S&P 500 1,156.87 +1.04%
A broad array of sectors contributed to another positive weekly performance for U.S. stocks. Homebuilders led the way with Gaming and Biotech stocks not far behind. With corporate executive corruption, Intel's conservative conference call and a weaker-than-expected jobs report dominating headlines, it is surprising and quite positive that stocks rose at all.
There were several developments that brought back investor concerns over executive corruption. First, Martha Stewart was found guilty of conpiring to obstruct an investigation of her sale of Imclone stock. Bernie Ebbers, the former CEO of WorldCom, was indicted on Federal charges that he masterminded the largest accounting fraud in U.S. history. Ex-CFO Sullivan pleaded guilty to the same charges. Finally, the New York Supreme Court dismissed the most serious charge against former Tyco CEO Kozlowski, however he still faces a possible 30 years in prison on other charges.
There were changes in leadership at a couple of America's top companies last week. Disney(DIS) decided to split the role of Chairman and CEO, leaving Eisner as CEO and naming George Mitchell as Chairman. Michael Dell will hand over his CEO title to President Kevin Rollins, but will remain Chairman of Dell.
In other developments, Clear Channel(CCU), the largest U.S. radio broadcaster, agreed to pay a $775,000 fine for airing lewd material. It was the second biggest fine ever for indecency. Intel lowered its 1Q guidance modestly after citing a small inventory buildup overseas, which it said it has since "worked through." Lehman Brothers was named manager of California's $15B bond approved by voters Tues. Walmart(WMT) opened its first grocery store in California. It plans to open 40 more in the next 4 years in Cali. to compete with Kroger, Safeway and Albertson's. Finally, Boston Scientific(BSX) won FDA approval for its drug-coated Taxus stent, allowing the co. to challenge Johnson and Johnson(JNJ) for the no. 1 spot.
BOTTOM LINE: Considering the fact that the headlines last week were dominated once again by negative news, obscuring the very positive economic data, it is a good sign that most stocks rose. Many sectors have broken out technically in recent days, with the exception of technology. I believe the catalyst to propel tech shares higher will be next quarter's earnings reports and guidance. While it is possible that semiconductor and equipment stocks may experience one more down-leg before they find a bottom, I think most are at good entry points right now. A 10% correction in the SOX, combined with rapidly improving fundamentals, makes valuations much more compelling than just a few months ago. I think the current semiconductor cycle will last much longer than analysts are now suggesting.
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