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From Briefing.com: 4:16PM Weekly Wrap: It was a difficult week for the stock market. Not only were the indices down, but the focus has shifted to the negatives.

The week began on an up note. Monday brought the typical merger announcements. This time, the big one was the IBM acquisition of Ascential Software. The market also got a late boost from an announcement by Genentech that a cancer drug showed some good results. It was surprising that a biotech company would provide broad support to the market, but that simply reflected thin conditions and a market looking for anything to provide direction.

From there, it was all downhill. The market dropped sharply on Tuesday rising oil prices. That proved to be a theme all week. Oil ended last week at $54.43 a barrel and this week at $56.72. That was despite an announcement by OPEC that it would raise production limits by 500,000 barrels a day.

On Wednesday, the bad news came from General Motors. Despite strong demand and high production, the company said it would report a huge first quarter loss. Global competition is continuing to pressure prices. GM's debt rating was put on review by the major agencies for a possible downgrade.

The market was mixed on Thursday and Friday, but the tone was clearly cautious.

There were very few earnings reports of note this past week. Adobe had a good report, as did brokerage firms Goldman Sachs, Bear Stearns, and Morgan Stanley. But those companies don't have broad implications for the market. There were also surprisingly few earnings warnings this week, even considering the GM warning.

There were also not many economic reports of note, but overall they reflected a strong economy. February retail sales showed good growth, and industrial production was up a steady 0.3%. Housing starts were up strongly for February. None of this data, however, had much impact. The stock market is aware that economic growth is very strong, and it is expected to stay that way.

Next week brings greater risks on the economic calendar. PPI is due on Tuesday, and CPI on Wednesday. Any sign of unexpected inflation could roil the markets. The earnings calendar is also very light, with Oracle's earnings on Tuesday the clear highlight.

There is a Federal Reserve FOMC meeting on Tuesday. The market is expected yet another 1/4% hike in the fed funds rate target. The Fed has raised rates at each of the past six meetings, and almost every time the stock market went up that day. So, that is not necessarily a worrisome event, but the backdrop of rising rates is a concern. Over the past week, the yield on the 10-year note fell from 4.53% to 4.51% but that hardly alleviated concerns about rising rates.

The stock market is languishing and it is not clear what would provide a bullish catalyst. Underlying concerns about inflation, interest rates and oil prices are dragging on the market, while there is concern that earnings growth is slowing down and the higher interest rates will eventually slow down the booming economy.

The tone is apprehensive and fragile to any bad news on the inflation front.

 
 Index      Started Week Ended Week  Change %Change  YTD  
 DJIA         10774.36    10629.67  -144.69  -1.3%  -1.4 %  
 Nasdaq        2041.60     2007.79   -33.81  -1.7%  -7.7 %  
 S&P 500       1200.08     1189.64   -10.44  -0.9%  -1.8 %  
 Russell 2000   626.84      622.55    -4.29  -0.7%  -4.5 %

6:34PM Swing Trader: Time for a Bounce? : -- Technical -- Markets opened relatively flat Friday morning and quickly extended its 2-week downtrend under its February lows. A rebalancing of some S&P 500 stocks mixed with triple witching expiration caused plenty of volatilty intraday and an slight upward bias headed into the close...(continued)

3:09PM Treasury Market Off on Light Trade : Treasuries headed lower and stayed there throughout the session, carving out less than 3 basis point ranges across the curve. The trade was thin and spotty for a number of reasons including the upcoming FOMC rate decision (up 25 bps, "measured" or not), a run of potentially inflationary economic data, quarter and week end activity and profit-taking (and, yes, basketball). The day's reports weighed on trade and the smack down that emanated out of GM filtered back out. Oil slipped from the highs and the dollar was generally better. Curve trading was reined in as well, with yield-spreads between maturities trading tight. BNP Paribas saying the curve has been a random trade this week and believes the longer-term charts still point to higher yields but this event is unlikely to occur before next weeks FOMC meeting and the release of the next round of price data. Tuesday, Mar 22 is shaping up to be a big day, Feb producer price index at 8:30ET and a Fed rate decision expected at 14:15ET. The market will be carefully examining the statement accompanied with the expected rate hike (please see 11:41 ET and 12:29 ET comment for more). An above consensus read in PPI may only provide limited selling power as the market will likely not jump to any inflation conclusions until CPI reads on Wed. Important housing data, durable goods, consumer confidence and Q4 GDP also add to the week's data load. The 10-yrs are currently -10/32nds yielding 4.505%.

