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Market Snapshot Wednesday, May 8th Dow Jones Industrial Average~10141.83+305.28 (+3.10%) NASDAQ..................................~1696.29~+122.47 (+7.78%) S & P 500 Index.......................~1088.40~+39.36 (+3.75%)
		Market Update It was a long time coming but tech stock investors finally had something to crow about. While all the major averages put together very impressive performances, the large cap tech dominated Nasdaq 100 topped them all with a gain of 10.6%. The Nasdaq Composite tacked on 7.7%. This was better than any of the post 9/11 recovery rallies and was the largest since April 18, 2001 when an advance of 8.1% was seen in the wake of a 50 bp ease by the Fed. The catalyst for the move was the better than expected earnings report from Cisco Systems (CSCO +24.3%) last night. The company beat the consensus estimate by /home/free/cgi-bin/util/sitebuilder.02 and while revenue was slightly below expectations, it came in with better than expected gross margins. The company is increasing its market share as its revenue growth rate was 2% while competitors revenue growth rate fell roughly 40%. This latter detail had little impact as strong gains today were seen in those stocks favorably impacted by an improvement in CSCO business as well as the competition. How much of an improvement is still open to debate, however, as Cisco's CEO said there are some tentative signs the tech economy is beginning to stir, but that it was too early to call a turnaround. The exceptionally strong reaction indicates that the deeply oversold technical condition (Nasdaq off 15% over last 3 weeks and down 25% off the Jan high) and short covering played an important role in the advance as did the fear of missing out on the spectacular rally. Volume was very strong as was the up volume/down volume ratio. While the A/D line for the NYSE was firmly bullish at 2 to 1, given the exceptionally strong percentage move, this is at least somewhat disconcerting. The Nasdaq A/D was only slightly better at 11 to 5. The Treasury market was hurt by out flows and heavy supply. DJTA +2.5%, DJUA +0.6%, DOT +11.3%, Nasdaq 100 +10.6%, Russell 2000 +2.1%, SOX +11.1%, S&P Midcap 400 +2.7%, XOI +1.7%, NYSE Adv/Dec 2017/1173, Nasdaq Adv/Dec 2467/1082 3:30PM : The major averages have pushed to minor new session highs in late trade. No change in the session dynamics as tech dominates the winners list with losses in those areas that had exhibited strength during the tech meltdown (health, restaurant, homebuilding, gaming and selected retail). Now seeing double digit percentage gains in networking, semi, Internet and software. Stocks scheduled to report earnings after the close today include: CLTK, CCI, DCEL, EXPD, OCLR, PIXR, SRV, VPI, WFMI and WFII. SOX +10.5%, XOI +1.5%, NYSE Adv/Dec 1906/1251, Nasdaq Adv/Dec 2389/1149 3:05PM : New session highs for the Nasdaq Composite and the S&P 500 in recent trade while the Dow hovers just slightly below today's peak. In early news KPMG Consulting (KCIN +13.7%) announced plans to acquire up to 23 Andersen consulting units. In intraday note, Banc of America reiterated its Buy rating and price target of . Firm views proposed acquisition favorably from both business strategy and shareholder value, and thinks acquisition adds significant scale, as well as geographic, industry, and service line diversification to KPMG's business. Also, firm forecasts EPS annual accretion of 12% (at the midpoint), should all the business be absorbed. DOT +10.7%, SOX +10.3%, NYSE Adv/Dec 1824/1349, Nasdaq Adv/Dec 2229/1277 2:35PM : A consolidation slightly below the session highs for the market averages has dominated for the last few hours. However, the limited profit taking thus far suggests potential for further upside probes this afternoon. The next resistance for the Nasdaq Composite comes into play in the 1692/1700 area. This marks the 20 day ema, early month recovery highs, the Feb low and a retracement target. A similar level for the S&P 500 is in the 1089/1091 area. Recent news for Williams Cos (WMB +2%): Moody's placed under review for possible downgrade the ratings of WMB, and will continue to assess 1) the level of cash flow each of WMB's key biz segments is likely to generate during the medium-term, the driver behind those cash flows, and the