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From Briefing.com: 4:30 pm : There wasn't any shortage of news on Tuesday. The problem for the stock market is that most of it seemed to skew to the negative side of things.

First and foremost, investors were rattled by accusations from the head of Dubai International Group that Citigroup (C 22.10, -0.99) will need a lot more capital from outside investors than it has already received. Citigroup's stock dropped as much as 8.0% in the wake of the accusation and weighed heavily on the financial sector along with the investment banks, which again saw another round of estimate cuts.

Separately, a warning from Intel (INTC 20.00, -0.01) that it was revising its first quarter gross margin rate guidance downward due to lower than expected NAND flash memory pricing also cast a pall on the broader market in the early going.

Selling activity intensified, though, after Fed Chairman Bernanke told the Independent Community Bankers of America that defaults and foreclosures in the housing market were likely to continue to increase. To help stem "preventable foreclosures," the Fed Chairman suggested banks consider writing down the principal amount on mortgage loans as a means of restoring equity for borrowers.

Bernanke's suggestion didn't help the financial sector as participants viewed it as a reminder that further write-downs look to be in store for the sector. Comments form a bevy of other Fed officials Tuesday, including Fed Vice Chairman Kohn, didn't do anything to lift the market's mood either.

The major indices went on to set new lows for the session around 14:00 ET. For the Dow, Nasdaq and S&P, that translated to losses of 226, 37 and 24 points, respectively.

As one can see from the final standings, those losses were pared considerably in late-afternoon trading.

Strikingly, a sell-off in commodity prices that resulted in a 1.9% decline in the CRB Index didn't act as the primary catalyst for the recovery. That honor in our estimation goes to Cisco (CSCO 24.29, -0.11) whose CEO said in a presentation that he's even more comfortable with the company's long-term guidance than he was following the last earnings conference call. Furthermore, he indicated that he believed the U.S. downturn would be short and shallow.

The comments from Cisco CEO John Chambers sparked a broad-based bargain hunting rally in the technology sector that favored a number of beaten up companies like Intel, Amazon.com (AMZN 65.34, +2.91), Microsoft (MSFT 27.59, +0.60), and Apple (AAPL 124.62, +2.89). Separately, Apple told investors that it isn't planning to start a dividend or to buy back stock right now and that it expects to hit its 10 million iPhone sales target in 2008.

Notably, the financial sector participated in the late recovery effort, also on some bargain hunting activity that kicked in after the sector came within a hair of revisiting its January low earlier in the session. In addition, the umpteenth report that an Ambac Financial (ABK 10.72, +0.78) bailout deal was near aided in the sector's recovery try. The financial sector, down as much as 3.3% earlier in the day, closed with a decline of 0.8%. DJ30 -45.10 NASDAQ +1.68 NQ100 +0.6% R2K -0.5% SP400 -0.6% SP500 -4.59 NASDAQ Dec/Adv/Vol 1786/1138/2.64 bln NYSE Dec/Adv/Vol 2120/1027/1.78 bln

4:30PM Semtech announces new $50 mln stock buyback plan (SMTC) 12.92 +0.33 :

2:00PM Celestica collaborates with Microsoft on the development of BEE3 platform prototypes (CLS) 6.47 -0.36 : Co announces it has collaborated with Microsoft (MSFT) on the design of the BEE3, Berkeley Emulation Engine 3rd version, to improve the ability of Microsoft and other companies to conduct computer architecture research.

1:07PM Tessera Tech confirms PTO Issues Initial Office Action on Patent; reiterates its revenue guidance for the first and second quarters of 2008 (TSRA) 13.81 -9.25 : Co confirms that the U.S. Patent and Trademark Office has issued an initial office action regarding Tessera's 6,133,627 patent ("627") in ex parte reexamination. This initial action is non-final and will be subject to a lengthy review process, including the possibility of appeal. This issued patent is presumed to be valid, intact and enforceable during the reexamination process, which on average takes 24 months to complete, not including appeals. It is not unusual for the PTO to preliminarily reject claims during the reexamination process. Tessera has the right to argue, and will continue to argue, the merits of its position. Tessera is concurrently reiterating its revenue guidance for the first and second quarters of 2008, as contained in its announcement dated January 31, 2008 (guidance is for Q1 revs of $55-57 mln vs. $56.1 mln consensus; for Q2 is $$53.55 mln vs. $54.4 mln consensus). In accordance with company's policy, Tessera's quarterly guidance does not include settlements from the company's current enforcement actions. (stock is halted)

