Intel, CSX results cheer Street

Stocks turn up -- as the dollar falls -- after the Fed vows to step in to boost economy. Pfizer is buying King Pharmaceuticals. Drilling shares rise after Obama lifts drilling moratorium.

By Charley Blaine Oct 12, 2010 1:35PM
Charley BlaineUpdated: 6:44 p.m. ET.

Shares of semiconductor giant Intel (INTC) and railroad operator CSX (CSX) were moving higher this afternoon after the companies reported better than expected third-quarter results.

The moves by the stocks came after the stock market reversed an early decline and finished the day modestly higher. The rally came after minutes from the Federal Reserve's September meeting suggested the central bank will move to boost the economy if it doesn't pick up on its own. The Fed's minutes offset worries about growth restraints in China.

The Dow Jones Industrials ($INDU) closed up 10 points to 10,020; the blue chips had been down as many as 97 points early in the day. The Standard & Poor's 500 Index ($INX) was up 4 points to 1,170. The Nasdaq Composite Index ($COMPX) was up 16 points to 2,418. Financial and technology stocks were the market leaders. Apple (AAPL) hit a new intraday high of $299.50 before falling back to $298.54, up 1.1%.

Among stocks of interest today:
  • Avon Products (AVP), up 4% to $34.50. The world's largest door-to-door cosmetics seller may be the subject of a takeover bid by L'Oreal (LRLCY), according to the Daily Mail newspaper in London. L'Oreal was up 0.4% to $22.75 in New York.
  • Fastenal (FAST), down 5% to $52.04. The largest U.S. retailer of nuts, bolts and other fasteners said economic weakness could delay its store sales goal by two years. The company earned 51 cents a share in the third quarter. The Street was expecting 50 cents a share.
  • Starbucks (SBUX), up 4.4% to $27.14. Credit Suisse raised the world's largest coffee-shop chain's 2011 earnings estimate to $1.45 a share from $1.44, and 2012 per-share earnings to $1.69 from $1.63.
  • U.S. Steel (X), down 1.7% to $44.83. The steelmaker may miss analysts' third-quarter earnings estimates because of "challenging" flat-rolled volumes, UBS said.
  • Verizon Communications (VZ), down 1.5% to $32.54. The telecommunications giant was cut to "underperform" from "market perform" by Sanford Bernstein analyst Craig Moffett. His 12-month price estimate is $25.
Intel earnings jump; tablet effect is unclear
The Fed news and the results from Intel and CSX should help stocks open higher on Wednesday. Futures trading suggests the market will open higher.

Intel said it earned 52 cents a share on revenue of $11.1 billion. Earnings were up 68% from a year ago; revenue was up 18% from a year ago. Analysts had expected 50 cents in earnings on $10.99 billion in revenue.

The Dow component said business was driven by "solid demand" from corporate customers, growth in its leadership products, such as microprocessors and continuing growth in emerging markets.

There were a couple of issues in the report. Sales of its low-end Atom processor fell 4% in the quarter. That suggested sales are being hurt by the emergence of tablet computers. Average selling prices were flat.

Intel sees revenue of $11.4 billion for the fourth quarter, with a gross profit margin of 67%, up from 66% in the third quarter.

Shares were up 0.8% to $19.93. The regular close of $19.77 was up 1.1% on the day.

Other tech shares were higher, including Apple's near-miss at $300. Microsoft (MSFT), up 1.2% to $24.89. (Microsoft is the publisher of MSN Money.)

CSX, meanwhile, earned $1.08 a share in the third quarter, up 46% from a year ago. Revenue was $2.7 billion, up 18% from a year ago. The Street was expecting $1.04 a share on revenue of $2.66 billion.

Overall freight volumes were up 10%, led by 20% gain in automobile shipments and intermodal traffic.

Shares were up 2.5% to $58.70 after closing down 1.6% to $57.26 in regular trading.

Energy prices -- New York close
 

Tues.

Mon.

Month chg.

YTD chg.
Crude oil 

$81.67

$82.21

2.13%

2.91%
(per barrel)











Heating oil

$2.2625

$2.2790

-7.27%

6.94%
(per gallon)











Natural gas 

$3.6290

$3.6010

-6.28%

-34.87%
(per mil. BTU)











Unleaded gasoline

$2.1239

$2.1655

3.87%

3.46%
(per gallon)











Retail gasoline

$2.8110

$2.8070

4.54%

6.52%
(per gallon; AAA)













Gold, oil head lower; so does the dollar
Gold settled down $7.70 to $1,346.70 an ounce, only its fourth decline in the last 10 sessions.

Crude oil fell 54 cents to $81.67 a barrel. The dollar was higher for much of the day but moved lower after the Fed minutes came out.

Corn continued to move higher after the Agriculture Department cut its estimate of this year's crop. Corn finished at $5.79 a bushel, up 4.2% on the day and 16.8% on the month. For the year, corn is up nearly 40%.

Interest rates were up slightly, with the 10-year Treasury yield rising to to 2.422% from 2.381% on Monday.

China was an issue overnight after its government increased reserve requirements for six big banks, stepping up efforts to cool the fastest-growing major economy. China affects U.S. stocks because of the enormous growth of its huge economy.

Obama lifts drilling moratorium
Oil service stocks were higher after the Obama administration lifted is controversial moratorium on deep-water oil drilling. It was unclear how quickly idled oil rigs can go back to work in the Gulf of Mexico.