variables that could put those cash flows at risk; 2) the co's medium-term liquidity position; and 3) the co's ongoing execution of its balance sheet enhancement plan. Treasury market remains under substantial pressureDOT +9.8%, SOX +10.5%, XOI +1.3%, NYSE Adv/Dec 1791/1359, Nasdaq Adv/Dec 2176/1276 2:05PM : Limited consolidation just slightly below the best levels of the day for the market averages. The limited list of losers has changed relatively little with restaurants, homebuilders, prescription bene mgt, utility and selected healthcare stocks modestly weaker. More recently, however, have seen gaming and lodging stocks (price war with discounters?) and selected retailers (GPS -2%, URBN -2.6%, TGT -2.4%, ANF -0.7%) weakening. In other news, the Medical Society of New Jersey files separate actions against AET, AmeriHealth HMO of New Jersey, CI, HNT, and OHP. The lawsuits state health plans employ illegal policies and practices that deliberately delay, deny, and impede payment to physicians who have provided medically necessary care to enrollees. SOX +10.8%, XOI +1.5%, NYSE Adv/Dec 1816/1306, Nasdaq Adv/Dec 2167/1226 1:30PM : The market averages are still up huge, numerous tech sectors are still near the double digit percentage gain level but have recently seen some minor profit taking in a few areas (traders needed some lunch money?). During their Salomon Smith Barney semi conference presentation Texas Instruments (TXN +11%) reiterated their guidance for Q2 rev growth of 10% (about bln), EPS of /home/free/cgi-bin/util/sitebuilder.06, and FY02 capex of mln; also mentioned that they will utilize fabs more extensively in the future for advanced process technology, which should help margins (and may benefit fabs as well). One area of the market that has been weak throughout is online travel/hotel sites-- ROOM (-13%), EXPE (-8%), USAI (-3.1%)-- in the wake of the WSJ report that two large hotel chains are looking to undercut online competitors by offering better deals themselves. SOX +10%, NYSE Adv/Dec 1817/1282, Nasdaq Adv/Dec 2194/1180 1:00PM : The rally continues to feed on itself as individual and institutional investors continue to pump money into the market. The news from CSCO (+20.7%) was the trigger but short covering and a fear of missing out on the spectacular run have clearly had a significant role in the advance. The Dow is hovering slightly below the 300 point gain level with the Nasdaq Composite recently crossing the triple digit gain level. The Nasdaq 100, which is comprised of large cap tech names, is outperforming them all with a gain of 8.2%. Volume is heavy, which is encouraging. Market internals are firmly bullish but the A/D line is only modestly so (5 to 4 NYSE, Nasdaq 2 to 1). DOT +9.4%, Nasdaq 100 +8.6%, SOX +11.6%, XOI +1.4%, NYSE Adv/Dec 1801/1261, Nasdaq Adv/Dec 2199/1133 12:35PM : The market averages are holding just below the recently established session highs with double digit percentage gains being posted by the semiconductor, networking and software sectors. Tech not the only area recovering from at least two month lows as financial issues (banking +3.2%, broker/dealer +6.3%) are up significantly. Individual names in the news in recent trade include: Microsoft (MSFT +8.1%)-- report sizeable increase in sales of its Xbox video game system throughout Europe after recent price reduction-- has also underpinned shares of graphics chip supplier NVDA (+12.5%); Corning (GLW +7.1%)--Moody's downgrades both the long-term and short-term debt ratings, cited growing concern that the recovery in the co's telecommunications operations will be delayed until well into 2003; Eastman Kodak (EK +5.5%)--reiterated Q2 and full yr guidance at its annual meeting. DOT +9.4%, SOX +11.7%, XOI +1.3%, NYSE Adv/Dec 1811/1221, Nasdaq Adv/Dec 2168/1141 12:05PM : The stock market is holding on to some of the most impressive gains since it first started recovering from the 9/11 related breakdown last Sep/Oct. The catalyst for the huge gains today is tech bellwether Cisco System (CSCO +20.3%) following their Q3 (Apr) earnings report. The company beat the consensus estimate by /home/free/cgi-bin/util/sitebuilder.02 and while revenue was slightly below expectations, it came in with better than expected gross margins. The company is increasing its market share as its revenue growth rate was 