The Jerry Query
By Todd Harrison Jul 16, 2003 8:22 am
I'm surprised that the Spoos aren't up more. Is that indicative of supply?
Sail away on that Rhapsody in Red
Don't care where those other rainbows led
With all those northern lights just blowin' away
Got no thought to relate in the same old way
(Jerry Garcia Band)
Good morning and welcome back to the band stand. With Elmer's zoo offering little clue, traders exhaled as they readied for Mr. Chips. On cue, Intel (INTC:NASD) beat the street and flexed margins that were far from gross. The brave face ignited a spirited race and the bulls snatched the baton back from a blinking Boo. Can Hoofy's heroes overcome the technically numb (S&P 1015) or will good news be met with a sweat? It's Hump Day in the city of critters, so lets get this party started right!
As a function of the recent upgrade parade, the bar (of expectation) for Intel was set rather high. While the commentary on the call was "good," the gross margin improvement was a clear victory for the bovine. Couple that with the gap fillage potential (to 27) and it appears as if the chip giant is a'ight. THE question, however, is two-fold. One, will traders "sell the news" (as we know rally phases tend to end on good news) and two, how will the structural dynamic influence the price action?
The rising rate environment, both domestically and in the JGB's (Japan), must be monitored. I've had discussions in this regard with Professor Reynolds (this is his bag, baby) and while he thinks it could matter...eventually. He's been white hot in the bond-to-stock (to bond?) trade and is as intelligent a voice as I've read in that regard. Still, after a monster truck rally--and with sentiment uber-complacent (A.A.I.I bulls 57.4 vs. 56.5, bears 17 vs. 18.5)--the specter of higher rates might spook some. Proof? Take a look at the housing sector yesterday. As rates started to jump, it became clear that homie don't play that game.
Intel will surely pace the tech sector and Citigroup (C:NYSE) will likely weigh on the big board. In addition to coughing up alotta dough for Sear's (S:NYSE) credit card unit, a management shakeup was announced this morning. Sir Sandy will be stepping down as CEO and while he'll remain Chairman, he'll no longer be calling the shots. That's likely to be perceived as incremental negative and will prolly lead to some N's over S's action.
So here we are...Hump Day in the city of critters. At the risk of raising Hoofy's ire, I will ask you to remain conscious of the possibility that traders sell on good news. We saw it yesterday (on the economic numbers) and if (big if) it starts to become habit forming, it'll be a clear signal of a change in dynamic. Also, remember that a ton of earnings remains (IBM (IBM:NYSE), MSFT (MSFT:NASD), a host of industrials) and the scorecard is still being tallied. Thus far, the earnings we've seen have been good. It remains to be seen, however, if they're good enough.
Good luck today.
position in intc
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