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Semi-equipment weighs on futures

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Morning notes out of Lehman Brothers that investors are overlooking weak fundamentals at semiconductor equipment companies in favor of the prospect of stabilization in end markets and the fear of missing the upturn in equipment shares is weighing lower on the group, as well as stock futures in early morning trading.

Lehman believes that overall, semiconductor equipment shares trade well above historical trough levels, and the company's with the greatest discrepancy between price/book and tangible book include AEIS $13.75, BRKS $14.60, KLIC $3.86, MKSI $15.39 and PLAB $13.44, and that KLIC and PLAB are the most likely candidates for asset impairment charges.

Also weighing on the semiconductor equipment group and broader semiconductor sector is last night's news out of Applied Materials (NASDAQ:AMAT) $16.45 that it will reduce its global workforce by approximately 1,750 positions, or approximately 11%, to address the continuing downturn in the semiconductor industry.

In a positive note, Soundview says that their Gartner-SoundView IT spending survey showed a strong year-to-year improvement in intent-to-spend questions, suggesting pent-up demand and a high probability that 2003 will be a positive inflection point in IT spending. Soundview says that although top-down budget questions indicate a flat year-over-year growth in 2003, firm says their survey has rarely shown such a divergence between IT spending confidence and IT user wants. However, the survey indicates that application software spending may lag broader infrastructure priorities, and security showed deceleration from last year. Highlighted company's include DELL, HPQ, CSCO, NTAP, and EMC.

Stock futures are edging modestly lower with S&P futures (sp02z) trading down 1 point at 906. NASDAQ futures (nd02z) are down 5.5 points at 1037.50, while Dow futures (dj02z) are off 2 points at 8,540.

Fair value for the S&P 500 today is $0.24. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.32 and set for program selling at $-1.84. Fair value for the NASDAQ-100 today is $2.10.

Jeff Bailey

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