After the Close - Stocks were hit with a modest midday reversal when search giant Google (GOOG) reported sales and earnings below analysts’ estimates ahead of schedule. Google had been expected to report after the closing bell, as many big technologies companies do, along with software giant Microsoft (MSFT – Free Microsoft Stock Report).
Tech stocks had not been performing all that well up to that point, anyway, after the release of disappointing results from bellwethers International Business Machines (IBM - Free IBM Stock Report) and Intel (INTC - Free Intel Stock Report) earlier this week. What there was of the day’s early strength resided in the Dow Jones Industrial Average, which was helped by favorably-looked-upon results from another pair of its components, Travelers (TRV -Free Travelers Stock Report) and Verizon (VZ - Free Verizon Stock Report).
Meanwhile, two out of three of this morning’s economic reports came in better than expected, and there was a continuation of the recent calm in Europe, with the euro remaining above $1.30. However, China reported that GDP for the third quarter of 7.4%, about as projected, but a clear indication that the world’s second largest economy is not growing nearly as quickly as in recent years, when double-digit advances were the norm.
At the close, the Dow Jones Industrial Average was down eight points and the NASDAQ gave back 31 points, or significantly greater than the Dow on a percentage basis. Losers outpaced winners by only a narrow margin on the New York Stock Exchange, but by two to one on the NASDAQ. There were still many more stocks hitting fresh 52-week highs on both the Big Board and the NASDAQ, reflective of the market’s recent strength.
Elsewhere, the yield on the 10-year Treasury noted climbed to 1.83%, well above last summer’s intraday low of 1.39%, when fears about Europe were greater and investors were shunning stock-market volatility. Even so, mortgage rates remain near their all-time lows, at around 3.37% for a 30-year loan, to the benefit of the housing market.
As noted above, Microsoft reported its quarterly results after the close of trading, and they seemed somewhat short of expectations at first glance. Tomorrow is another big day for quarterly earnings releases, as well, with heavyweights, such as General Electric (GE -Free GE Stock Report), Honeywell (HON), McDonald’s (MCD - Free Microsoft Stock Report), and Schlumberger (SLB) all expected to show some level of profit improvement.
On the economic calendar, fresh data on existing-home sales due out on Friday is projected to show the housing market’s recovery is on track.
Unless there are some major disappointments in earnings and/or the business news tomorrow, the Dow should be able to post a gain this week, although the NASDAQ’s weekly performance is less certain, with that index close to its level at the start of trading on Monday. - Robert Mitkowski
At the time of this writing, the author had a position in Intel.
12:30 PM EDT - The U.S. stock market opened lower this morning, but is now improving nicely. As we pass the noon hour in New York, the Dow Jones Industrial Average is up 20 points (0.2%); the broader S&P 500 Index is ahead slightly; the NASDAQ is lower by four points (-0.1%). Market breadth suggests a mixed tone to the session, as advancing issues are just leading decliners on the NYSE. The major market sectors also show a lack of direction. There is some strength in the conglomerates, and consumer cyclical names. However, there is weakness again in the technology names. Notably, the Philadelphia Semiconductor Index (SOX) was lower this morning, but has been paring its losses.
Technically, the S&P 500 Index has managed to put together a few consecutive days of gains, bringing the Index up close to 52-week high ground. The market could well encounter some resistance here, as it had in September and again in early October. So, this level certainly bears watching.
Traders got little direction from a batch of mixed economic reports released today. Specifically, the employment situation is back in the spotlight. According to the Department of Labor, initial jobless claims for the week ended October 13th came in at 388,000, which was higher than analysts had anticipated and up from the 342,000 claims logged in the prior week. Notably, many analysts look for levels lower than 350,000 as an indication of some job creation. On a brighter note, weekly continuing claims actually showed improvement. Meanwhile, not all the news was negative. The Philadelphia Fed Survey came in at 5.7 in October, a reading better than the slight decline analysts had forecast, and last month’s weak showing. Further, the Conference Board’s leading Indicators index rose 0.6% in September, which exceeded expectations, as well.
Meanwhile, the corporate reports continue to stream in. In the Dow, American Express (AXP - Free American Express Stock Report) stock is off after the financial giant posted solid profits on a light top line. Also in financial sector, Morgan Stanley (MS) is seeing its stock slip even though the investment banker’s earnings exceeded the consensus view. In tech, semiconductor company Xilinx (XLNX) posted mixed results, and that issue is directionless.