12:11PM STMicroelectronics Supervisory Board confirms "speculations that have appeared in the media concerning possible changes in the highest levels of the top management are without foundation" (STM) 11.34 -0.36 :

9:26AM Applied Materials discloses $1.9 bln solar equipment sales agreement (AMAT) 18.88 : Co discloses that it has entered into sales agreements with a privately-held corporation based outside the United States, under which AMAT will supply equipment and installation/warranty services for multiple solar factories to be constructed by the buyer. The factories, which will feature Applied SunFab thin film tandem junction production equipment, collectively are expected to produce an annual output of solar photovoltaic modules capable of generating electricity on a gigawatt scale. The aggregate purchase price for the equipment and related services (exclusive of post-warranty services) to be provided by AMAT under the agreements is approximately US$1.9 bln.

DigiTimes: With the possibility LCD panel prices for notebook applications may rebound $1-2 in April, some notebook makers recently increased their panel procurement to build up their inventory. Leading notebook vendors such as HPQ and DELL had already started building up their panel inventory since the end of 2007 as they expected to see a panel shortage in 2008. In addition, recently some notebook system makers have been looking to increase their panel inventory by about one week above the 1-2 month levels they usually retain, amid expectations of a price increase for notebook panels in April, according to the system makers.

8:04AM Atmel and PTEC announce the integration of ATMLl's FingerChip biometric security solutions in PTEC's FailSafe and SecureCore Pre-boot Authentication products (ATML) 3.28 :

7:49AM Trina Solar beats by $0.13, beats on revs; guides Q1 revs in-line; FY08 revs above consensus (TSL) 32.62 : Reports Q4 (Dec) earnings of $0.62 per share, $0.13 better than the First Call consensus of $0.49; revenues rose 161.6% year/year to $101.4 mln vs the $95.6 mln consensus. Co issues in-line guidance for Q1, sees Q1 revs of $112-120 mln vs. $115.86 mln consensus. Co issues upside guidance for FY08, sees FY08 revs of $770-808 mln vs. $691.18 mln consensus. "The Company believes gross margin for the first quarter will likely be between 23% and 25% and estimates operating margin to range between 13.5% to 15.5% of total net revenues. The Company is expecting gross margin for the year between 23% and 25% and believes operating margin will likely be in the range of 15% to 17% of total net revenues."

09:31 am Microsoft: AmTech Research initiates Buy. Target $44. Amtech initiates MSFT with a Buy and a $44 tgt saying they believe that excellent fundamentals in MSFT's core Client and Business segments will drive upside to conservative consensus estimates through CY09. The firm also says the long-term challenges from virtualization, open source, and virtualization necessitate MSFT achieve success in the Internet Advertising space. They believe that the most likely scenario is for MSFT to acquire YHOO near the current offer price with potential for significant revenue and cost synergies in the long-term.


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10:57 am Intel (INTC)

When Intel (INTC 19.77, -0.24) provided its first quarter guidance in mid-January, it warned that it was taking a conservative line on things due in part to the weak NAND flash memory pricing environment. Its attention to U.S. economic indicators, which had been flashing slowdown signals, was the other driving factor.

After Monday's close, Intel provided updated guidance that qualifies as a disappointment. Interestingly, the company didn't say anything about economic indicators in the U.S., as it pinned a downward revision to its gross margin guidance solely on lower than expected prices for NAND flash memory chips.

Intel didn't clarify if the price deterioration was a function of reduced demand or simply excess supply from industry manufacturers. Either way, Intel now expects its first quarter gross margin rate to be 54%, plus or minus a point, versus prior guidance of 56%, plus or minus a couple of points.

The company didn't make any other changes to the business outlook it provided following its fourth quarter report. That means it didn't adjust its revenue guidance of $9.4 billion to $10 billion. Still, the gross margin guidance will prompt some downward revisions to analysts' EPS estimates for the first quarter.

Intel's stock has held up reasonably well in light of the disappointment. Losses have been tempered by the recognition that Intel wasn't overly-priced to begin with at 14x estimated 2008 earnings, as well as the understanding that PC demand, which is the core driver for its overall operations, is holding up fairly well.

All things considered, we'd continue to hold the stock here. However, given the market's misgivings about the economic and demand outlook, we'd refrain from committing new money just yet.

Intel will be holding an Analyst Day on Wednesday, March 5.

--Patrick J. O'Hare, Briefing.com