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Manufacturing Strengthening

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The mega merger of Compaq and HP couldn't get the markets moving, but some economic data did.

The NAPM Manufacturing Index rose to 47.9 in August from a reading of 43.6 in July. This confirms the Chicago number that was released last week, and trumped the consensus estimate of 44. A reading below 50 still signals a contraction in manufacturing, but reduced inventory levels could clear the way for increased production later this year. Construction spending fell 0.1%, but that was inline with expectations, so traders have decided to focus on the NAPM data.

The Dow is up 87 points, and back above the coveted 10,000 mark, thanks primarily to Johnson and Johnson (JNJ). The company announced that their new stent showed great promised in preventing arteries from blocking again. Retailers Wal-Mart (WMT) and Home Depot (HD) are also helping out the Dow by gaining more than $1.

The Nasdaq-100 is having trouble staying in positive territory due to a $3.82 drop in Nvidia (NVDA). Declines by Qualcomm (QCOM), Sanmina (SANM) and Ciena are also hurting. Intel (INTC) is down $0.81 after Lehman Brothers cut their revenue estimate for Q3. Most of the strength in the Nasdaq-100 is due to biotech stocks. Bed Bath and Beyond (BBBY), Dell (DELL), and Microsoft (MSFT) are the non-biotech issues leading the NDX.

With the Nasdaq and Nasdaq-100 back in negative territory, it looks like the pattern of popping on good economic news and then slowly drifting lower for the rest of the day is taking hold.

Super Chip

Motorola (MOT) has created a computer chip that is reported to be 35 times faster than anything on the market. The silicon/gallium arsenide chip solves a long running problem of creating a faster but cheaper chip for cell phones, DVDs, etc.

Motorola Daily Chart

While the chip is being touted as a "major turning point for the semiconductor industry," and "a monumental change in the constraints on the construction of semiconductor systems," investors are less impressed with Motorola's chip. MOT is down 0.97%, and getting close to testing support at $17.00. That is the top of an ascending triangle that Motorola broke out of back in June. Since then the stock has had trouble moving above $20, and could very well be forming a double top.

Jeffrey Canavan
Assistant Analyst

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