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MORNING WATCH, Sep. 4
By Frederic Ruffy, Optionetics.com
9/4/2003 6:15:00 AM

http://www.optionetics.com/articles/article_full.asp?idNo=9005

Stocks are likely to open mixed or slightly lower when trading begins this morning. Technology stocks may get a lift from a host of analyst upgrades, but the blue chips are expected to trade lower following a disappointing report on weekly jobless claims. Consequently, roughly forty-five minutes before the start of trading, index futures were pointing to a 20-point loss in the Dow Jones Industrial Average ($INDU) and a modest gain in the tech-heavy Nasdaq Composite ($COMPQ).

Stock index futures declined early Thursday following the release of the latest weekly jobless claims from the Labor Department. The weekly numbers are disseminated every Thursday morning one hour before the opening bell. This week, the Labor Department reported a surprise jump in the number of individuals filing for jobless benefits. For the week ended August 30, initial claims for state unemployment aid rose 15,000 to 413,000. That was up from a revised 398,000 the week before and well above economist estimates of 390,000.

Meanwhile, a separate report released Thursday morning showed a surge in the nation’s productivity. According to the Labor Department, US non-farm productivity jumped at a 6.8% annual rate during the second quarter, and well above the previously reported 5.7% increase. Strong productivity has allowed US businesses to increase output without hiring more workers. At the same time, unit labor costs, which are often used to gauge inflation pressures, fell 2.1% in the second quarter, according to the Labor Department's latest figures.

While the major averages are expected to open lower due to the disappointing employment numbers, the tech sector could get a lift from a series of analyst upgrades. Shares of Applied Materials (AMAT) are expected to trade higher after a UBS analyst raised the rating on the semiconductor equipment maker to “buy” from “neutral”. The analyst cited increased order flows for the upgrade. Chip stocks may also get a boost after Cypress Semiconductor (CY) said late yesterday that third quarter revenues are likely to be 2% higher than analyst estimates.

Meanwhile, shares of Symantec (SYMC) are also expected to get a lift after JP Morgan upgraded the maker of Norton anti-virus software from “underweight” to “neutral”. Analysts also upgraded their ratings on networking giant Cisco Systems (CSCO). Goldman Sachs raised shares to “outperform” and a UBS analyst boosted Cisco to a “buy” from “neutral”.

Going forward, the focus is likely to remain on the economy. National Semiconductor (NSM) is scheduled to announce earnings later today. Outside of that report, the earnings calendar remains light and investors will probably assign greater importance to the economic data. Therefore, the latest numbers of factor orders and the ISM—non-manufacturing index, both due out at 10:00 a.m. ET, will probably garner some attention from investors. However, the next key piece of economic data is scheduled for tomorrow morning when a monthly report on the employment situation is released one hour before the opening bell.



Frederic Ruffy
Senior Writer & Index Strategist
Optionetics.com ~ Your Options Education Site