Sector Investing

[ReturntoSender]

From Briefing.com: 4:30 pm : Tech led the Nasdaq to an enviable gain, but the broad market booked a loss as bank stocks and financial services plays succumbed to aggressive selling pressure.

The mood among market participants this morning was dampened by renewed weakness among Europe's major bourses, which moved lower after Asia's major averages staged strong gains in overnight action. Worries about the quality of third quarter bank earnings also weighed on early sentiment.

JPMorgan Chase (JPM 31.23, -1.97), widely regarded as one of the best run and most fundamentally sound banks in the business, posted this morning an upside earnings surprise, but the results were helped by deterioration in the company's own debt prices. Uncertainty about what other banks and financial services firms may report took the KBW Bank Index down almost 5% and the broader financial sector more than 3% lower before losses were trimmed in afternoon trade.

Pressure eased, but didn't exactly evaporate, in afternoon action. That helped the S&P 500 climb to the neutral line after it had been down more than 1% at its session low. Resistance at the flat line kept the broad market measure in negative territory. The Dow followed suit.

The Nasdaq was more successful in its effort. In turn, it scored another gain, which is actually its seventh in eight sessions. The Nasdaq's strength was owed to tech issues, which collectively climbed 1.0% while almost every other sector failed to either logged a loss or remained mired at the neutral line. Internet search giant Google (GOOG 558.99, +10.49) provided leadership ahead of its quarterly report.

Treasuries advanced, but surrendered some of their gains as the stock market recovered into the close. Results from an auction of 30-year Bonds didn't really have an impact on trade. The auction drew a bid-to-cover of 2.94, dollar demand of $38.2 billion, and an indirect bidder participation rate of 28.7%.

As for today's data, the latest initial jobless claims tally declined by 1,000 week over week to 404,000, which is on par with the 406,000 initial claims that had been broadly expected.

The trade deficit for August came in at $45.6 billion, which is slightly less than the $46.1 billion deficit that had been generally anticipated among economists polled by Briefing.com.

Advancing Sectors: Tech +1.0%, Telecom +0.6%
Unchanged: Utilities
Declining Sectors: Health Care -0.1%, Consumer Staples -0.1%, Consumer Discretionary -0.2%, Energy -0.3%, Materials -0.5%, Industrials -0.9%, Financials -2.4%DJ30 -40.72 NASDAQ +15.51 NQ100 +0.9% R2K -0.2% SP400 +0.1% SP500 -3.59 NASDAQ Adv/Vol/Dec 1226/1.67 bln/1271 NYSE Adv/Vol/Dec 1171/898 mln/1831

4:46PM Emulex required to pay $387,922 in patent trial with Broadcom (BRCM) (ELX) 6.78 -0.08 : Co reported the completion of the trial in the U.S. District Court for the Central District of California, and the resulting partial verdict determining that co is to pay $387,922 in the patent infringement lawsuit filed against Emulex by Broadcom (BRCM). The monetary award of $387,922 was based on U.S. sales by Emulex from the date of filing of the original lawsuit, September 14, 2009, through August 27, 2011. In its annual report Form 10-K for the fiscal year which ended on July 3, 2011, co reported that it had cash, cash equivalents and investments of $183,350,000. The $387,922 award is 0.2 percent of that amount. Although the trial was completed, only a partial verdict was reached involving two patents out of the six patents included in the trial. A mistrial was declared concerning the remaining four patents for which no unanimous verdict was reached.

4:20PM Microchip sees Q2 revs of $340.6 mln vs. $360.2 mln Capital IQ Consensus Estimates; sees EPS of $0.45-0.47 vs. $0.52 consensus (MCHP) 35.31 +0.85 : Co said, "Our net sales activity in the September quarter did not progress as we originally expected. Entering the September quarter we anticipated that business conditions would continue to be impacted by weak, broad-based demand conditions, but would begin to improve towards the latter part of the quarter from the seasonal Christmas builds in Asia. Instead we experienced incrementally stronger headwinds and saw no seasonal Christmas build, which in turn adversely impacted all of our product lines and sales channels. The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry. While we are disappointed with our September quarter results, we continue to see excellent design win traction in our microcontroller and analog product lines and maintain a strong competitive position. Net sales from our 32-bit microcontroller business was up 10.4% sequentially, and our licensing business was up 6.4% sequentially, both setting new records in the September quarter. Additionally we shipped our 10 billionth microcontroller during the quarter."