2% while competitors revenue growth rate fell roughly 40%. This latter detail has had little impact as the strong gains today have come amid those stocks favorably impacted by an improvement in CSCO business as well as the competition. A deeply oversold technical condition (Nasdaq off 15% over last 3 weeks and down 25% off the Jan high) and short covering have also provided the market a sizeable boost. CSCO was not the only positive news in the tech arena this morning as PMCS (+17.7%) and AMCC (+18.5%) were upgraded by CIBC, HPQ (+6.3%) was upgraded by Prudential; ANAD (+17.1%) raised guidance; QLGC (+19.4%) and ATVI (+5.7%) were upgraded after earnings. The gains are broad based in nature and have come amid strong volume with defensive sectors and those that had outperformed of late weaker today (gold, health, restaurant, homebuilding, utility).DOT +8.7%, SOX +10.3%, XOI +1.2%, NYSE Adv/Dec 1829/1174, Nasdaq Adv/Dec 2159/1083 11:35AM : A fresh wave of buying has lifted the indices to new session highs in recent trade with the networking (NWX +10%) and semiconductor (SOX +9.8%) pacing the way. CSCO has matched the spectacular turnaround of Oct 03 (Fed eased Oct 02) with a 29% surge off of yesterday's low. The overall sector performance is still relatively the same but have seen improvement in the gold group and selling in homebuilding and restaurant stocks (other safe havens such as utility and health also weaker). One of the top point gainers today is QLogic (QLGC +7.09) in the wake of their earnings report last night and today's upgrade by Legg Mason. Heavy trade continues with the Nasdaq already topping the 1 bln mark. DOT +8.5%, SOX +9.8%, NYSE Adv/Dec 1815/1119, Nasdaq Adv/Dec 2167/1025 11:00AM : The overall dynamics of the market have not changed as tech sectors provide the fuel for today's explosive advance. While the CSCO (+20%) report was the catalyst and clearly encouraging, there are obviously other factors at work. The market has made it through earnings season and several economic reports that caused some concern regard the strength of the recovery. Also, the Nasdaq had plunged roughly 15% over the previous three weeks and was down as much as 25% off the Jan high. This suggests that it was extremely oversold which implies that short covering has added to the advance. The volume totals are strong with the market internals, particularly the volume ratio, firmly bullish. DOT +8%, SOX +8.6%, XOI +0.4%, NYSE Adv/Dec 1738/1094, Nasdaq Adv/Dec 2129/956 10:30AM : Not surprisingly, the Nasdaq Composite has been the best performer today in the wake of the CSCO (+18.6%) news with the index recently establishing a minor new session high. The Dow and S&P are also performing very well but they are currently consolidating just off the best levels of the day. Laggards in the Dow today include: Coca-Cola (KO -1.2%), Johnson & Johnson (JNJ -1.5%), McDonald's (MCD -1.1%), Merck (MRK -1.3%) and Philip Morris (MO -1%). Have noted increased pressure in the Healthcare (HMO -2.3%) and Health Provider (RXH -1.1%) groups with defensive sectors (gold, utility) also slightly weaker. DOT +7.3%, SOX +8.3%, XOI +0.5%, NYSE Adv/Dec 1806/936, Nasdaq Adv/Dec 2098/845 10:00AM : Still holding impressive gains but the market averages and the various tech sectors that made a mad dash out of the starting gate are currently taking a little breather. Groups/stocks that didn't participate in the opening sprint include defensive plays such as gold and utility along with coffee retailers (SBUX -1.6%, PEET -1.7%) and healthcare in more recent action. The semi sector has been one of the quickest to catch its breath with new session highs established. Volume continues at a very strong pace with internals firmly in the bullish camp. DOT +6.4%, SOX +6.8%, XOI +0.6%, NYSE Adv/Dec 1847/713, Nasdaq Adv/Dec 1960/728 9:45AM : Huge gains in tech off the open with the Nasdaq Composite up more than 4%. Better than 5% gains noted in semiconductor, Internet, disk drive, wireless, software with networking up 8.5%. The trigger for the move, Cisco Systems, is up a massive 18.8%. As the old adage says, a rising tide lifts all ships as we are also seeing solid gains outside of tech: broker/dealer (XBD +2%), beleaguered biotech (BTK +4%), banking (BKX +2.5%), cyclicals (CYC +1.7%) and retail (RLX +1.4%). Volume is strong with market