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Intel Knocks It Out of the Park By: Charles Payne

|Includes: ADCT, Intel Corporation (INTC), XLNX
The market started earnings season off with a bang, and anecdotal evidence suggests investors are willing to look out a little further.

* Item- Portugal's debt rating knocked down a couple of pegs and the market didn't blink.
* Item- U.S. budget deficit languishes into 21st consecutive month, but could have been worse.
* Item- U.S. trade deficit widens, again, but exports were higher.

Last month any of the above items could have knocked the market for a loop, but yesterday investors didn't blink. That's great news so let's see how long it stays that way.

On the topic of blinking, something happened yesterday that I've been warning and screaming about for a few months. One of our Hotline ideas exploded to the upside. In fact, ADC Telecom (ADCT) was the number one percentage gainer in the entire market, up 41% for the session. It was also an open position on this service going back to last August. The good news is that many people still had the stock with an average cost of $8.20, but too many sold already.

People claim they want to be investors but sell with the crowds because they have so much fear, anxiety, and frustrations.

Yet, taking a loss simply because a stock is down with the broad market is typically a huge mistake. Please be investors if that is what you want to be.

When you've done your homework (we do that for our subscribers) there are times when you should be buying and not falling victim to the silly emotions of crowds. The same thing occurred with XLNX, another giant winner that was only featured in May.

Stay the course. Like I've said on my radio show and on television, as well as written here a million times, I understand why you are worried and I understand the fickleness of the stock market. But, you become a victim to the tyrants you loathe when you don't invest in the market or America and when you take losses on great and/or undervalued companies when the herd is moving out.

Deficits Rule

The June budget deficit was $68.42 billion from $94.33 billion a year ago, but most pundits modeled for a worse number. Yes, we can celebrate a deficit of only $1.6 trillion for FY10. It is interesting to see the leap in outlays for the Department of Education and slight decline in Homeland Security.
The trade deficit of $42.3 billion was the largest since November 2008, but exports are also at their largest level since September 2008. The Street didn't expect a 4.8% increase but how it happened was really interesting. Typically, trade deficits are driven by U.S. stronger demand for crude. In May, demand for crude decreased! $20,919,000,000 down from $23,109,000,000 month over month means there was demand in other areas for imported goods and services. Interestingly, one of the biggest leaps came in imports of drilling and oilfield equipment to $936.0 million from $588.0 million. On the export side, industrial machines and semiconductors are going like gangbusters. Auto imports and exports are up substantially in the past year.
Intel Inside

I'm going to hum that stupid Intel (NASDAQ:INTC) thing all day as the stock carries the broader market along on this rally that's picking up steam and credibility, too. The company earned $0.51 per share, beating the Street by $0.08, on a 34.6% jump in revenue. The $10.8 billion on the top line was ahead of the $10.25 billion anticipated, and gross margin of 67% was well above the 64% consensus. This was one of the best quarters in the history of the 42-year old company according to the company's CEO. Business was driven by strong demand from corporations. Guidance was solid, too, and convincing. There is a special comprehensive institutional research report from our semiconductor analyst Carlos Guillen on


There is much scuttlebutt that Benihana is up for sale and I'm reminded of the story of Rocky Aoki who qualified as a wrestler for the summer Olympics in 1960 but instead came to America. He drove an ice cream truck in Harlem and saved $10,000 to open his first restaurant four years later, today there are almost 100. It's another reminder of the greatness of this country when people work hard and believe. I'm not sure what kind of premium the company could fetch but it's a survivor. The stock was slammed last January, and back in 1991 the stock hit $0.50 only to rally back to $35.00 by 2006.

Economic Data

Mortgage applications were disappointing again. Refinance applications held up but purchase applications dropped to the lowest point since December 1996.
Retail Sales were disappointing this morning, more disappointing than expected, although most watchers expected the number to disappoint.

Is the June retail sales data as bad as advertised? That's the question we find ourselves pondering this morning. On the one hand, retail sales ex. auto declined 0.1% (consensus: 0.0%), missing consensus forecasts, reflecting noticeable declines in furniture (-1.1%) and sporting goods (-1.3%). In particular to furniture sales, they have been on a downtrend since April, suggesting continued tight access to credit, renewed weakness in the housing numbers, and general uncertainty by the consumer. The weakness in sporting goods is surprising considering the World Cup, among other factors. However, on the flip side, retail sales ex. building materials, gasoline sales, and autos increased 0.2% with broad-based gains evident. There were increases reported in very discretionary consumer areas, such as department stores (+1.1%), electronics (+1.3%), and health and personal care (+0.5%).

In the end, the data is supportive that the consumer has taken a pause to reassess their personal finances as the June 2010 results are being matched to soft year earlier numbers. If the consumer was out purchasing strongly, which one could surmise given the generally solid mall traffic on the weekend, the June 2010 data would have been robust. Unfortunately, as we learned with the June same-store sales results last week, promotions are still needed to entice the consumer. We expect back to school shopping promotions to begin in earnest later this month (they have begun to a certain extent already) as retailers are now in a pickle, having bought into the consumer recovery and increased inventory levels to support the hypothetical demand. In the world of retail, product lead times could be detrimental to margins, and our sense is that will be the case for the third quarter.
The initial Intel bounce was already fading before the one-two punch from retail sales and mortgage applications. Now the session's outcome could depend on what the Fed has to say at 2:00 pm via the release of minutes that many expect to reflect confusion. There is a good piece in the WSJ that says confliction reins as there is mixed worries over deflation and inflation.

Disclosure: None