Strong earnings send stocks rallying

Quarterly results from Wells Fargo, Delta and Boeing beat estimates. Morgan Stanley reports a loss. The Fed will release its Beige Book this afternoon.

By TheStreet Staff Oct 20, 2010 8:08AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 1:27 p.m. ET

 

The Dow Jones industrials added more than 100 points Wednesday as basic materials stocks, helped by a weaker dollar, rebounded from the previous day's sell-off.

 

At 1:27 p.m. ET, the Dow Jones Industrial Average ($INDU) was up by 162 points, or 1.5%, at 11,141. The S&P 500 ($INX) was up by 16 points, or 1.4%, at 1,182. The Nasdaq ($COMPX) was rising by 30 points, or 1.2%, at 2,467. 

 

"The market is responding very well to earnings today," said Michael Strauss, the chief economist at Commonfund. "We're beginning to see signs that investors are preparing themselves for the increased prospect that either the economy will get better or that the Fed will take action to help the economy get better."

 

Investors were also looking ahead to the 2 p.m. release of the Federal Reserve's Beige Book. They will look for signs that additional quantitative easing might be on the way. The report, a compilation of anecdotal evidence on economic conditions across the Fed's 12 districts, is what the Federal Open Market Committee will refer to during its next policy-setting meeting on Nov. 2-3. 

 

Shares across the basic materials, transportation and capital goods sectors were leading gains, with DuPont (DD), Boeing (BA), Intel (INTC) and Caterpillar (CAT) topping the Dow.

 

Delta Air Lines (DAL) reported quarterly earnings of $929 million, or $1.10 a share, excluding special items. Analysts had estimated 94 cents. Revenue rose 18% to $9 billion. Analysts had estimated $8.8 billion. Delta shares were up 9.2% at $12.78.

 

Boeing (BA) said it earned $837 million, or $1.12 a share, in the third quarter. Analysts surveyed by Thomson Reuters had estimated $1.06. Revenue rose 2% to $17 billion. Analysts had estimated $16.8 billion. Boeing shares were gaining 2.3% at $70.65.

 

Wells Fargo (WFC) said it earned $3.34 billion in the September quarter on revenue of $20.9 billion; $3.15 billion, or 60 cents per share, was applicable to common shareholders. Analysts had estimated earnings of 55 cents per share on $20.95 billion, on average, according to Thomson Reuters. Wells Fargo shares were gaining 2% at $25.04.

Morgan Stanley (MS) posted a third-quarter loss of $91 million from a year-earlier profit. Income from continuing operations fell to 5 cents a share from 50 cents last year, falling short of the 15-cent estimate of analysts. Morgan Stanley shares were falling 3.5% to $24.56.

 

U.S. Bancorp (USB) reported record revenue of $4.6 billion and topped profit expectations with earnings of 45 cents a share. The shares were ahead by 0.3% at $22.87.

 

Piper Jaffray (PJC) reported a 24% decline in third-quarter net income but topped analysts' estimates on strong revenue from advisory services and municipal financing. Piper Jaffray shares were gaining 0.2% to $29.80.

 

United Technologies' (UTX) earnings of $1.30 a share beat analysts' estimates for $1.28, but its sales of $13.5 billion missed expectations for $13.9 billion. United Technologies' shares were losing 0.1% to $73.50.

 

Textron (TXT) reported a third-quarter loss from continuing operations and a drop in revenue on lower business jet deliveries. The stock dropped 4.3%, to $20.05.

 

Shares of M&T Bank (MTB) were down 1.4% to $74.71 despite better-than-expected earnings of $1.48 a share, while shares of regional bank Marshall & Ilsley (MI) shed 5.8% to $6.55 on a wider-than-expected loss of 32 cents a share.

 

EBay (EBAY) will report earnings after the closing bell. According to Briefing.com, analysts expect profits of 37 cents a share. EBay shares were climbing 0.5% to $25.65.

 

The dollar was trading lower against a basket of currencies, with the dollar index down by 1%, and the benchmark 10-year Treasury note fell 2/32, increasing the yield to 2.488%.

 

The Energy Information Administration reported an increase of 700,000 barrels in crude oil supplies in the week ended Oct. 15, which was lower than the build of 2.1 million barrels that analysts polled by Platts expected and also below the 2.31 million-barrel build that the American Petroleum Institute reported late Tuesday.

