While the Big Board languished with low volume yesterday, Nasdaq (NASD) again stole the show with a gain of almost 1%. The chief reason for Nasdaq’s gain was the semiconductor stocks, which have been showing strength lately, and were led again by the Philadelphia Semiconductor Index (SOX), up 4.45%.
Texas Instruments (TXN) rose over 6% after the company raised its Q2 profit outlook. And Intel (INTC) was up more than 3%, while Cypress Semiconductor Corp. (CY) hit a new high, up almost 5%.
Financial stocks closed mixed despite the news from the Treasury Department that 10 of the 19 largest banks will be allowed to repay TARP funds. The list of banks included BB&T (BBT), US Bancorp (USB), Capital One (COF), JP Morgan Chase (JPM), Bank of New York Mellon (BK), American Express (AXP), Northern Trust (NTRS) and Goldman Sachs (GS).
At the close, the Dow Jones Industrial Average (DJI) was off more than a point at 8,763, the S&P 500 (SPX) rose 3 points to 942, and Nasdaq gained 18 points to close at 1,860. The NYSE traded just over 1 billion shares, with advancers over decliners by about 9-to-5. On Nasdaq, only 649 million shares were traded, with advancers ahead by about 3-to-2.
July crude oil rose to $70.01 a barrel, up $1.92, breaking $70 for the first time in seven months, and the Energy Select Sector SPDR (XLE) closed at $52.50, up 51 cents.
Gold for August delivery rose $2.20 to $954.70, as the U.S. dollar weakened again. The PHLX Gold/Silver Index (XAU) rose a nickel to $151.13.
What the Markets Are Saying
Everything seems to be stuck in the dreariness of an early summer trading pattern except Nasdaq. On June 1, the junior index gapped through resistance at 1,780 after a month of hesitation and hasn’t looked back.
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And the component of Nasdaq that has received a lion’s share of the buying is technology, with an emphasis on the semiconductor stocks.
Dorsey Wright reports that after falling off their performance list on April 30, the semis have again moved to the front. And our own work at ChangeWave Research, where we’ve just completed a quarterly corporate survey, tells us that semiconductor stocks again look like a buy.
For those who follow the semis, the most visible index is the Philly Semiconductor Index (SOX).
In mid-March, the index broke from an extended double-bottom, and since then has been making steady progress in a very organized channel uptrend. The SOX closed yesterday at $282.60, up $12.05, and has support at the 50-day moving average at about $254 with resistance at $300.
For now, with most other industry groups consolidating and lower quality stocks getting a lot of attention, we should shift our attention to the groups that still have some quality names. The semis might just fit the bill.
Today’s Trading Landscape
Earnings to be reported include: Brown-Forman Corp. (BFB), Isle of Capri Casinos (ISLE), Luby’s Cafeteria (LUB), Measurement Specialties (MEAS), North American Energy Partners (NOA), Optical Cable Corp. (OCCF), Spartech Corp. (SEH), Stewart Enterprises (STEI) and Volt Information Sciences (VOL).
Economic reports due: June 5 Mortgage Refinance Applications, April Trade Balance (the consensus expects -$29 billion), June 5 U.S. Energy Deptartment Oil Inventories, May Federal Budget Balance (the consensus expects -$180.5 billion), and Federal Reserve Beige Book.
Late news: The U.S. Supreme Court has rejected creditors’ objections leading the way to a rapid closing of the Fiat deal to buy Chrysler.
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Sam Collins is a registered, fee-based portfolio manager who may be contacted at samailc@cox.net. You can also check out an archive of his most recent market outlooks.