Stocks heading higher include Orient Express Hotels (OEH), Key Corp (KEY), and eBay (EBAY). Stocks headed lower include Abbott Labs (ABT) Boston Scientific (BSX), and Huntington Bancshares (HBAN). - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch From The Survey - American Express (AXP - Free Amex Stock Report) reported earnings after the close yesterday. The credit card company and Dow-30 member saw pockets of strength, but its customers’ spending habits still leave much to be desired, as revenues were on the soft side.
Telecommunications titan and Dow-30 component Verizon Communications (VZ - Free Verizon Stock Report) reported quarterly earnings this morning. Results showed higher revenues in its wireless business buoyed by the iPhone 5.
Travelers Cos. (TRV - Free Travelers Stock Report), the insurance behemoth and Dow-30 concern, said prices rose and costs stemming from natural disasters fell off. In premarket trading, the stock touched on an all-time high.
Financial conglomerate Morgan Stanley (MS) posted earnings results that were off from last year, but still beat expectations. Revenue gains were broad-based with asset management leading the way.
Technology stalwart Apple (AAPL) has lost its appeal against a ruling that cleared rival Samsung of copying its registered designs for tablet computers, in a decision which could end the legal dispute on the subject across Europe. - Erik M. Manning
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - The stock market put on a very uneven performance yesterday, with the Dow Jones Industrial Average and the NASDAQ scoring only incremental gains on the day, and even those respective five- and three-point increases came with a lot of difficulty, as both indexes were in the red for much of the day. The Standard and Poor's 500 Index rose more definitively, if moderately, while the smaller-cap composites put in a much stronger showing, with the Russell 2000 adding almost a full percentage point, while advancing stocks led declining issues on the Big Board by a ratio of better than 2-to-1. It was that kind of a day. As to groups, eight of the ten S&P market sectors rose, underscoring the aggregate strength in the market yesterday.
Behind this dichotomy, which, as noted, saw most equity groups perform well, and technology stumble, was a dour performance by leading tech bellwether International Business Machines (IBM – Free IBM Stock Report). That company posted generally in-line earnings for the third quarter, but missed on the revenue line, a fairly common outcome thus far during this latest earnings season, which is currently in high gear. Wall Street, meantime, is proving most unforgiving in such instances, and yesterday was no exception, as the fallout from IBM's revenue miss was sizable, with that stock losing more than 10 points on the day, to close just above $200 a share, after having fallen into the $198-a-share area for a brief time yesterday. The IBM setback, it should be noted, cost the 30-stock Dow Industrials some 78 points yesterday, and also took an indirect toll on the NASDAQ. Although IBM, unlike Intel (INTC – Free Intel Stock Report), which also disappointed investors with its fourth-quarter guidance, is not also traded on the NASDAQ, a number of tech stocks that are domiciled on this composite did suffer setbacks, helping to limit the gain there to the aforementioned three points.
While earnings and revenues have been mixed, with ailing banking giant Bank of America (BAC – Free BofA Stock Report) posting slightly better-than-expected results for the latest quarter, there was no indecision on the part of the economy in the latest session. There, data issued on housing starts and building permits was exceptional, with starts jumping 15% in September on a consecutive-month basis, to an estimated annualized rate of 872,000 homes. Strength was especially strong in the South and the West, the nation's two largest regions. Building permits, a more forward looking metric, also jumped ahead nicely, gaining more than 11% to nearly 900,000 homes on an annualized basis. Housing has really come back this year, and while there is still plenty of potential recovery up ahead, as starts, at the 872,000 level are little more than half the average over the past half century, we will need to keep an eye on sales and inventories to see whether or not there is too much building going on. We do not think so, but there is no assurance of a happy outcome at this time.
Meanwhile, a new day dawns and we have seen healthy gains overnight in Asia, where the Nikkei was up a stirring 2.0%, or 176 points, while the Hang Seng was better by a more modest half a percentage point. And stocks are a bit better in Europe today so far, with the London FTSE up slightly. As to our market, it has a slightly weaker tone to it, as perhaps the bulls could be contemplating some profit taking at the outset following the gains so far this week. In all, the S&P 500 Index is off by a bit more than three points and the NASDAQ is lower by almost 11 points. A much bigger-than-expected rise in weekly jobless claims seems to be at least partly behind this early indicated weakness. An uninspiring revenue showing at credit card issuer and financial services giant American Express (AXP – Free Amex Stock Report) released after the close yesterday is also not helping, with Amex shares indicated lower as well. – Harvey S. Katz
At the time of this article's writing, the author had positions in INTC.