4:01PM Maxim Integrated enters into $250 mln credit facility agreement (MXIM) 25.14 +0.77 :

4:00PM Plexus Plexus to receive AS9100 certification in China (PLXS) 26.51 -0.17 : Co announced today that it has successfully completed its audit and has received recommendation for AS9100 certification at its Hangzhou, China facility. AS9100, the quality management standard of the aerospace industry, demonstrates excellence in quality management systems that satisfy the safety, reliability and quality concerns specific to aerospace.

10:23AM Benchmark Elec temporarily closes Thailand facility due to flooding (BHE) 14.66 -0.24 : Co announced today that its subsidiary, Benchmark Electronics (Thailand) Public Company Limited, has temporarily suspended operations as a result of flooding in the surrounding areas of the Hi-Tech Industrial Estate in Ayudhaya, Thailand. The industrial park is without power and officials have ordered an evacuation of the area. Benchmark has moved equipment and inventory to higher ground and, as of today, its facility has not been flooded, however the dike surrounding the Hi-Tech Industrial Estate has been compromised. While the full impact and extent of damage is unknown at this time, Benchmark has insurance coverage for any flood/water damage to its facility and additionally carries business interruption coverage. The company will remain focused on restoring operations to full production levels as quickly as conditions permit.

SMSC (SMSC) announced that Samsung Electronics has licensed SMSC's patented Inter-Chip Connectivity technology.

Nexans, Siemens (SI) and American Superconductor (AMSC) announced the successful qualification of a transmission voltage resistive fault current limiter that utilizes high temperature superconductor wire.

7:34AM Fairchild Semi beats by $0.02, reports revs in-line; guides Q4 revs below consensus (FCS) 12.24 : Reports Q3 (Sep) earnings of $0.34 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.32; revenues fell 2.7% year/year to $403.2 mln vs the $404.1 mln consensus -- co lowered rev guidance last month; adjusted gross margin of 36.0 percent, down 120 basis points QoQ and 50 basis points YoY. Co issues downside guidance for Q4, sees Q4 revs of $350-370 vs. $395.95 mln Capital IQ Consensus Estimate. "Our current scheduled backlog is nearly sufficient to achieve the low end of this range. We expect adjusted gross margin to be between 32 to 34 percent as we adjust factory loadings lower in the fourth quarter to reduce inventory... Mobile and automotive demand was in line with expectations. Computing demand remained muted and we continue to drive inventory lower in the distribution channel for these products. Consumer and solar demand remains weak. Distribution sell-through decreased 9 percent sequentially which was more than expected and resulted in a modest build of channel inventory. We plan to ship substantially less into the channel than our distribution customers are forecasting for sell through in the fourth quarter. This should enable us to exit this year with a leaner inventory position and be ready to grow sales again in 2012."

6:51AM Hewlett-Packard: Gartner says worldwide PC shipments grew 3.2% in 3Q of 2011; HPQ first in global PC shipments (HPQ) 25.87 : Worldwide PC shipments totaled 91.8 mln units in the third quarter of 2011, a 3.2 percent increase from the third quarter of 2010, according to preliminary results by Gartner. These results are slightly lower than Gartner's earlier projection of 5.1 percent growth for the quarter. HPQ was the No. 1 vendor based on global PC shipments, grew faster than the industry average, and its market share reached 17.7% in the Q3 of 2011. Despite announcing in the middle of 2Q11 the potential spinoff of its PC business, HPQ experienced strong growth in the U.S., while outside the U.S., growth was relatively weak or average. Lenovo (LNVGY) became the second-largest PC vendor in the worldwide market for the first time.

6:03AM Research In Motion reports 'significant increase' in Blackberry service levels (RIMM) 23.88 : Co announced, in Europe, Middle East, India and Africa, they are seeing a significant increase in service levels. Service levels are also progressing well in the U.S., Canada and Latin America and the co is seeing increased traffic throughput on most services, although there are still some delays and services levels may still vary amongst customers. In the US, Email systems are operating and the co is continuing to clear any backlogged messages. Support teams are working to minimize the impact on their customers.