 

Gasoline stocks unexpectedly gained 1.2 million barrels, upsetting projections for a decline of 1.2 million barrels, while distillates shed 2.2 million barrels. Analysts had expected a draw of 1.3 million barrels.

 

Crude oil for November delivery gained 87 cents to trade at $81.03 a barrel, while the December gold contract was rising $8.70 to $1,344.70 an ounce.

 

Stocks in Asia dropped after China unexpectedly increased its benchmark interest rate yesterday. Hong Kong's Hang Seng fell 0.9%, and Japan's Nikkei lost 1.7%.

 

The FTSE in London inched 0.4% higher, and the DAX in Frankfurt was ahead by 0.3%.

 

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67Comments
Oct 20, 2010 8:54AM
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Angelo Mozilo should be sharing a cell with Bernie Madoff. We live in a strange country, where you can go to prison for possessing a few joints but get your wrist slapped for committing fraud and contributing to the worst economic disaster since the great depression.
Oct 20, 2010 2:06PM
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Deklen, those that can do, those that can't need the government. It's pretty obvious that you need a whole lot of government.
Oct 20, 2010 8:35AM
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B of A was basically forced by the gov to acquire Countrywide about the same time they were forced to acquire Merrill Lynch.  I wonder how many of these shoddy mortgages came from Countrywide?  Angelo Mozilo must be laughing on a yacht somewhere in the Mediterranean. 
Oct 20, 2010 12:16PM
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WHAT JOKE THIS MARKET IS.....Nothing but Manipulation.........Over the past several days the FED did over 10 Billion in POMO operations. Then this morning they went straight to the TIPS market. In a nutshell, after the opening rush higher, the market started fading and then as usual "boom" it was rescued.  Market hasn't been free in 20 years and now it's so manipulated it's a joke. 
Oct 20, 2010 11:54AM
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deklen,

You're right the prescription drug benefit was a budget buster and should have never been passed in any form that didn't include serious means testing. However, I fail to see your point. Al Gore whom Bush defeated was running on a platform that included an even more generous prescription drug plan, and congress was itching to spend the surplus.

Oct 20, 2010 11:14AM
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WOW, the dollar is weaker, the American workers are still losing their jobs and their homes SO the market goes up. They bet AGAINST America and its people and they are winning. The biggest profit takers are those that produce NOTHING but hot air.

 

Personal responsibility is what the bankers are preaching now days, PAY your mortgage because it is the right, moral and ethical thing to do, BS and I repeat that, BS.  

 

John Courson, President and CEO of Mortgage Bankers Association walked away from his company’s property when it went underwater. Their little walk away was for, drum roll please……. 79 MILLION. How many average Americans debt would it take to equal this one company’s? Yet he is on the air demanding that WE be responsible. Bend over America, they got their bail out and are coming back for more!!!

Oct 20, 2010 3:15PM
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Deklen,

i'd also like to thank the repub party for being primarily responsible for illegals coming over the border unfettered because they work very cheap for the repub partys only real constituents, the corporations

You are the most delusional person on here, the dumbest, or the most dishonest. I'm betting on the trifecta.

 

Why are dems so intent on keeping the border open and letting the illegals stay, get drivers licenses, get healthcare, educations, and vote if it only benefits the evil republican corporations?

 

Oct 20, 2010 3:10PM
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Of course, that is the same CBO that said the Health Care bill would actually provide a surplus prior to it getting passed.  Then, lo and behold, they came out w/ a revised number that said "Just Kidding".

I'm sure CBO's original number on the Medicare Part D said it was budget neutral...haha!

Either way, it sounds like we need to kill that bill right along side of Obamacare and start both over from scratch.

Hey, my portfolio is green today...i like it.

Oct 20, 2010 2:49PM
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Tumble, what % of the repubs actually have a business that hire illegals? Thousands out of tens of millions. Your argument is extremely weak and on the point of being invalid. Dems constantly do their best to keep the status quo. The vast majority of repubs what them relocated to their homeland.

The funniest part is that these undocumented democrats up the supply of unskilled labor in direct competition with the dems that whine about low wages. Then again most dems are clueless when it comes to economic issues. If you are only making minimum wage, there is usually a pretty good reason why.

