Sunday, June 27, 2004

Market Week in Review

S&P 500 1,134.43 -.05%

U.S. indices finished mixed last week on a good pick-up in volume as technology shares outperformed substantially, offsetting declines in healthcare-related stocks. Stocks fell slightly on Monday, led lower by healthcare and energy-related shares. A mid-week rally began Tuesday, led by technology stocks, after SBC Communications announced a $6 billion capital spending spree to build a new fiber optic network. As well, the very successful IPO of boosted sentiment towards technology stocks. Finally, falling interest rates, increasing merger activity, strong corporate earnings reports and declining energy prices also spurred investor enthusiasm mid-week. The week ended on a mixed note as violence in the Middle East prevented investors from bidding shares higher in advance of the coming week's Iraqi handover of power. Moreover, the Russell rebalancing, end of the quarter repositioning and imminent Fed rate-hike continued to weigh on investors' psyche at week's end.

There were several notable movers last week. Shares of Taser International(TASR) rose 63.3% after boosting 04 annual revenue growth from 100% to 150% and speculation over a deal with Sharper Image to sell a personal version of its stun gun. NVE Corp.(NVEC) rose 46.7% after receiving a new patent on an innovative type of MRAM. PalmOne(PLMO) gained 62.5% after beating 4Q estimates and raising its 1Q forecast substantially. Dick's Sporting Goods(DKS) increased 14.5% after saying it would purchase Galyan's Trading for $305 million in cash. Career Education(CECO) fell 20.0% after the company said a SEC inquiry was raised to a formal investigation. Orasure Technologies(OSUR) gained 24.7% after it received FDA approval of it OraQuick Rapid HIV-1/2 Antibody Test. Shares of Performance Food Group(PFGC) fell 19.3% after lowering its second-quarter earnings estimate, saying the distribution of fruit products and retooling plants is costing more than anticipated. Finally, AT&T(T) fell 9.0% after it reduced its 2004 profit and revenue forecasts because it lowered prices to business customers.

Bottom Line: The tone of the market last week was very good, notwithstanding minimal movements in the major averages. The advance/decline line continued to improve and volume increased. Many sectors registered substantial gains with small-cap and technology shares outperforming significantly. According to Thomson First Call, positive-to-negative earnings pre-announcements are running at a record high. This is turning out to be one of the best years in recent history for stock-pickers as the major averages flounder while certain sectors and stocks register significant gains. Last weeks' market action, combined with declining interest rates and energy prices, bodes well for the future.

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