From Briefing.com: 4:20 pm : What was shaping up to be a very strong start to 2007 actually ended on a rather lackluster note, as diminishing hopes of a possible interest rate cut left the sustainability of a nearly six-month rally in stocks up for debate.
With U.S. markets closed Tuesday to commemorate the recent passing of President Ford, and equity markets rallying around the world, investors feeling left behind embraced upbeat corporate news, some positive analyst commentary, falling oil prices and the seasonality factor to get back into buying mode.
As a reminder, today marked the second-to-last trading day of the classic year-end Santa Claus rally which, according to the Stock Trader's Almanac, has resulted in an average return of 1.5% for the S&P 500 since 1950. In fact, an influx of new fund inflows that typically hit the market on the first day of trading for the month/quarter/year, as evidenced by the biggest volume in several weeks, provided an additional floor of market support.
After contracting for the first time in more than three years, the ISM index rebounding to 51.4 in December (from a sub-50 read in November) provided even more confirmation that manufacturing is holding up nicely, helping to alleviate the worst of recession fears. In fact, the report more than offset monthly ADP employment data that suggested Friday's closely-watched and more credible Dec. jobs report will disappoint.
Throw in Wal-Mart (WMT 47.50 +1.32) providing an additional vote of confidence about the health of the consumer, after saying December same-store sales rose more than expected, the surprise resignation of Home Depot (HD 41.12 +0.96) Chairman and CEO Robert Nardelli, and bargain hunters jumping at the chance to buy last year's worst performing Dow component, Intel (INTC 20.32 +0.07), and Wednesday had all the makings of a broad-based rally. Intel was up more than 3% at one point, providing a huge boost for the influential Tech sector.
Be that as it may, with the market pricing in the chances of a soft landing for the U.S. economy and an eventual Fed rate cut, investors already anxious about what the FOMC minutes from the December 12 meeting would say about inflation and the direction of Fed policy grew even more concerned in afternoon trading.
At 2:00 ET, investors sifted through a report showing that all Fed members agreed that the risk of inflation failing to moderate remained the "predominant concern." With the market even more preoccupied about the pace of economic growth, several policy makers also acknowledging that the "downside risks to economic growth in the near term had increased a little," with economic activity in the second half of this year probably "a touch softer than had been expected," also took a toll on overall sentiment. In fact, today's volatile action resulted in the biggest range for the Dow (175 points) since August 2006.
Oil prices posting their biggest one-day decline (-4.5%) since April 27, 2005 (-4.8%), was another source of support; but the subsequent absence of leadership in the Energy sector (-3.7%) also served as a reminder of how crucial profits from the likes of explorers, drillers, refiners and integrated oil companies are to the overall earnings picture. Crude for February delivery slipped below $59/bbl for the first time since November 24 and closed at $58.32/bbl after the National Weather Service called for warmer temperatures through the 15th of January in the U.S. Northeast, the largest customer of heating oil. DJ30 +11.37 NASDAQ +7.87 SP500 -1.70 NASDAQ Dec/Adv/Vol 1496/1624/2.30 bln NYSE Dec/Adv/Vol 1870/1863/2.24 bln
4:04PM Cirrus Logic acquires China's Caretta Integrated Circuits for $10.5 mln (CRUS) 6.99 +0.11 : Co announces it has purchased all of the outstanding stock of Caretta Integrated Circuits, a fabless integrated circuit design co based in Shanghai. In connection with the acquisition, Cirrus Logic paid Caretta's stockholders $10.5 mln in cash and has agreed to pay certain employees a potential earn-out based on financial performance over the next two years. The co expects to recognize a one-time charge of $1 mln to $4 mln in the Dec quarter of 2006. This transaction is expected to be neutral to earnings per share in calendar 2007.
8:06AM Pixelplus announces rulings from Intellectual Property Tribunal of the Korea Intellectual Property Office (PXPL) 1.60 : Co announced it obtained a "completely positive and affirmative ruling" from the Intellectual Property Tribunal of the Korea Intellectual Property Office granting the co's request to effectively cancel and invalidate the disputed contact hole process patent claimed by MagnaChip Semiconductor. The co, however, did not obtain a positive ruling from KIPO on the cancellation and invalidation of the disputed color filter patent alleged by MagnaChip. To reverse this ruling and obtain a positive decision on the color filter patent, the co will file an appeal with the Patent Court. Despite KIPO's ruling on the color filter patent, the co is pleased it received completely favorable and commendatory rulings from KIPO on three of the four patents granting the co's request to effectively cancel and invalidate the disputed photo diode and sensor patents in September 2006 and also the disputed contact hole process patent discussed above.
8:04AM Rambus and Qimonda sign technology license for XDR DRAM (RMBS) 18.93 : Co announced that Qimonda (QI), a global producer of DRAM memory products, recently signed a technology license agreement for the Rambus XDR memory interface solution. The Rambus XDR solution will be implemented in Qimonda's 75nm process technology for integration into high-volume applications, including game consoles, digital televisions, set-top boxes and PC graphics.
3:41AM Fairchild Semiconductor to launch tender offer for System General (FCS) 16.81 : Co announces that it expects to launch a tender offer to acquire 100% of the outstanding shares of Taipei-based System General Corporation for NTD 93 per share in cash through a wholly owned Fairchild subsidiary.
09:53 am Xilinx: Nollenberger Capital initiates Buy. Target $28. Nollenberger initiates XLNX with a Buy and $28 tgt. Firm thinks that despite the supply chain inventory correction that both Altera and Xilinx are weathering in the December quarter and possibly in CQ1, investment in both stocks entering the seasonally stronger period for PLDs is a solid investment strategy. Firm believes growth momentum should return in C2Q07.
09:54 am Altera: Nollenberger Capital initiates Buy. Target $26. Nollenberger initiates ALTR with a Buy saying despite the supply chain inventory correction that both Altera and Xilinx (XLNX) have been weathering in the December quarter, and may also in C1Q, investment in both stocks entering the seasonally stronger period for P.L.Ds is a solid investment strategy.The firm believes ALTR shares should trade at a premium to XLNX, given Altera's faster growth rate, increasing market share, and higher gross margins.
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