08:55 am Altera downgraded to Neutral from Outperform at Robert W. Baird; tgt lowered to $35 from $46: . Robert W. Baird downgrades ALTR to Neutral from Outperform and lowers their tgt to $35 from $46 saying a slowdown in the FPGA manufacturing supply chain for 4Q suggests lack of revenue momentum for the next few quarters, likely leading ALTR and XLNX shares to remain in a trading range near term. They also note that China-based basestation production has recently slowed.

Fairchild Sem (FCS $13.15 +0.91) reported third quarter earnings of $0.34 per share, excluding non-recurring items, $0.02 better than the Capital IQ consensus of $0.32, while revenues fell 2.7% year/year to $403.2 million versus the $404.1 million consensus. The company lowered revenue guidance last month and adjusted gross margin of 36.0 percent, down 120 basis points quarter over quarter and 50 basis points year over year. The company issued downside guidance for the fourth quarter with revenues of $350-370 million versus the $395.95 million consensus.

Broadcom (BRCM 37.00 +0.81) was upgraded to Outperform from Neutral at Robert W. Baird and the firm raised their target to $46 from $36. The firm notes their field research points to current momentum for company's baseband and connectivity business, along with rebounding order trends in the mobile phone supply chain since August. They state company's wireless momentum is driven by a 3G baseband ramp at Samsung as well as strength in connectivity ICs. Additionally, new 10GbE products should also see momentum starting in 1H12, with Romley acting as a catalyst.

10:23 am S&P Tech Sector Near Flat Line; ALTR, ADS Downgraded (ALTR)
The tech sector is trading relatively flat today, outpacing losses in the broader market. Semiconductors are showing relative strength in the tech space with the Philly Semi Index trading 0.7% higher. NVDA (+4.0%) is a notable leader in that chip index. Among other major indices, the S&P 500 is trading 0.9% lower, while the NASDAQ is trading 0.2% lower. The QQQ, meanwhile, is trading 0.1% higher. Among tech bellwethers, AAPL (+1.0%) is showing notable strength, while ORCL (-1.1%) is under pressure.

In earnings, SMSI (+10.4%) issued downside guidance, while CLWR (+13.9%) issued upside guidance. Also, FCS (+4.6%) posted a slight beat, but guided below consensus.

In news, TXI (-4.4%) suspended its quarterly dividend. Among rumors, there's been speculation that GOOG (+0.2%) may be interested in AKAM (+5.4%), although GOOG reportedly denied such interest. Also, there's SINA (+7.2%) takeover chatter making the rounds.

Among notable analyst upgrades this morning, RAX (+1.4%) was upgraded to Buy at Goldman, NTES (+1.0%) was upgraded to Overweight at Piper Jaffray, and BRCM (+3.3%) was upgraded to Outperform at Baird.

In downgrades, ALTR (-0.6%) was downgraded to Neutral at Baird, ADS (-5.5%) was downgraded to Neutral at Suntrust, and Needham downgraded RNOW (-1.0%) to Hold.

GOOG (+0.2%) is the notable name in tech set to report results today after the close.

10:06 am Fairchild Semi Guides Fourth Quarter Revenue Below Consensus (FCS)
Fairchild Semi (FCS $12.50 +0.26) reported third quarter earnings of $0.34 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.32.

Revenues fell 2.7% year/year to $403.2 million versus the $404.1 million consensus -- company lowered revenue guidance last month; adjusted gross margin of 36.0 percent, down 120 basis points quarter/quarter and 50 basis points year/year.

For the fourth quarter, the company expects fourth quarter revenue guidance to be $350 million to $370 million versus the $395.95 million Capital IQ Consensus Estimate.

"Our current scheduled backlog is nearly sufficient to achieve the low end of this range. We expect adjusted gross margin to be between 32 to 34 percent as we adjust factory loadings lower in the fourth quarter to reduce inventory... Mobile and automotive demand was in line with expectations. Computing demand remained muted and we continue to drive inventory lower in the distribution channel for these products. Consumer and solar demand remains weak. Distribution sell-through decreased 9 percent sequentially which was more than expected and resulted in a modest build of channel inventory. We plan to ship substantially less into the channel than our distribution customers are forecasting for sell through in the fourth quarter. This should enable us to exit this year with a leaner inventory position and be ready to grow sales again in 2012."