internals very bullish. Treasury market feeling the pain of money out flows. DOT +6%, SOX +6.6%, XOI +0.9%, NYSE Adv/Dec 1745/545, Nasdaq Adv/Dec 1884/551 9:15AM : Further minor gains on top of the already impressive pre-market advance as the open draws near. Clearly CSCO has been the top story but one of the leaders in terms of volume and percentage gain this morning is WorldCom (WCOM). The NYT is reporting that WCOM is expected to borrow .65 bln from its banks as part of negotiations to rework the terms of its financings; move part of an effort by the new CEO to reassure customers that the company is not close to bankruptcy. Other significant movers on the upside include: AMCC +17% (CIBC upgrade), EXTR +14% (on back of CSCO), QLGC +13% (upgraded after earnings, shorts cover), BRCD +11% (follows QLGC higher), SUNW +7.8% (participates in general market strength), ATVI +6% (upgraded on earnings). 8:50AM : The market is poised for a very strong start to the session with the earnings report from Cisco (CSCO) last night the main impetus. CSCO beat the consensus estimate by /home/free/cgi-bin/util/sitebuilder.02 and while revenue was slightly below expectations, it came in with better than expected gross margins. The company is increasing its market share as its revenue growth rate was 2% while competitors revenue growth rate fell roughly 40%. The impact on the market has been far and wide but there also have been other positive calls in the tech arena that has added to the bullish tone. Prudential has upgraded Hewlett Packard (HPQ); CIBC upgraded both PMC Sierra (PMCS) and Applied Micro Circuits (AMCC) while ANADIGICS (ANAD) has guided higher for Q2. The S&P 500 futures are 13.8 points above fair value while the Nasdaq 100 PMI is up 43.25 points. 8:40AM : Slight extension of the already strong pre-market gains. The S&P 500 futures are 14.5 points above fair value, the Nasdaq 100 futures are 38.5 points above fair value while the Nasdaq 100 PMI is up 38.88 points. 8:10AM : Strong upside bias remains intact in the wake of the CSCO report with numerous tech names posting near double digit percentage gains. Currently the S&P futures are 12.3 points above fair value while the Nasdaq 100 futures are 36 points above fair value. 7:25AM : This morning's fair value figures -- S&P 500 fair value: 1050, closed 3 pts below fair value. Nasdaq 100 fair value: 1162, closed 6 pts below fair value. Current indications: S&P 500 futures are +15, or 12 pts above fair value. Nasdaq 100 is +38, or 32 pts above fair value... Futures soar on Cisco earnings. 6:34AM : S&P futures trading at 1061.4, 11.4 points over fair value, Nasdaq 100 futures trading at 1188, 26.0 points over fair value. The 10-year note is down 12 ticks at 5.104%. The dollar is outperforming both the yen and the euro. 6:34AM : FTSE +1.06%, DAX +1.49%:European stocks sharply higher. Technology outperforming on the back of better than expected earnings out of Cisco. Telecom and telecom equipment makers finding some much-needed reprieve. Media stocks also higher after the British government cleared the way for consolidation in the industry. 6:33AM : Nikkei +1.81%, Hang Seng -0.23%:Asian stocks mostly higher. Computer-related shares outperformed on the favorable news out of Cisco. Bank shares fared well on Taiwan amid expectations for more M&A activity. Automakers in Japan also traded higher as strong productivity numbers out of the US helped foster a bounce in the dollar.
		SEC Approves New Rules for Stock Analysts WASHINGTON (Reuters) - U.S. financial regulators on Wednesday approved new rules to force stock analysts to reveal more about their ties to companies they research, in an effort to stop them touting shares they don't really believe in. The U.S. Securities and Exchange Commission unanimously approved the measures with an eye to curbing abuses -- like those at Merrill Lynch (NYSE:MER - news) where Internet analysts publicly touted stocks they had slammed privately as "junk." "This is an important first step. I hope it works and if it doesn't, we'll have other steps," said SEC Commissioner Cynthia Glassman at an SEC public meeting. The rules, originating on Wall Street and called inadequate by some investor advocates, would limit when and how analysts can issue opinions on stocks, restrict their personal investing activities and force