2:40PM Point Gainers List : Issues posting the largest gains on a point basis: ADBE +4.30, ASCA +3.80, VPI +3.31, MSTR +3.17, CTMI +2.80, KWK +2.52, SCHL +2.41, JBL +2.20, CCJ +2.31, MOVI +2.08, ELOS +1.97, NBIX +1.77, NIHD +1.71, EOG +1.67, CEDC +1.57, NBR +1.40, COP +1.40, MACR +1.35, KBH +1.29, XOM +1.24.

2:22PM Point Losers List : Issues pacing the way on the downside on a point basis include: DRL -5.90, LFG -5.11, GSOL -3.26, PHS -3.23, STC -3.23, FAF -3.06, RSH -3.05, CMTL -3.04, FNF -2.84, DRIV -2.34, HANS -2.29, TSRA -2.29, PLMO -2.22, PCU -2.13, AET -2.11, MDTL -2.03, CAMD -2.01, AHM -1.94, HUM -1.70, JWN -1.69, UPS -1.63, AIG -1.63, UPS -1.62, PLCE -1.58, NAV -1.50.

7:47AM Diana Shipping prices 12.37 mln share IPO at $17.00, the high end of the $15-17 range (DSX) 17.00: Diana Shipping prices its IPO at $17.00, vs the expected range of $15-$17. The co is an operator of dry bulk carriers that transport iron ore, coal, grain and other dry cargoes along worldwide shipping routes. Its fleet consists of seven modern Panamax dry bulk carriers. The co has entered into newbuilding contracts with a Chinese shipyard for the construction of two additional Panamax dry bulk carriers and it has agreed to purchase a secondhand Capesize dry bulk carrier. The first new Panamax dry bulk carrier and the secondhand Capesize dry bulk carrier were delivered last month.... Briefing.com Note: There have been a number of cargo ship cos coming public, striking while the iron is hot as the sector has been a strong performer driven by high coal, iron ore and oil prices. Recent cargo IPOs have performed well: Arlington Tankers (ATB 24.11), Top Tankers (TOPT 18.86), US Shipping (USS 26.06) and DryShips (DRYS 20.51) are up 21%, 71%, 17% and 14%, respectively, from their $20, $11, $22.25 and $18 offering prices. This is a 12.37 mln share deal led by Bear Stearns.

4:06PM NIKE Inc. (NKE) 85.84 -0.99: He certainly has big shoes to fill...that is Nike's new CEO William Perez who has been at the helm of athletic shoe and clothing company for eight weeks. The former CEO of S.C. Johnson & Son replaces Phil Knight who started the company by selling shoes out of the trunk of his car turning Nike into a premier worldwide brand. The company reported its Q3 earnings topping consensus estimates for the seventh straight quarter.

Earnings were $1.01 per share up from $0.74 per last with revenues increasing 14% y/y to $3.31 bln - the sixth consecutive quarter of double-digit gains. The top line was improved by 3% in currency gains. Nike enjoyed broad-based growth across all geographies, categories, and brands.

Nike reported worldwide future orders for footwear and apparel scheduled for delivery from 3/05 to 7/05 increased 9.6% y/y to $5.2 bln. Sales by region: US +9%, Europe +7%, Asia Pacific +14%, and Americas +22%. This is evidence of the company's global brand strength and strong order momentum. Currency does and will continue to contribute to Nike's top line growth as the greenback remains on its downward trajectory.

The upside in revenues came from strong growth in Asia and EMEA (Europe, Middle East, and Africa) both up 18% to $472.8 mln and $1 bln, respectively. Sales in China more than doubled for the quarter, while the Americas gained 10%. Nike did experience some weakness in Japan and Germany due to increasing competition from Adidas along with France. Although its core brand Nike still enjoys the strongest growth, other brands are also performing well. This category, which includes Converse, Starter, Nike Golf, Bauer, and Cole Haan grew an impressive 20% to $389.6 mln. Gross margins widened by 2 points to 44.1% due in part to currency gains. SG&A expenses rose over a point to 31.3% of sales. Nike also benefited from a lower tax rate for the quarter of 33.9%.

Nike remains one of the premier brand names in the world. This was an impressive quarter as Nike was able to drive growth across a broad array of categories, from apparel to the new Shox sneakers, across all geographies. Weighing the robust order momentum, continued product innovation, strong fundamentals, and brand strength, the risk is to the upside going forward. The upside beat in earnings is also like to spark positive revisions from the Street. Shares are trading at 19.4x forward earnings a discount to its 5-year historical average of 21x. This is compared to 13.2x for its closest competitor, Reebok (RBK), which has less than half its market share.---Kimberly DuBord, Briefing.com

1:52PM DreamWorks Animation SKG, Inc. (DWA) 39.10 +0.75: Never has there been a more successful green, lovable ogre with a severe ear wax problem than DreamWorks' Shrek. The hero of Far Far Away should receive a significant signing bonus for "Shrek 3," as the second installment of this tale generated the bulk of DreamWorks Animation's revenues in Q4. The creator of computer generated (CG) feature films reported pro-forma earnings of $1.61 per share - topping consensus estimates by $0.08. Revenues soared 268% year/year to $495.7 mln vs. the $385.6 mln consensus.

