From Briefing.com: Weekly Recap - Week ending 05-Oct-07
Showing improved sentiment at the outset of the fourth quarter, the stock market finished the week higher as the Labor Department reported strong September job growth, which helped offset concerns of persisting weakness in the housing market and sluggish economic growth.
Despite profit warnings from some large banks on Monday, investors looked past concerns about credit market problems and sent stocks sharply higher in the first day of trading for the fourth quarter.
Monday's gains were supported by new economic data that showed manufacturing conditions have held up well, and offset warnings from UBS AG (UBS) and Citigroup (C), which forecast a substantial decline in third quarter earnings due to disruptions in the credit markets.
The broad-based S&P 500 index gained 1.3% during Monday's session while the Dow Jones Industrial Average increased 1.4% to close above the 14,000 level for the first time since mid-July.
Meanwhile, on Tuesday, more disappointing news on the housing front prompted many investors to take some profits from the prior session's rally. The National Association of Realtors reported pending home sales fell a larger than expected 6.5% in August from July and 21.5% from a year earlier – the lowest reading since records began in January 2001.
The market consolidated for a second consecutive day on Wednesday, as investors digested a mixed report on the services sector of the economy along with news that Germany’s Deutsche Bank AG (DB) would have to take a $3 billion charge in the third quarter due to global credit market problems.
The ISM Services Index for September showed a reading of 54.8. While that was down from 55.8 in the prior month, it still reflects a picture of growth as a number above 50 indicates expansion.
With little in the way of corporate news or market-moving economic data on Thursday, the market remained focused on the government's September jobs report, which was released on Friday, for greater insight into the overall health of the economy.
The Department of Commerce reported that factory orders in August slipped 3.3%, versus analysts' expectations for a decrease of 2.8%. Orders were up 3.4% in July. Weekly initial jobless claims for the week ended September 19th rose to 317k. That was up from the previous reading of 301k, and higher than the consensus estimate of 310k. Neither report had any significant bearing on the overall market.
On Friday, the Labor Department reported strong job growth for September and revised the weak data from August upward. Specifically, payrolls rose a slightly larger than expected 110,000, and, importantly, the 4,000 decline in August was revised to an 89,000 increase.
The report helped to calm recession worries and offset warnings from Merrill Lynch (MER) and Washington Mutual (WM) – the latest financial firms to lower their outlook due to recent turmoil in the credit and mortgage markets. Stocks, in turn, traded sharply higher after the reassuring report with both the Dow and S&P hitting new all-time highs during intraday trading. All in all, it was a bullish end to the week and a bullish start to the fourth quarter.
--Richard Jahnke, Briefing.com
Index Started Week Ended Week Change % Change YTD
DJIA 13895.63 14066.01 170.38 1.2 % 12.9 %
Nasdaq 2701.50 2780.31 78.81 2.9 % 15.1 %
S&P 500 1526.75 1557.59 30.84 2.0 % 9.8 %
Russell 2000 805.45 844.86 39.41 4.9 % 7.3 %
3:45PM Market View: New highs all time intraday highs for Dow and S&P 500 (TECHX) : Suggested watching for signs of a correction/pullback in the wake of the knee jerk reaction to the jobs data (Non-Farm 110K vs. consensus 100K, Aug revised to 89K from -4K and Hourly Earnings +0.4% vs. consensus +0.3%) but the index merely drifted to a minor retrace support and extended into midday setting a minor new all time high in the process. Once again only a limited pause was noted with the rally extended as high as 1561.91 during the afternoon. The advance was broad based in nature with Transports (Rail +4.7, Trucking +3.9%, Airline +2.7%) pacing the way along with Steel +3%, Home Construction XHB +2.9%, Paper +3%, Retail +2.5%, Gold/Silver +2.3% and Internet +2.2%. Little other than Oil Service -0.3% and Tobacco -0.2% were in the red. The market is technically extended in the wake of recent advance (S&P 500 +3.6% off last wk's low, +8.5% off Sep low, 14% off Aug low) so still watching for indications that a short term correction will continue develop off the current high or near an equality target at 1565 early next week.
09:31 am RF Micro Device: AmTech Research initiates Buy. Target $10. AmTech initiates RFMD with a Buy and $25 tgt as firm believes co is well-positioned for the 3G ramp with over 50% share of Power Amps (PAs) in WCDMA handsets. Top customers include NOK, MOT, Samsung, Chinese vendors and smaller players. In addition, firm sees RFMD's content increasing from ~$1.50/phone to upwards of $3/phone over the next 12-24 months driven by the increased use of FEMs, the move in WCDMA to multiple band/multi-mode configurations, and the ramp of Polaris 3. Firm believes RFMD will report solid Sept quarter results and outlook on October 23 driven by the strong 3G ramp at NOK and Samsung, the subsiding MOT drag and the initial Polaris 3 ramp.
08:43 am Research In Motion (RIMM)
Investors love Research In Motion's (RIMM 100.54) stock just about as much as consumers love their Blackberries. Can't say we disagree. The stock has tripled since we started recommending the name in June last year, arguing that valuation and the upside potential from its first endeavor into the consumer market offered considerable upside potential.
We reiterated our position in September after the Waterloo, Ontario-based company added another 800k subscribers and released the Blackberry Pearl. We retained our bull position again in December after it added 875k subs, in April after subs reached 8 million after another million were added in the quarter, and finally in June as demand for its Pearl, Curve and 88xx series drove subscriber growth of 1.2 million.
In July, the good news kept on coming. The company won approval, after an eight year effort, to sell its handsets in China. We argued then, "the stock shouldn't be chased but added to when the market inevitably starts second guessing the company's ability to meet heightened expectations." Those expectations were running high into the second quarter results after the stock ran from $85 (post-split) to $100 in one month.
The results themselves were strong, on the top and bottom line. However, the 50 cents in earnings per share, which surpassed estimates by only a penny, may not be enough to continue the upward momentum. As such, we think investors should take some profits off the table, but retain a core holding in the stock. We would be adding back on pullbacks as we head into the seasonally-strongest period of the year.
In the quarter, subscriber additions were strong, up 21% sequentially. A robust topline and ongoing operating leverage drove the quarter. For the first time in the company's history, consumers, not enterprise customers, drove the upside. The company guided 1.65 million net subscriber additions for the third quarter (14% q/q, 89% y/y) ahead of expectations.
Estimates are likely to be revised higher following RIMM's impressive showing. We think strong subscriber growth and accelerating consumer adoption will continue to propel the stock higher over time. The launching of the Touch confirmed even Apple (AAPL) doesn't think it can usurp the Blackberry as the consummate email device on the planet. The bear case going forward is volume growth will lead to margin compression. We side with the bulls on this one, believing RIMM will be able to retain margins while continuing to deliver the topline growth leading to strong earnings growth.
--Kimberly DuBord, Briefing.com |
