RealTime IT News

Chip Stocks Lead Market Higher

Claims by Merrill Lynch that the worst of the semiconductor downturn is over sent tech stocks surging on Wednesday.

The ISDEX http://www.wsrn.com/apps/ISDEX/ gained 5 to 210, and the Nasdaq surged 41 to 2068. The S&P 500 rose 4 to 1215, and the Dow slipped 12 to 10,510. Volume declined to 1 billion shares on the NYSE, and 1.5 billion on the Nasdaq. Advancers led 18 to 12 on the NYSE, and 20 to 15 on the Nasdaq. For earnings reports, visit our earnings calendar at http://www.wsrn.com/apps/earnings/internet.xpl and reported earnings at http://www.wsrn.com/apps/earnings/ireported.xpl. For after hours quotes and news, visit our after hours trading site at http://www.afterhourstrading.com.

Investors shook off the latest NAPM survey, which showed manufacturing mired in a recession for the 12th consecutive month.

Chip stocks surged on Merrill's comments that the worst of the downturn is over, and the Philadelphia Semiconductor Index cleared its 200-day moving average for the first time in a year. However, Merrill also said that a recovery for the sector is still a year away. PMC-Sierra surged 3 points during the day, and added another 3 after the bell on news that it will be added to the S&P 500 after the close tomorrow.

Priceline rose .63 to 9.50 after reporting pro forma earnings of 5 cents a share, 4 cents better than estimates, and GAAP earnings of 1 cent a share. Register.com lost .64 to 12.84 despite beating estimates by 2 cents with 13-cent earnings. S1 , up .65 to 14.24, beat estimates and maintained guidance, and KLA-Tencor rose 2.62 to 57.01 on its earnings report.

Lucent lost .57 to 6.13 on news of a $1.75 billion preferred stock offering.

MicroStrategy rose .58 to 3.82 on optimism that a turnaround at the company is underway.

Network Appliance bolted 2.89 to 15.37 on comments that the company should make its quarter, and EMC , up 1.18 to 20.90, also climbed on optimism.

Yahoo rose .73 to 18.35 on rumors that Sony could make a play for the company.

Cisco rose 1.05 to 20.29, but below critical 20.50-20.75 resistance, on optimism ahead of its earnings report on Tuesday.

Some technical comments on the market: Note: We include charts in the technical market commentary. If you can't get the charts via the e-mail newsletter version, try this link: http://www.afterhourstrading.com/column.html

We'll repeat last night's opening line: GE still looks weak, Microsoft doesn't look so great either, and the semiconductor stocks that have been leading the market higher are getting overbought enough so they could begin a pullback in a day or two, with the rest of the market not far behind. The Nasdaq and Nasdaq 100 appear to be forming rising wedges on the intraday charts (Nasdaq pictured in the first chart), indicative of a weak rally and a possible turn down to the 1900 level on the Nasdaq. The S&P 500 is also forming a similar wedge, and may have broken down out of it today (second chart). On the plus side, the Nasdaq 100 (third chart) broke its main downtrend line today, but the Nasdaq did not (fourth chart). 2078 is now the critical level for the Nasdaq to clear (the main downtrend line; the upper rising wedge boundary is higher than that, probably about 2090 tomorrow), and a break of the 2050 level would break that rising wedge. The S&P (fifth chart) faces tough resistance at 1225, and the 1205 level should be support. The Dow (sixth chart) faces tough resistance at 10,600, and 10,430-10,475 is first support. The early part of next week remains a major turn window, and it's not the greatest sign for the bulls that the market is heading into that turn overbought.

Special report: For a free introduction to technical chart patterns and an overview of last year's action in the stock market, visit http://www.internetstockreport.com/guest/article/0,1785,2571_500051,00.html.