The upside beat was driven by strong "Shrek 2" DVD sales and international "Shark Tale" revenues. "Shrek 2" is the third best selling DVD of all time behind "The Lion King" and "Titanic." A total of 37 mln units were sold during the quarter generating $360 mln in sales, pushing the tally to over $900 mln worldwide in 2004. DWA expects the movie will sell another 3 mln units in Q1 reaching 55 mln during its lifetime. "Shark Tale," released domestically on October 1, 2004, sold 12 mln units generating $62 mln in revenues with worldwide box office sales of approximately $316 mln for the year. The TV premier of "Spirit: Stallion of the Cimmaron" generated $43 mln in revenues.

SG&A rose due to higher marketing and promotional spending, along with several one-time expenses totaling $21 mln. These included IPO-related costs of $5 mln and company wide bonuses of $8 mln. The company went public back in October of last year. The strong quarter is likely to result in positive earnings revisions by the Street.

There are several near-term catalysts for shares. The first is the company's analyst meeting on April 6th, which will include a screening of its newest film "Madagascar." This movie, which the company says is testing well, is slotted to be released on May 27th. Positive buzz could propel the stock in anticipation of a strong opening weekend. "Madagascar" stars the voices of Ben Stiller, Chris Rock, Jada Pinkett Smith, and David Schwimmer as a couple of zoo animals that after living it up at New York's Central Park Zoo, escape for a night on the town only to be captured and sent to Africa. The trip is then sabotaged by a bunch of penguins leaving the friends to be washed ashore on the island of Madagascar. Promotional partners for the movie include Hewlett-Packard (HPQ), General Mills (00C), Payless Shoes (PSS), and Denny's (DNYY).

Other future films include "Wallace & Gromit: Tale of Were Rabbit" and "Shrek 3" expected to be released on Oct 7th, 2005 and May 2007, respectively. Due to the company's successful track record to date, the outlook is quite promising as animation films continue to rein at the box office. The family movie market has grown by 4% CAGR over the last years. The industry does carry some risks, namely film delays and box office performance. For now, DWA is enjoying positive momentum as reflected in shares Friday following the strong result. Additionally, an article in Business Week stating Walt Disney's (DIS) new CEO, Robert Iger, may make a bid for the company is also contributing to the stock's performance. Disney is thought to be trying to woo Pixar (PIXR) back, as such a deal with DWA would take the market by surprise. It would, however, face challenges including a considerable price tag and its distribution agreement with NBC Universal. Shares are trading at price to forward earnings multiple of 21.4x vs. Pixar at 47.7x.---Kimberly DuBord, Briefing.com

11:01AM GS IT Survey: Tech Has Matured The Goldman Sachs IT spending survey has been one of the best leading indicators of the enterprise information technology (IT) market for many years. The firm interviews CIO (Chief Information Officers) at major enterprises with respect to their actual approved budget authorization levels as well as their "wishlist" budget hopes and needs. The real benefit of this survey is that it reaches the executives who are closest to the actual needs of large enterprises (as opposed to CEOs who rely on their CIOs to tell them what's needed) and that it deals with actual budget allocations, not just expectations. The track record is very good at predicting the overall "tide" of spending in the enterprise tech market, which, of course, is where the revenues of IT vendors comes from.

Today's newly published survey (distributed to Goldman Sachs clients) does not paint a very good picture for anyone who is hoping for capital spending by enterprises to return to the gold-rush days of the 1990s. Before the internet came along, every enterprise was investing heavily to upgrade and extend their IT systems. The value of information processing had become obvious (some people argue that Wal-Mart's true competitive advantage is their IT system) and no enterprise wanted to be left behind.

Then the internet frenzy drove many a large enterprise to invest heavily, all over again, in order to ensure that some new upstart company run by a 24 year old would not destroy them! It almost seems humorous today, but that fear was widespread and truly frightening.

But after the internet startups collapsed in 2000, followed by the telecom startups collapsing, the overall tech industry collapsed in 2001. Ever since that time, there has been a legion of people faithfully awaiting the "return of tech." Overall spending in the tech market stopped declining in 2003, which lead a lot of people do believe the long awaited rebound had occurred.

