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Friday, July 07, 2006

Weekly Wrap for Week of July 7, 2006

Main Stock Tickers: MMM, AMD, DLTR, LAB, NYX, MIVA, OPWV, HUMC, OTEX, BTU, PGL, WPS, DQE, VCI, AD, DTAS, CHTR, SBUX, AEOS, MWRK, PFCB, PNRA, PSUN, WMT, ZUMZ, COST, MRVL, OPSW, LPL, GLW, RSH, PMCS, AAPL, BORL, EBAY, EXTR, SUPG, SIRI, XMSR, RICK, TRMP, HANS, HD, VG, NWRE

For Friday's Daily Changes:
DJIA 11,090.67; down 134.63 (1.20%)
NASDAQ 2,130.06; down 25.03 (1.16%)
S&P500 1,265.48; down 8.60 (0.67%)
10YR Bond 5.132%

For the WEEKLY Change:
DJIA 11,090.67; down 59.55 for the week.
NASDAQ 2,130.06; down 42.03 for the week.
S&P500 1,265.48; down 4.72 for the week.

Have you ever sat on the bow of a boat in rough water? That is how this shortened week felt. Up, down, up, down. Unfortunately, the broader market ended the week on a down note. It didn't help that North Korea decided to testfire missiles while we celebrated the 4Th of July. The ADP jobs number showed a much higher jobs reading than expected, which the markets interpreted as an excuse for the Fed to keep tightening. The REAL jobs number was released and it showed a different picture with a slightly weaker job creation number, but the wage component was enough to spook investors. 3M (MMM) was the real reason for the weakness, because we were set to be slightly higher for the week until they warned at 9:00 AM on Friday. All in all, this feels like the normal in-fighting with traders interpreting the same piece of economic data with opposite interpretations toward the end of a rate cycle.

This was the last week before earnings season officially starts for the quarter, but many issued guidance. Earnings guidance helped some companies, but there were many companies that endured significant losses on warnings. Advanced Micro (AMD) initially fell about 5% on their warning, but only ended down 1.1% at $23.56; Business Objects (BOBJ) fell over 21% on their warning to end the week at $21.03; Dollar Tree (DLTR) fell 1% despite putting earnings at the high-end of prior guidance; LaBranche (LAB) fell over 24% from its warning and added losses from holdings in NYSE (NYX) and LAB closed down at $9.42; MIVA (MIVA) gave up 20% after their warning; JDA Software (JDAS) initially fell 6% on their earnings warning, but JDAS shares closed up marginally for the week at $14.09; Openwave (OPWV) was one of the worst performers losing another 1/3 of its value to close at a 2-year low at $7.54 after projecting losses, and that was after it had already been down 50% from its recent highs.

Mergers still ruled the roost as the ongoing corporate land grab wars continue. Hummingbird Ltd. (HUMC) gained almost 4% on word of a $27.75 buyout offer from Open Text (OTEX). Peabody Energy (BTU) rose 4% on word that it was making a $1.3 Billion acquisition in Australia. Peoples Energy (PGL) rose almost 10% on reports that it was in merger talks with WPS (WPS). Duquesne Light (DQE) shares gained 19% on word that it agreed to a private equity buyout at $20 per share. Valassis (VCI) fell 15% after making a takeover offer for ADVO (AD), although shares of AD rose almost $11 on the week to close at $35.35.

We also had some analyst calls that were directly responsible for significant price moves. Digitas (DTAS) fell sharply on a WRHambrecht downgrade, but recovered all losses after 4 firms defended the shares. DTAS did close the week down about 3% at $11.34. Charter Communications (CHTR) rose after Citigroup raised its rating to a Buy' CHTR rose almost 8% on the news to close out the week up 4% total at $1.15.

We also saw some significant price moves from retailers that showed a mixed bag of same-store-sales for the month of June. Starbucks (SBUX) fell 4.8% after missing June numbers to close the week at $36.04; American Eagle (AEOS) rose 2.5% to close the week at $25.65 on stronger sales; Mother's Work (MWRK) closed down about 2% on the week at $34.43; PFChangs (PFCB) fell almost 10% on the week after posting a drop in sales to end at $34.78; Panera (PNRA) posted week sales and closed down about $3.00 on the week at $64.15; Wal-Mart (WMT) posted only 1.2% comparable sales gains to close down over $2 on the week at $46.00; Zumiez (ZUMZ) closed down over $2.00 on the week to close at $35.28 despite posting 12% comparable sales gains; Costco (COST) posted 6% gains but fell short of estimates, so it closed down over 1% on the week to close at $56.16.

