What Will Shed Light On Chip Strength…

June 18, 2002
Daniel Beighley

Price action on the indexes was
choppy and narrow, as the market took a breather from back-to-back wide-range
sessions. The biggest gainers of the day were gold and silver, Japan,
healthcare, utilities, and airlines, with the biggest losers networking,
semiconductors, Mexico, and oil service stocks.

Closing poorly, the Semiconductor
Index
(
$SOX.X |
Quote |
Chart |
News |
PowerRating), down 1.55%, will have its book-to-bill number
released by the Semiconductor Industry Association. This news, and more
importantly the reaction to the news, will shed light on the sector’s strength.

U.S. Treasury Bonds were
up 3 at 103 ’07.

Economic news was bullish today, as housing starts
advanced 11.6% in May to 1.722 million. Analysts were looking for 1.60 million.
Also, May’s consumer price index came in relatively unchanged, with
analysts looking for a 0.1% increase. A tame CPI is as a good sign for a
recovering economy.

Market breadth was mostly positive, with NYSE
advancing issues over declining issues by a ratio of 1.06, and up volume over
down volume by a 1.12 ratio. Nasdaq declining issues over advancing issues came
in at 1.14, and up volume beat down volume by a 1.26 ratio.

Below-average volume had
the Dow, the S&P 500, and Nasdaq close in “doji” formations.
The Broker/Dealer Index
(
$XBD.X |
Quote |
Chart |
News |
PowerRating), up 0.41%, also closed in a
“doji” formation.

Computer maker International Business
Machines (IBM),
down 1.55 at 75.94, has had its earnings estimates cut by Morgan
Stanley who believes hardware IT spending is a low priority for 2002. Estimates
for 2002 have been cut to $3.85 from $3.95, and for 2003 to $4.35 from $4.45.

Retailer Best Buy (BBY),
down 5.93% at 39.75, announced a 27%
increase in earrings for the quarter, though warned that it will not likely meet
its second quarter earnings. The company attributes the rise to cost cuts and
increased marketing.

Chip maker ESS Technology (ESST),
up 4.61% at 18.57, has raised its quarterly outlook due to an increase in demand
for its product. The company now expects to earn 34 cents a share vs. the 24
cents previously expected.

Also in the semiconductor sector, Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating), up 4.28% at
22.15, was upgraded by Morgan Stanley from “overweight” to “equal
weight.”

Insurance company United Health
Group (UNH),
up 1.47% at 95.39, the No. 1 U.S. managed-care company, announced that it will
buy AmeriChoice for $530 million. The deal is believed to strengthen medical
services offerings for Medicaid beneficiaries.

Brokerage firm Lehman Brothers
(
LEH |
Quote |
Chart |
News |
PowerRating), down 0.27% at 62.48,
announced that their net income fell 31% for the fiscal second quarter with
earnings of $1.08 a share. The company still beat estimates by 3 cents.

What Will Shed Light On Chip Strength…

BUY THE FEAR, SELL THE GREED

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