Semis Get A Boost From TXN Raising Outlook

The markets are getting a slight boost in early trading, after some positive news in the semi space, and the announcement that the Treasury would allow some big banks to repay TARP funds.

Last night, Texas Instruments (TXN) raised its outlook for Q2 profits. The company raised revenue guidance to $2.30-2.50 billion (vs. $2.21B consensus) and EPS to $0.14-0.22 (vs. $0.10 consensus). The company said analog products are doing particularly well, and that EPS will benefit from improved inventory levels. The news is boosting the chip index (SOX), which is up +2.25% so far.

The Treasury Dept. announced that 10 of the 19 largest U.S. banks will be allowed to repay TARP funds, which will total $69 billion. That figure is well above the initial $50B estimate first offered by the Treasury. This should be good news for those banks, as it will remove many of the restrictions that came with accepting TARP funds. They should be allowed to reinstate dividends, pay bonuses, and spend what they deem is appropriate on marketing.

There is also a $35 billion auction of 3-year Treasury Notes today, and these auctions have now become closely watched events due to all of the debt the Treasury is issuing these days. Right now, the 10-year yield is slightly lower to 3.83%.

The dollar is lower today, helping boost commodity prices (oil, gold, etc); Asian markets were lower overnight; and the VIX is back below the 30 level, currently at 29.59.

Trading comment: I took partial profits yesterday on our Visa (V) position. I still love this name longer-term, but want to lock in some profits while we have them, and look to add back to the position if it pulls back.

I think yesterday's action was pretty benign. It could have easily been a day where the market closed down more than -1.0%, but we rallied into the close. Since the last distribution day on 5/13, there have not been any -1% declines accompanied by higher volume. Conversely, there have been several +1% rallies that came on higher volume. So I am not alarmed by the price/volume action lately.

The SPX looks to be doing that frustrating sideways consolidation again, which could set us up for another push higher. You know that I am in the camp that is looking for just such a push higher into quarter-end, as underinvested managers make moves to "window dress" their portfolios.

long V