Tuesday, July 25, 2006

Market Poised To Break Downtrend

Morning News of Note:
  • Gapping Up
    Gapping up on strong earnings/guidance: SNDK +14% (also Baird upgrade), DXPE +10%, ARMHY +8%, DADE +6%, ACL +5%, OXPS +4.6%, BJS +4.6%, NBR +4.4%, CNCT +3.4%, ALTR +2.9%, AMLN +2.8%, TXN +2.7%, X +2.6%, HOLX +1.6%... Other News: RYAN +40% (to be acquired by Old Country Buffet), WGRD +13% (to be acquired), ENZN +10.4% (FDA approval for Oncaspar), CRME +6.6% (extends yesterday's 36% move), MYOG +6.2% (FDA delays approval of competing ENCY drug), ACGY +4.8% (light volume 1,300 shares), SHPGY +4.2% (announced FDA approval late yesterday for Elaprase), AVCI +4% (its largest customer AT&T reported strong results), MU +3.8%, NVDA +2% (extends yesterday's 10% move), PEIX +1.9%, GSK +1.9%, RMBS +1.7%, LTXX +1.5%... Under $3: OSCI +22% (to buy US rights to Reliant's cardio drug Antara; also JMP Sec upgrade, $3.50 tgt), PAE +27% (boutique firm announces $3.60 tgt), QEE +13%.
  • Gapping Down
    Gapping down on disappointing earnings/guidance: ZRAN -24% (also downgrades from CIBC and OpCo), NFLX -20%, RNOW -15%, NTRI -12%, ORCT -12%, AV -11%, LCAV -10%, UPS -9.4% (also Merrill downgrades to Sell; down in sympathy: FDX -3.3%), STN -6.1% (down in sympathy: BYD -3.3%, LVS -1%), STMP -6%, JBLU -4.8%, ATHR -2.5%, MMM -1.9%, BNI -1.5%, LVLT -1.4%... Other News: ENCY -44% (FDA withholds final approval on Thelin), ALTU -37% (two drug trials delayed), ATML -5.4% (delays Q2 report), MOVI -4.4% (in sympathy with NFLX), ERICY -1.7%, SYMC -1.5% (Merrill downgrade), SGP -1.5% (Avelox clinical data)... Under $3: CPST -9.4% (CEO resigns), PRAN -9% (profit taking after 65% move yesterday), CMOS -3.5% (to be removed from S&P MidCap 400).
  • X U.S. Steel beats by $0.69, ex items (59.86 )
    Reports Q2 (Jun) earnings of $3.10 per share, excluding non-recurring items, $0.69 better than the Reuters Estimates consensus of $2.41; revenues rose 14.7% year/year to $4.11 bln vs the $3.93 bln consensus. Co notes: "We expect continued strong operating results for our three reportable segments in the third quarter of 2006. Healthy steel consumption levels are expected during the quarter along with further increases in flat-rolled prices in the U.S. and in Europe."
  • GOOG Google: Google sites rev has more costs than previously understood - UBS (390.90 )
    UBS believes that rev booked as Google sites rev is incrementally lower "quality" than previously thought, and think Google sites rev has more costs than previously understood. They now understand that there is TAC associated with some of this rev, it does not represent only "organic" growth, and is susceptible to competitive pressures. Also, generally assumed TAC rate calculations do not take into account TAC associated with Google sites rev.
  • NTRI Nutrisystem CEO appears on CNBC, discusses COO's departure, Q3 results (67.80 ) NTRI CEO appears on CNBC, wont comment on what happened with stock price. Focusing growth on mail market. Thinks that 1/3 or more of their business in next 12-18 months could come from men. Says business isn't based around controversial weight loss. Co is absolutely not for sale, have not been approached. Energy prices have not affected the co. Says there is no connection between COO's departure and anything going on in the co, but will not cause the co to "stutter step"
  • OXPS OptionsXpress beats by a penny (22.65 )
    Reports Q2 (Jun) earnings of $0.29 per share, $0.01 better than the Reuters Estimates consensus of $0.28; revenues rose 65.4% year/year to $47.3 mln vs the $46.6 mln consensus. "This year, the typical summer slowdown, which didn't materialize until late May, combined with choppy market conditions resulting in a significant drop in June DARTs. We believe this decline in customer activity has likely stabilized and remain confident that the retail investor will come back as the market environment improves..."
  • BJS BJ Services beats by $0.09, beats on revs; guides Q4 EPS above consensus (31.06 )
    Reports Q3 (Jun) earnings of $0.67 per share, $0.09 better than the Reuters Estimates consensus of $0.58; revenues rose 36.7% year/year to $1.12 bln vs the $1.05 bln consensus. Co issues upside guidance for Q4, sees EPS of $0.73-0.75 vs. $0.68 consensus.

Market Comments: The market had a very solid day yesterday. Volume didn't rise enough to make it a follow-through day, but the price action was solid nonetheless. The SPX closed above its 50-day, and is now poised to overtake its 200-day as well.

This would mark a change in trend that has been in place since the selloff began in May. Earnings reports have been solid, and overall S&P 500 earnings have continued to be revised higher, with this quarter's profits looking like they will grow 13%+.

The 10-year yield is flat this morning at 5.04%, and oil is up slightly. Boone Pickens spoke this morning, and said that oil could reach $100 within a year. But he has been predicting higher oil for a while, so this isn't much of a surprise. Strong earnings reports from companies in the oil patch is pushing the whole group higher this morning.

SNDK reported a much stronger than expected quarter, which is helping push the semis higher also. And the biotech (BTK) group looks like it might break its recent downtrend also.



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