Sector Investing

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From Briefing.com: The Nasdaq edged out yet another new closing high for this massive three-month rally. So at current levels, the index has lifted roughly 33.0% off that March low of 1253.

Yet outside this decidedly strong broader technical picture, there may be one additional issue worth consideration which we touched on Monday morning. Namely, there are now just two weeks remaining until the end of June. The end of this month marks the end of the second quarter, and also represents a time in which many, if not most, mutual funds submit their quarterly results.

Now we've already alluded to the Nasdaq's unusual strength through this second quarter. This means any fund that has underperformed the broad markets -- or has a larger than average cash balance -- now has two weeks to 'dress up' their portfolios. I.e. money managers will be looking to book the strongest performers over these next two weeks so it 'looks as if' they were in the proper spots at the right time.

That funds may be picking up these names at substantially higher prices is somewhat beyond the point. Put another way, it isn't the actual return many managers care about, so much as the appearance of well-reasoned decision making that matters. At any rate, be aware this two-week catch up period may provide a favorable backdrop for additional upside over the near-term.

Looking ahead, Tuesday is a relatively active day with several economic reports that could be characterized as 'second tier'. To start, look for the Consumer Price Index (CPI) and data on Housing Starts, both of which are set for release pre-market at 8:30 ET. Those are followed by data on Capacity Utilization and Industrial Production scheduled after the start of trading at 9:15 ET.

For a more detailed look at upcoming reports, please visit Briefing.com's Earnings Calendar and Economic Calendar. -- Mike Ashbaugh -- Briefing.com

Close Dow +201.94 at 9318.96, S&P +22.24 at 1010.88, Nasdaq +40.09 at 1666.58: After last Friday's noticeable absence, buyers seized control of the market today and bid stocks to record highs...The S&P 500 closed comfortably above the important 1,000 level for the first time in almost a year and the Dow finished above the 9,300 mark for the first time in 11 months in a telling sign that the indices' recent upward moment remains intact... A number of developments fostered the upbeat tone of trading: the impressive 1.8-3.0% gains on the major European bourses, the dollar's strong move against the euro, and the better than expected Empire State index...
The regional manufacturing report surged to 26.8 (consensus of 8.8), its highest level ever, and suggested that the Philadelphia Fed Index - another regional manufacturing report that shares similar boundaries and industry bases - would show noteworthy improvement as well... Briefing.com would add, however, that the Empire State Index is only two years old and thus its readings are subject to a high degree of volatility... Another factor that contributed to the substantial advance in stocks was the impending quadruple-witching, options expiration day on Friday...

The simultaneous expiration of stock, index, futures, and individual stock futures options generally adds high volatility to the market and amplifies the present trend in stocks... As such, the major indices worked their way progressively higher, underpinned by bullish market internals, heavy volume totals, and strong industry leadership... Biotech, homebuilding, drug, financial, and retail led the market's rally and found ample support in the technology, transportation, and cyclical issues...

Only the oil service shares posted losses for the day, due in part to a RBC Captial Markets downgrade of 18 names (see Upgrades/Downgrades for the full list) due to its more cautious near-term outlook...Russell 2000 +1.7%, SOX +3.1%, S&P Midcap 400 +1.9%, NYSE Adv/Dec 2409/892, Nasdaq Adv/Dec 2087/1140

4:06PM Lattice Semi announces $200 mln convertible (LSCC) 8.71 +0.30:

10:49AM Micron: Rally not commensurate with fundamentals -- Moors & Cabot (MU) 12.83 -0.25: Moors & Cabot believes that recent run up in the stock has been related a recent firming of DRAM pricing, as investors speculate on the sustainability of demand trends. In an internal call, firm indicates that it does not believe demand trends will be sustainable, and thus believes pricing in the DRAM market will decline after almost two months of stability. Recommends that investors reduce their exposure to the stock, on view that there is significant downside potential versus upside from current levels.

9:58AM Analog Devices: Bookings likely flattening -- Bear Stearns (ADI) 33.62 -0.82: Bear Stearns checks indicate that bookings for high performance analog components, while still healthy, have flattened out after a strong start to the year. Firm believes that book-to-bill ratios are poised to decline as we head into the summer, which could cause revenues to flatten out as we progress into 2H03. This could impact ADI's October and January-ending quarters. Firm believes revenue upside potential could be limited later in the year.

9:32AM Axcelis Tech initiated with Outperform at SG Cowen (ACLS) 6.10 +0.08: SG Cowen initiates coverage on ACLS with an Outperform rating, saying the co's implant biz (80% of revs) will surge as capacity orders return; firm also notes that the stock at $6 trades at only 1.3x book value.

9:31AM S&P 500 and Dow levels : -- Technical -- Initial resistance for the S&P 500 is in the 991.50/992.50 area with a secondary zone at 994/995. Support is in the 990/989 area. Resistance for the Dow is at 9145/9155 area with the next barrier of interest near 9175. Intraday support is at 9130/9120.

9:30AM Nasdaq technical levels : -- Technical -- From current levels, the index faces initial resistance at 1638 followed by additional overhead in the vicinity of 1646. To the downside, look for initial support at 1632, followed by an additional floor 1626.

8:12AM Lexar Media added to JP Morgan Top 3 Ideas list (LEXR) 8.42: Firm views stock as undervalued at 19.6x fiscal 2004 earning estimate, a 21% discount to co's growth rate and a 28.7% discount to competitor SanDisk (SNDK). Firm notes that investors should be prepared for the co to issue debt or equity to bolster the balance sheet, following through on a shelf registration completed in Feb.

8:10AM NY Empire State Index : The June data came in at 26.8 vs the consensus estimate of 8.8 and the May report of 10.6.

7:42AM Standard Micro guides Q2 & Y04 in line with consensus (SMSC) 15.25: Company issues guidance for Q2 (Aug), sees EPS at $0.05, vs Reuters Research consensus of $0.04, and revs of $$44-45 mln vs estimate of $42 mln; co also sees Y04 EPS of $$0.24-0.28 vs R.R. estimate of $0.20 and Y04 revs of $178.85 mln (approx 15% YoY growth) vs R.R. estimate of $180 mln.

7:23AM PMC-Sierra upped to Sector Perform at CIBC (PMCS) 11.47: The upgrade from Sector Underperform is based on valuation. Firm views PMCS as a premium co in the sector that should outperform most peers. Also comments on co's exposure to access networks and sees PMCS as a beneficiary of increased DLS rollouts, which should keep shares at a premium valuation.

http://finance.yahoo.com/q?s=^SOXX+ADI+ACLS+ALTR+AMAT+AMD+BRCM+CY+INTC+KLAC+LEXR+LLTC+LSCC+LSI+MOT+M...

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