In 2004, there was some resurgence of spending in tech stocks, but full fledged all-out capital investment by enterprises did not occur. We have argued for almost three years now that the enterprise IT market has matured. Every large corporation already has an IT system. They have already upgraded it to acceptable performance. All they are doing now is customizing and refining the application level software that processes and analyzes the data they need to run their business better. It is the reason they invested in the IT system in the first place. A return to the boom days for technology companies - at least those companies that sell any part of a computer system to large enterprises - is over. The market won't disappear, but it is mature, like so many other markets, and will grow modestly, like other markets.

The following quote from the Goldman Sachs IT Survey captures today's environment best: "The best of the post-downturn spending "bounce" may well be behind us, and without a landscape-changing technology shift to drive sustained outperformance, tech looks to be firmly in the cyclical category for now. We expect 2005 IT spending to be modestly better than last year, but still not reflective of a fully healthy tech spending environment." The key word here, for us, is "cyclical." The very concept of cyclicality is one that applies to mature markets, not growing ones. In fact, the phrases "cyclical for now" and "modestly better than last year" can probably be found in research reports on such industries as steel, or autos. - Robert V. Green

10:52AM PalmOne (PLMO) 22.25 -1.80: The luck of the Irish did not help the shareholders of PalmOne last night, as the company reported in line earnings (with higher than expected revenues) but soured things by issuing lower than expected guidance. During the conference call, management noted that they had increased the number of software engineers on staff and looking to hire even more in an effort to become known as a mobile computing company.

The current perception of PalmOne is that they are the maker of some neat handheld computers and they are the chief competitor to Research in Motion's Blackberry. While their Treo product does offer some formidable competition to the Blackberry, consistent troubles in the manufacturing process has once again reared its ugly head. The company noted that delays would push some deliveries from early in the next quarter to later in the next quarter and may even end up being in the following quarter.

In after hours trading during the conference call, the stock was in real danger of sliding below $20. From that time to the open, the stock recovered a bit to open down about 7% from yesterday's close of just north of $24 a share. Clearly, investors are being given a second chance here as some of the brokers are focused in on the possibility of better metrics down the road and the low multiple the stock currently carries.

The company noted on the call that a part of its transition from being known simply as a producer of smartphones and a mobile computing juggernaut, that it would increase investment into designs and other entertainment devices. One device in particular was mentioned on the call - next generation radios. We understand that the popularity of iPod's and the like have turned that idea into a white-hot sector and trying to cash in on it is a reasonable idea. But one has to look at the expected competition in that market. Sony has announced a new line of products to compete against the iPod and it would be nothing short of foolish to think that there isn't another big product announcement coming down the road from another electronics giant.

The company plans for increased investment led to the lower guidance for earnings, something that investors should take seriously. Obviously, decreasing earnings more often than not, lead to decreasing share prices. Factor in the ideas of poor execution (product delays) and a shift in focus to a segment that has intense competition, and a general idea begins to take shape.

The smartphone market is a big market. Of all phones, less than 3% are smart phones. This fact implies that the potential growth for this market is huge. Competition will be present no matter where PalmOne focuses its efforts, but after generating a solid foothold in the smartphone market, it is hard to imagine what is making them want to expand into areas where there will be even more competition. Something should be said for their vision to diversify their revenue stream before it gets threatened to an extreme degree by the like of Samsung and others; but what will be the cost of that diversification?

8:41AM Page One - Range Bound : The S&P 500 index is poised for its second straight weekly decline. It opens today at 1190, after closing last week at 1200. The index is right where it was in early December. It is still very much a trading range market.

Futures suggest a slightly higher open this morning. Oil prices have come off their highs, but remain over $56 a barrel. The 10-year note yield sits at 4.49%.

The corporate news is fairly upbeat. Adobe Systems had a very good earnings report after the close yesterday. That has given a boost to techs. Nike and Jabil Circuit also had good reports. PalmOne, however, had a poor report, warning for the current quarter. Also in corporate news, the Financial Times is reporting that Oracle has again topped SAP's bid for Retek. The all cash bid reflects the strong cash flow and balance sheets across US companies that is boosting merger and acquisition activity.

There are no economic releases today other than the Michigan Sentiment index due at 9:45 ET. That release can sometimes cause a market reaction, particularly when consumer spending trends are in doubt. But it doesn't correlate well with spending, and the trend right now is clear (strong).

The market remains torn between the positives of a booming economy, strong cash flow, and mergers on the positive side, and the negatives of inflationary pressures and rising interest rates. For now, that means the trading range is likely to continue. Next week there are very few earnings reports scheduled. The Oracle report on Tuesday is by far the biggest. The economic calendar is light, but PPI and CPI loom. There is a risk that even an extra 0.1% on either core rate could roil the markets. Dick Green, Briefing.com

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