The ongoing saga of corporate stock options inquiries from the SEC and US Atty Offices granting punished many companies in what is becoming a trend that may act as a lid on tech stocks. Marvell Tech (MRVL) fell 7.8% on word that it was part of an options inquiry, and that was down over $2.25 for the week to end the week at $41.73. Opsware (OPSW) fell 7% on word of its options inquiry, and that put shares down almost $1.00 at $7.39 on the week. Zoran (ZRAN) gave up 10% on this but recovered to close at $22.75, down about 7% on the week.

3M (MMM) fell a sharp 8.9% Friday after warning weak LCD and flat panel chemical sales would lower earnings; it closed at $74.10. They weren't the only Flat Panel and LCD-exposure company to be hit. LG Philips LCD Co. (LPL) warned that it would have a loss for the quarter. The company fell about 7% on the news itself, but the shares ended the week down over $1.50 at $16.58. Other LCD-exposed companies performed poorly with Corning (GLW) falling an additional 5% after the MMM news and down 4% on the LPL warning; GLW closed down to $22.15 on the week.

There were also just many pieces of company specific news that helped influence companies.

RadioShack (RSH) rose as much as 23% after hiring turnaround expert Julian Day as its new CEO. It closed the week at $16.96, up almost $3.00 for the week.

PMC Sierra (PMCS) fell over 12% after announcing its CFO was leaving the company, despite reiterating guidance. CFO departures and merely guiding within expectations is usually not received well by the street when a company has a 100+ Price/Earnings ratio. PMCS closed at $7.87.

Apple (AAPL) fell some 2% after reports surfaced that Microsoft was considering a release of what it hopes will be an iPod killer. Shares of AAPL ended the week down almost $2 to close at $55.40.

Borland (BORL) rose 6% after putting earnings at the higher-end of estimates, even with its CFO leaving. Shares of BORL ended the week at $5.29, essentially flat on the week.

eBay (EBAY) fell 5% yet again after its head of PayPal is leaving the company, which was perceived as a blow as it may be in online payment wars with Google (GOOG). EBAY shares ended the week down

Extreme Networks (EXTR) fell over 3% on the news that its CEO was leaving the company, and it ended the week down about 9% at $26.62, which is the lowest close in over 2-years.

Supergen (SUPG) rose 10% on word that it had reached a milestone payment level for part of a $10M payment due from J&J; its shares rose $0.20 on the week to close at $3.83.

The satellite radio wars heated up. This week Sirius (SIRI) exceeded its projected numbers and XM (XMSR) fell short of their estimates. SIRI closed at $4.41, down $0.34 on the week. XMSR closed at $14.03, down $0.62 for the week.

Rick's Cabaret (RICK) is difficult to call a retailer as it is actually a strip club operator, but its shares rose a busty 9% after saying its quarterly sales had risen over 70% year-over-year. RICK ended at $6.62, up $0.47 for the week.

Trump Entertainment (TRMP) fell 5% on a temporary closure affecting all of Atlantic City and New Jersey gambling operators as the state had a temporary failure on its budget agreement. Fortunately it ended up off its lows at $19.31, down from last Friday's close of $20.15.

Hansen Natural (HANS) rose ahead of its planned 4 for 1 stock split in what appears to be a classic run into a split. Guess what happens after the fact? HANS shares rose over $13.00 this week to close at $203.80, but remember this will reflect its split Monday and show a $50's handle.

DJIA component Home Depot (HD) continued its perpetual slide down every day this week, even after the CEO tried to defend recent negative corporate actions. HD shares closed down over 1% on the week at $35.37.

Vonage (VG) continued its brutal slide this week, although not really on any news other than its underwriters not giving it positive coverage. Its shares slid almost another $1.00 to close at $7.67.

Neoware (NWRE) actually posted a nice recovery attempt this week. It had warned the week before and been cut nearly in half, but it rose almost $1.00 this week to close at $13.05.

THE WEEK AHEAD: Next week you can expect the deluge of earnings reports to begin trickling in. Congress also comes back next week and we'll get a vote passage most likely for the Homeland Defense spending. We should also see the IPO from Cowen, but the earnings onslaught should take all the headlines.

Jon C. Ogg
July 7, 2006
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