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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Sonki who wrote (4295)	12/22/1997 10:30:00 PM
From: Chris	Read Replies (1) \| Respond to of 42787

sonki.. im glad you're less bullish.... read this one: Updated for: December 23, 1997 Please note: Briefing.com is provided as an information service only. Charter Media, Inc. and Briefing.com do not make specific trading recommendations or provide individualized investment advice. Readers should make investment decisions based on thorough research and their own investment criteria. See Disclaimer. General Commentary All of a sudden, the tone in the tech sector has changed... Fears of a protracted decline due to the deepening financial crisis in Asia and slowing earnings growth, have given way to the belief that the worst is behind the sector... As such it's time to snap up some bargains... What nonsense... Was the sector oversold from a short-term perspective at Friday's lows?... Sure... Could we continue to see some modest additional gains between now and year-end... Also, yes... But do the gains represent anything more than a corrective bounce?... Not likely... Why? Underlying technicals remain weak with bearish chart configurations dominating the landscape of every industry. No leadership... The leaders in each of the major tech groups have broken down... Note Seagate, Compaq, Dell, Oracle, Microsoft, Intel, Texas Instruments, 3Com, Applied Materials and Northern Telecom. Earnings growth expected to slow due to weakening demand in Asia. Domestic growth also put into question by news out of Oracle, 3M and Cabletron. PC sales expected to slow. Capital spending by corporate America could slow if U.S. economy dragged down by Asian contagion. Valuations remain high (in general). In other words, buyer beware. Computer Systems & Peripherals Brief: A mixed session for the group with solid gains from the computer systems area... Compaq, Dell and Hewlett-Packard posted strong gains on news that ABN Amro Chicago Corp. reiterated its buy ratings on the companies... Micron Electronics edged higher on news that it agreed to sell 90% of its contract manufacturing unit to Cornerstone Equity Investors for about $271 mln... Disk-drive related companies didn't fare as well, as last-minute tax selling weighed on the group... Seagate, Western Digital and Iomega paced the retreat. Computer Networking Brief: Cisco Systems added 1 3/16 in active trading on news company was acquiring Lightseed International for $160 mln in stock... Cabletron Systems eked out a gain of 5/16 after reporting earnings for the third quarter of $0.13, two cents above recently revised (downward) estimates... Limiting the upside was fact that revenues fell 85 year-over-year and more than 11% sequentially... Losers were led by Ascend Communications which shed 1 11/16... Stock having trouble penetrating stubborn resistance in the 29-30 area. Computer Software & Services Brief: Internet related stocks were the place to be as AOL surged 5 1/8 on expectations of strong holiday shopping over the net... Gains came despite revelation that insiders actively sold stock in early December... Yahoo! also rallied to a new 52-wk high, gaining 2 9/16... Apparently no value is too high for these companies... Computer Sciences signed a $55 mln contract to perform mainframe processing and network server functions for New South Wales Department of Community Services... Broderbund's shares tumbled after CIBC Oppenheimer cut its rating from hold to underperform and set a 12-mo price target of 20... Noted valuations and sluggish growth prospects... EVEREN Securities upped its n/t rating on Microsoft to market outperform from market perform citing valuations and belief that current litigation won't impact MSFT's future business. Semiconductor: Brief: The general tone in the chip sector was positive, though most of the gains were fractional... A few exceptions included Intel (+1 7/16), VLSI (+1 1/16) and Lattice Semiconductor (+1 5/8)... The former rallied on news that Hambrecht & Quist maintained its hold rating while upping its Q4 earnings estimate by four cents to $0.90... Micron Technology bucked the trend and ended lower by 15/16... Stock suffered from profit-taking after last week's advance... Interestingly stock slipped on day that Brown Brothers Harriman upped its rating to hold from avoid... C-Cube was another loser, as the stock shed 1/2 on news that C.E. Unterberg Towbin cut its rating to buy from strong buy. Semiconductor Equipment Brief: Group continued to rebound, led by solid gains in Asyst Technologies, KLA-Tencor and ETEC Systems... The latter jumped on news that Needham & Co reiterated its strong buy rating... However, recovery to be tested today as FSI International reported disappointing earnings after Monday's close... FSII posted a gain of $0.08, 3 cents (or 27%) below street estimates and 55% below year-ago level... Revenues were down 3% over the same period a year ago... To make matters worse, company noted that anxiety over Asia could lead to order delays or cancellations over the next three months... Cited softening in orders, particularly from Korean semiconductor manufacturers and U.S. thin film head manufacturers... Though company expects FY98 revenues to exceed FY97 levels, no longer sees FY98 revenues eclipsing $300 mln... As noted on yesterday's Trader's Edge page, street heavily weighted toward strong buy/moderate buy ratings on the company... Consequently, we could see a rash of downgrades weigh on the stock in today's session. Telecommunications Equipment Brief: Seasonal bargain hunting lifting group despite anecdotal evidence suggesting a slowdown in the telecom equipment area... Monday's winners included ADC Telecommunications, Tellabs, Northern Telecom and DSC Communications... Should be noted that each of these stocks is well of its late summer high. [ Index ]

To: Sonki who wrote (4295)	12/22/1997 10:31:00 PM
From: Chris	Respond to of 42787

one more: Potentially Volatile Week Daily commentary updated for December 22, 1997 There are very few scheduled releases this week, no trading on Thursday, and half days on Wednesday and Friday. It will be slow, but it could be volatile. The market is still struggling between two competing forces: 1) the belief that the U.S. remains the safest investment in the world and the the recent sell-off presents a buying opportunity and, 2) the reality that the Asian crisis has and will impact earnings for U.S. companies at a time when valuations remain very high. Both arguments have validity, and the markets could react strongly on any given day to whichever argument is temporarily dominant. Risks are High During Earnings Season The market also faces a great deal of risk the next two weeks. The last two weeks of a calendar quarter are "earnings warning" time. This is when companies that realize they aren't going to meet Wall Street estimates typically make a pre-announcement to that effect. This quarter, there have already been a large number of firms warning that earnings will fall short of expectations, and more are certain to come. There were already signs that earnings growth would slow from the recent torrid pace of 15% even before the Asian crisis hit. Now, that has clearly compounded problems. We will leave aside for the time being just how much of an impact on U.S. corporate earnings the Asian turmoil will have, but we can guarantee this: it is a net negative. So is the stronger dollar, and that may even be worse. Just a few weeks ago, the consensus earnings estimates for the S&P 500 for the fourth quarter in aggregate (year over year) was over 12%. Now, it is down to about 8%. Rack it up to whatever you want, but that is significant. And the repercussions for 1998 have not yet sunk in. For the first quarter, estimates are still above 15%. That is highly unlikely. This means that many companies have to start guiding Wall Street estimates lower if Wall Street doesn't do it on their own. If the fourth quarter comes in around 8%, and the Asian credit problems start to spread, the consensus estimate for all of 1998, currently close to 15%, has to come down. The S&P 500 still trades at a very high 23 times trailing earnings, based in large part on expectations of continued strong earnings growth. The stock market will have to deal with a steady stream of earnings estimates reductions for 1998. The last couple of weeks in a quarter are always high risk, but often set the stage for an earnings season rally. This week, with light volume, the market could be particularly subject to volatile swings.