banks to disclose more about their ties to companies they research and those of their analysts. New disclosures to be required in research reports would include charts showing how stocks have performed relative to the recommendations of analysts and figures showing what portion of a bank's total recommendations are buys, sells or holds. The stock exchanges will phase in the measures over six months, said New York Stock Exchange spokesman Ed Kwalwasser. The rules were developed over many months by the New York Stock Exchange, the Nasdaq-regulating National Association of Securities Dealers, the SEC and Republicans in Congress. The SEC on April 25 launched a formal investigation of analysts and whether they have misled investors. The probe could produce further reform proposals, officials said. "It's a dramatic change and I just think that as we see how they work out, there could be some new changes and interpretations," SEC Commissioner Isaac Hunt said. Amid a broad crisis of market confidence triggered by the Dec. 2 bankruptcy of former energy trading giant Enron Corp. (Other OTC:ENRNQ.PK - news), controversy has grown over the role of stock analysts at the world's top investment banks. CONFLICTS LONG RECOGNIZED Experienced Wall Streeters have long winked at the dual roles of sell-side analysts. While portrayed as objective market researchers, they also serve the marketing and investment banking interests of their powerful employers. Such conflicts were tolerated until early 2000, when America slid into its first major bear market since stock ownership exploded among the middle classes in the 1990s. New York State Attorney General Eliot Spitzer last month ripped the lid off the problem. In an investigation he led, Merrill analysts were shown to have privately disparaged shares in Internet firms that they had publicly recommended. Rep. Richard Baker, a Louisiana Republican instrumental in helping develop the rules, said in an interview there was no need for new laws to cover egregious misbehavior by analysts. "That's actionable under the fraud statutes," he said. Democrats blasted the new analyst rules as insufficient. "These rules take an important first step, but do not go nearly far enough to limit the ties between analysts and their firms' investment banking departments," said New York Democratic Rep. John LaFalce in a statement. Baker responded that the rules were more than a fig leaf for the financial industry and GOP supporters. "This was not just a glossing over of a significant problem to protect political friends," said Baker. The new stock exchange rules would: --Prohibit pegging analysts' pay to specific investment banking deals and require disclosure if analysts' pay is pegged to investment banking revenues in general; --Ban offering favorable research for banking business; --Ban analysts from issuing research reports 40 days after the IPO of a company handled by that analyst's bank; or 10 days after a secondary offering "for an inactively traded company." --Restrict, but not ban, collaboration on research reports between analysts and investment banking employees; --Limit pre-publication review of analysts' research reports by the companies written about; --Require more disclosure of analysts' pay and personal holdings, the bank's holdings and its client relationships; --Restrict analysts from dealing in initial public offering shares in sectors they cover, except in diversified funds; --Require "blackout periods" prohibiting analysts from trading in shares of companies they follow for 30 days before and 5 days after issuing a research report about the company. --Prohibit analysts from trading against their most recent recommendations. --Require banks to clearly explain their stock rating systems and disclose historic data about ratings assigned.
