From Briefing.com: 4:25 pm : The equity market was in a meandering mode for a good part of Tuesday's session, but it soon perked up following the release of the FOMC Minutes from the September 18th meeting.
The end result is that the Dow and S&P 500 both closed at new highs in a low volume move while the Nasdaq logged its fourth consecutive winning session. Remarkably, the Nasdaq is now up 17% from its August 16th low.
With respect to the rally that followed the release of the minutes, we aren't buying the notion that it was predicated on a sense of optimism that the Fed will again cut rates at the October 31 FOMC meeting.
On the contrary, our interpretation of the minutes was that they did more to weaken the case for a rate cut than they did to strengthen it.
The Fed noted that future actions would depend on the economy and market developments. Although the Fed could cut rates again if economic growth weakens, recent data and the behavior of the capital markets suggest otherwise.
In looking at the rally, the explanation that makes sense is that it was driven by a sense of optimism that the economy is in good enough shape that another rate cut isn't needed. To be sure, it is more important for the market that the economy not enter a recession than it is to get another rate cut.
Our view aside, there was no mistaking the bullish bias in the market following the release of the minutes. The late day surge was powered by broad-based buying interest and was led by a resurgent financial sector (+0.8%) that was in negative territory prior to the minutes.
Goldman Sachs (GS 239.20, +12.24) was a winning standout whose outperformance provided a real boost for other financial stocks.
All ten economic sectors closed the day with a gain. The biggest movers were the materials (+2.0%), energy (+1.8%) and utilities (+1.4%) sectors. The consumer discretionary sector (+0.2%) brought up the rear as it was held back by a relatively weak showing from many retailers ahead of the September same-store sales reports later this week.
The tech sector (+0.6%), which has been so strong of late, underpeformed the broader market, yet it was underpinned by leadership from Microsoft (MSFT 30.10, +0.26). The latter stock rose in response to Goldman Sachs lifting its profit estimates for 2008, 2009 and 2010.
Despite the stock rally, the dollar came under some pressure as seen in the 0.2% decline in the dollar index (DXY). The dip in the greenback helped spark buying interest in the commodity arena. Oil futures tacked on 1.4%, rising to $80.13 per barrel, while gold futures jumped 0.6% to $743.10.
In Wednesday's trade, the weekly inventory report from the Dept. of Energy and the earnings report from Alcoa (AA 39.752, +1.42) will be focal points.DJ30 +120.80 NASDAQ +16.54 SP500 +12.57 NASDAQ Dec/Adv/Vol 1244/1711/1.89 bln NYSE Dec/Adv/Vol 1011/2285/1.19 bln
4:30PM Semitool announces it has sold an advanced Raider tool to a customer focused on development of high-efficiency, low cost-per-watt solar devices (SMTL) 9.52 +0.00 :
3:58PM Market View: Late run to new highs (TECHX) : A firmer start to the session with the Nasdaq Comp/100 able to set new multi-year intraday highs in early action amid strength in stocks such as MSFT (2008 through 2010 estimates raised by Goldman) and GOOG. The rest of the indices were higher as well but they did not confirm the breakout above last week highs. This lack of confirmation, pressure in Semi and Retail along with a caution in front of the 14 ET FOMC minutes results in several hours of choppy range trade. The minutes increased volatility but no clear direction for 25 minutes. Once the minutes were fully digested, however, the indices began to lift higher with comments from two Fed members providing support for the late day upside extension. The Dow and S&P 500 ended with new all time highs and the Nasdaq 100/Comp set fresh multi-year highs. The Russell 2000 continues to lag as it failed to break Friday's high and is 11 points shy of its all time high from July. Commodity related sectors paced the way on the upside (Coal +4.2%, Mining +3.6%, Steel +2.8%, Gold/Silver +2.8%, Natural Gas +2.1%, Oil +1.8%, Oil Service +1.8%) along with Broker +1.7%, Chemical +1.4%, Utility +1.3%, Restaurant +1.2%, and Home Construction +1%. Semi (SMH -0.4%) and Retail (RTH -0.2%) rebounded well off their lows but ended with minor declines.
9:01AM Tegal announces that it has received additional orders for 981ACS units from a "leading hard disk drive manufacturer" (TGAL) 5.42 : Co announces that it has received additional orders for 981ACS units from a leading hard disk drive manufacturer to support capacity expansion for magnetic data storage device fabrication. The order also includes additional ACS productivity upgrades for the customer's legacy 900 Series tools.
09:32 am Microchip: AmTech Research downgrades Buy to Neutral. Target $47 to $37. Amtech downgrades MCHP to Neutral from Buy noting yesterday after the close, MCHP pre-announced its FQ2 revenue would be down ~2% vs. previous guidance for flat to up 2%, and the company expects Q4 revenue to be down sequentially vs. their original estimate for 4% sequential growth. The firm says while they continue to believe shares have support at current levels from the 3.4% dividend yield, they do not see any incremental catalyst to drive shares higher in the near-term.
09:32 am Broadcom: AmTech Research reiterates Buy. Target $40 to $45. AmTech notes BRCM and Samsung announced an expanded partnership where BRCM will supply multiple ICs including EDGE basebands, 3G WCDMA co-processors, Bluetooth, power mgmt, and software. Firm views this announcement as a key positive as this is BRCM's third Tier-1 cell phone baseband win with the others being Sony-Ericsson and NOK. Firm believes volumes are likely to be modest however, they would like to note that BRCM has now expanded its geographic coverage at Samsung to include Asia-Pacific, Africa, Australia, and "elsewhere". Firm notes the expanded partnership with Samsung gives them higher conviction in their above consensus ests. Firm raises their tgt to $45 from $40.
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