Interior Secretary Ken Salazar, in a statement, said drilling in waters deeper than 500 feet can resume, so long as rig operators can demonstrate they comply with new safety regulations imposed since the April 20 Deepwater Horizon oil-rig explosion that began the three-month Gulf oil spill.

Diamond Offshore (DO) jumped 4% to $69.37. Transocean (RIG) was up 4.7% to $64.81. Halliburton (HAL) was up 0.8% to $34.84. Hornbeck Offshore Services (HOS) added 4% to $20.87. The Philadelphia Oil Service Sector Index ($OSX) was up 1.7% to 203.78.

The Fed wants more growth
Investors started to buy after concluding that the Fed would move fairly soon to add cash to the financial system. But the minutes don't offer specifics on either timing or the amount of cash it will inject into the economy.

The minutes from the Fed's Sept. 21 meeting show that members of its rate-making body, the Federal Open Market Committee, are worried about continued high unemployment and whether inflation will be too low. A concern is that deflation will swamp the economy.

The big tool left to the Fed is what's called "quantitative easing," whereby it buys in Treasury securities to keep long-term interest rates low.

Short-term rates are practically at zero.

Thomas Hoenig, the president of the Kansas City Federal Reserve Bank, thinks the Fed should not do any more easing. If anything, he thinks the Fed should be thinking about raising rates.

Fed Chairman Ben Bernanke and others believe the Fed needs to do more to create the conditions for domestic demand to start growing again.

The economy has been mired in the collapse of new-home construction and severely depressed existing-home sales. Unemployment has been at or near 10% for more than a year, with little to suggest the situation is about to turn.

Financial stocks rise; a big deal in pharma
Financial stocks were the market's leading sector. Bank of America (BAC) was the Dow leader, up 2.8% to $13.52. JPMorgan Chase (JPM) and American Express (AXP) were the third- and fourth-best Dow performers, up 1.7% to $40.40 and 1.6% to $38.54, respectively.

JPMorgan reports third quarter earnings before Wednesday's open.

Pfizer (PFE) agreed to buy King Pharmaceuticals (KG) for $3.6 billion. The deal values King at $14.25 a share, or a 40% premium over King's closing price of $10.15 a share Monday. Pfizer shares were up 0.6% to $17.48, while King shares jumped 39.3% to $14.14, tops among S&P 500 stocks.

Activist investor Carl Icahn bought an almost 10% stake in Dynegy (DYN) for $57.5 million, according to a regulatory filing. The move could incite a buyout battle with private-equity player Blackstone Group (BX) over the energy company. Dynegy shares were up 2.5% to $4.87. Blackstone shares were up 0.4% to $13.58.

 

Entergy (ETR) said it's cooperating with the Justice Department on a civil investigation of competitive issues at divisions in several southern states. Shares of the New Orleans company were off 0.4% to $76.81.


Buyout firm KKR (KKR) has partnered with the Korean national pension system to buy a minority stake in Colonial Pipeline, a unit of Chevron (CVX). The deal is valued at close to $1 billion. KKR shares were up 2.5% to $11.25, while Chevron's shares were falling 1.1% to $82.77. KKR was up 2.6% to $11.29. Chevron was up 0.2% to $83.84.

 

Johnson Controls (JCI) expects full-year earnings of $2.30 to $2.45 a share on sales of $37 billion. That's a bit less than the Street estimate of $2.37 a share and sales of $36.27 billion. Shares fell 0.3% to $31.54.


Nineteen of the 30 Dow stocks were higher, along with 63 stocks in the Nasdaq-100 Index ($NDX.X). The Index was up 15 points to 2,042.


Short hits from the markets -- New York close
 
  Tues.

Mon.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.120%

0.120%

-20.00%

140.00%
5-year Treasury note 

1.136%

1.101%

-12.21%

-57.71%
10-year Treasury note

2.422%

2.381%

-4.04%

-36.98%
30-year Treasury bond

3.727%

3.727%

0.81%

-19.69%
Currencies







 

 
U.S. Dollar Index

77.588

77.664

-1.71%

-0.81%
British pound

$1.5790

$1.5886

0.44%

-2.38%
(in U.S. $)











U.S. $ in pounds

£0.6333

£0.6295

-0.44%

2.44%
Euro in dollars

$1.3872

$1.3881

1.55%

-3.22%
(in U.S. $)











U.S. $ in euros

€ 0.7209

€ 0.7204

-1.53%

3.33%
U.S. $ in yen 

81.97

82.06

-2.05%

-11.86%
U.S. $ in Chinese

6.70

6.66

-0.30%

-1.87%
yuan











Canada dollar

$0.989

$0.987

1.81%

4.05%
(in U.S. $)











U.S. dollar 

$1.011

$1.013

-1.78%

-3.89%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,346.70

$1,354.40

2.83%

22.85%
(per troy ounce)











Copper

$3.7895

$3.7895

3.78%

13.24%
(per pound)











Silver

$23.1470

$23.3490

6.08%

37.41%
(per troy ounce)











Wheat 

$7.1000

$7.0925

5.34%

31.12%
(per bushel)











Corn

$5.7900

$5.5575

16.79%

39.69%
(per bushel)











Crude oil 

$81.67

$82.21

2.13%

2.91%
(per barrel)










 


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