stock is down a smaller percentage than they would normally expect, had the stock not already been in decline.
1:26PM 200 Day-Alert -- Teradyne (TER) 21.54 -0.99: -- Update -- -- Technical -- Stock gapped lower and tested support at its 200 day simple mov avg at 21.52 in early trade (session low 21.52). While able to recover roughly 1.6% at its midday high, it has rotated lower this afternoon and is again hovering near the session low/200 day. Next support if a sustained break is seen is at the March low of 21.01
11:26AM Carrier Access selected by Cingular for network expansion (CACS) 11.80 +0.57: Co announces that Cingular Wireless has expanded CACS's contract for cell site backhaul products to support Cingular's network expansion. In the multi-year contract, Cingular will deploy CACS's MASTERseries Cell Site Access Gateway to meet its current requirements for efficient nxT1 cell site to mobile switch center transport, while simultaneously preparing its network for future packet-based transport and advanced protocol processing. Deployments will begin immediately.
8:31AM IXYS Corp wins in U.S. Court of Appeals in IRF patent dispute (SYXI) 8.94: Co reports that the U.S. Court of Appeals for the Federal Circuit reversed, or vacated and remanded, all findings of patent infringement previously issued against IXYS by the U.S. District Court for Central California in the patent infringement lawsuit filed by International Rectifier (IRF) in respect of its U.S. Patents Nos. 4,959,699, 5,008,725 and 5,130,767. The Appeals Court also vacated the final judgment in those proceedings upon which the District Court's earlier damages award and injunction were based. The Appeals Court's actions mean that the District Court's award of $27.2 million in damages and injunction against IXYS are vacated as a matter of law.
8:31AM O2Micro cuts guidance (OIIM) 15.00: Company revises Q1 guidance, now sees EPS of $0.08-0.10, vs the Reuters Research consensus of $0.12, and revenues of approx $21.6-22.4 mln (down approx 11-14% from Q4 revenues of $25.17 mln), vs an estimate of $25.4 mln. Co cites significant weakness in portable PC market with lower than expected run rates at major manufacturers in Taiwan and China.
8:28AM Expect bullish MU outlook when co reports Wed -- First Albany 15.81: First Albany reits a Strong Buy and $22.50 target on Micron (MU) ahead of the co's Q2 (Feb) report next Wed after the close. The firm expects the co will provide a bullish outlook, as DRAM prices continue to move higher. Most of the DRAM fabs that are in production today were built in the mid-1990s, and few new plants are under construction. In addition, DRAM makers have pushed the life span of the equipment in production to the limits of their capability. This, coupled with manufacturers' shifting DRAM capacity, bodes well for DRAM prices this year.
7:28AM MSFT: Microsoft to cut Xbox price early next month -- WSJ 24.89: The WSJ reports that Microsoft (MSFT) is taking the offensive in its videogame battle with Sony by cutting prices as part of a wider push to boost sales of its Xbox game system. Microsoft plans to drop the price of the Xbox console by $30 early next month, to $149. In addition, Microsoft also may start selling a limited-edition Xbox packaged with Microsoft's Halo, a shooting game, for $169, these people say. Halo, one of the most popular titles exclusive to the Xbox, could spark sales of the game machine itself.
finance.yahoo.com
Looks like we are all Paul Simon fans!
My favorite among lots of songs I love:
Something So Right
You've got the cool water
When the fever runs high
You've got the look of lovelight in your eyes
And I was in crazy motion
'Til you calmed me down
It took a little time
But you calmed me down
When something goes wrong
I'm the first to admit it
I'm the first to admit it
But the last one to know
when something goes right
Well it's likely to lose me
It's apt to confuse me
It's such an unusual sight
I can't get used to something so right
Something so right
They've got a wall in China
It's a thousand miles long
To keep out the foreigners
They made it strong
I've got a wall around me
You can't even see
It took a little time
To get to me
Chorus
Some people never say the words
I love you
It's not their style
to be so bold
Some people never say those words
I love you
But like a child they're longing to be told |