		Merrill Rallies as Settlement Nears in Spitzer Probe New York, May 8 (Bloomberg) -- New York State Attorney General Eliot Spitzer said he may not seek restitution from Merrill Lynch & Co., which is being investigated over allegations that it misled investors. Merrill shares and other brokerages rose as the firm moved closer to a settlement of the matter. Negotiations have been ``productive,'' said Merrill spokesman Tim Cobb. Spitzer in an interview said compensation to aggrieved investors who relied on Merrill's research should come from lawsuits or arbitration. Merrill climbed 7 percent to .66, the biggest rise in more than seven months. Merrill's gains, which came amid a rally in U.S. stocks, reflect investor optimism that the cost to the firm of any penalties from the probe will be smaller than suggested by the shares' slide in the past month. Merrill lost more than billion in market value through yesterday since Spitzer released e- mails on April 8 from the firm's analysts indicating research was influenced by banking relationships. ``No matter how high the settlement ends up being, it's already been discounted in the price,'' said Joe Sharma, who helps manage about .7 billion at Systematic Financial Management in Teaneck, New Jersey, including Merrill and other brokerage shares. ``The question now is, when is it going to be over?'' Though Spitzer said he probably won't seek money for investors, Merrill and other firms still face class action lawsuits and potential arbitration claims. Federal regulators, including the Securities and Exchange Commission, and other state regulators have also started investigating Merrill and other Wall Street firms. Potential Fine Merrill has offered to pay about million, though a final figure is still being discussed, the Wall Street Journal reported, citing unidentified people familiar with the matter. Spitzer yesterday postponed a court appearance on the matter until May 16. An agreement that separates research and investment banking within the firm could keep the attorney general from seeking civil or criminal charges against the firm. Spitzer indicated he'd prefer not to file criminal charges. ``I continue to be in discussions with Merrill Lynch and if it's possible to resolve this without a filing or charges, that would be an affirmative step both for the company and for the markets,'' Spitzer said. Rivals Morgan Stanley Dean Witter & Co., Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. all rose in step with Merrill. They each climbed more than 6 percent, sending the American Stock Exchange Broker/Dealer Index up 6.8 percent. Other Actions A million settlement would be the same as what Credit Suisse First Boston agreed to pay earlier this year to settle regulatory charges that it allotted sought-after shares of initial public offering in exchange for investor kickbacks in the form of higher commissions. Spitzer wants Merrill's analysts to be paid from a pool of money separate from that generated from investment banking fees. He also wants to stop analysts from participating in pitches to win business, and wants Merrill to publicly recognize that it misled investors and pay a fine. Merrill doesn't want to agree to new research policies unless its rivals also adopt such changes. Spitzer's investigation, which began with Merrill, has widened to include other securities firms. Other regulators, including the SEC, the National Association of Securities Dealers and the New York Stock Exchange, have joined the investigation. The SEC today approved rules to curb conflicts of interest among stock analysts, barring them from profiting from their stock recommendations and requiring more disclosure by brokerages. Profit Push Merrill, which has had lower earnings or a net loss in each of the past five quarters, is facing Spitzer's probe as it seeks to boost profit after lagging rivals. Last year, the firm slashed thousands of jobs and other costs under a restructuring led by President Stanley O'Neal. Spitzer had criticized Merrill's research, releasing an October 2000 e-mail about Internet Capital Group Inc. in which analyst Henry Blodget said there was ``nothing to turn this around'' and ``nothing positive to say.'' At the time Merrill rated Internet Capital ``accumulate,'' its second-highest rating. Merrill has said the e-mails were taken out of context. Merrill Chief Executive Officer David Komansky last month apologized for the e-mails and said ``they fall far short of our professional standards and some are inconsistent with out policies.'' ``Wall Street has had a basic conflict of interest for some time,'' said Howard Ward, who manages the .95 billion Gabelli Growth Fund and owns shares of Merrill and other securities firms. ``The most likely case is a settlement with maybe a fine and a change of practices.'' Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.