 

Oct 20, 2010 2:19PM
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Tumble, who is more responsible for the open border and impeding the relocation of the undocumented democrats?
Oct 20, 2010 1:32PM
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The bottom line is that the Dummycraps don't give a flip about middle class Americans.  All they want to do is redistribute America's wealth the sit on my rear end generation.  The Republicans don't really give a rats butt about hardworking middle class Americans either.  They just want to line their pockets with all the gold in the world.  What we need is a new party...a party made up of middle class Americans who are tired of getting the shaft by corporate America and Dummycrap socialism.  We created this country, we built this country, and we damn sure finance this country; it's about damn time we took control of it. 
Oct 20, 2010 1:07PM
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Gamer,

 

The problem with supply-side theory, is the easiest way for business to lower overhead is to outsource, decrease wages/benifits, and elminate jobs.  Farther, theres no guarentee the prices for goods will in fact drop (IE: Business could decide to just lower overhead and keep prices the same, unless theres adequete competition on price).

I guess businesses should be in the business of keeping unneccessary overhead to keep demand up.

It doesn't sound like you have ever run a business.

Oct 20, 2010 12:16PM
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Economic theories are not a precise science - never have been and never will be. Except for some common sense cause and effect reactions and relationships, it is a phony science for academic debate and thesis argument. The theory of supply side economics is pure bologna. I don't know of any business that doesn't try to maximize their profits .

Spending on capital goods for expansion and efficiency and growth is a far better economic barometer than revenue for recovery evaluation, especially spending on R&D.

Oct 20, 2010 9:02AM
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End of the world isn't until Dec 21 2012.

My stepson told me that, I asked if I could have his car since he won't be using it.
Oct 20, 2010 8:57AM
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Here's a quote from an MSN article about the deal...

It also places Lewis in the position of a market savior. By buying Countrywide, he’s keeping the industry and regulators from the messy task of figuring out who would take on the responsibility of collecting payments for the 9 million U.S. home loans serviced by the Calabasas, Calif.-based lender.

You'll never convince me the gov wasn't involved in finding a buyer for Countrywide and B of A was the most logical choice.  But I doubt any of us will ever learn the truth about anything that really happened between the gov and big financial corps, like why they let Lehman fail but bailed out some others, etc...

However, just to clarify, B of A bought Countrywide in Jan/Feb of 2008 and didn't buy Merrill Lynch until Sept/Oct 2008.

Oct 20, 2010 4:55PM
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Deklen, it's a shame that so many of you require so much government assistance and hate tax cuts for those that actually pay more than a little in income taxes. I would think you losers would appreciate the tax payers that support you. I would like to see how you nanny state free loaders would have done during the time this country was being built. Your poor attitude and constant whining may have significant role in why you can't keep a job. But I do understand how it is easier to blame others, particularly if they are successful, instead of accepting your own shortcomings.
Oct 20, 2010 4:08PM
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Dekeln, Illeagls can't vote, neither can dead people. You not allowed to vote more than 1x. Hmmmm, some how it happens. Historians claim Kennedy won by the  dead vote in Chicago.
Oct 20, 2010 4:05PM
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Deklen,

I would say tax cuts to those that pay taxes would rank pretty high, along with undoing some of Johnson's failed welfare program, maintaining the world's  best military, and creating a better  general climate for business. They have also tried to implement school vouchers to allow parents more choice in their kids education that has been blocked by the dems. Pretty much limiting as many liberal wealth redistribution programs as possible that reward failure, laziness, and stupid decisions making is also a big accomplishment. Of course I would like them to do even more to shrink the size of government, cut spending, maintain a strong military, and cut taxes.

Oct 20, 2010 3:28PM
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Deklen,

The truth is, both parties are doing their best to capture the "illegal" vote.  And don't forget, there's also a move underfoot to make Puerto Rico the 51st state (58th state according to BHO), which would add another few million votes to the equation.  And you could make the argument that Reagan's push for amnesty was also a political move designed to get more votes.  The problem is, this quest for votes is being done at the expense of national security.

Oct 20, 2010 3:01PM
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The idea that deflation is a bad thing is the biggest piece of propaganda perpetuated on the American public in regards to economics.  When we were a production powerhouse nation, prices fell all the time as economies of scale were reached due to increased productivity. 

The price of houses needs to fall.  They went up too high too fast due to artificially low interest rates and speculative lending practices. 

Of course if housing prices fall, it has a potential negative effect on one group (homeowners) and a positive effect for another group (homebuyers).  This is how the market works.   It really only hurts homeowners if they are planning to sell soon or were using their home equity to fund excessive consumption.   The Fed and our government doesn't want to let market forces work, because they are trying to avoid any sort of pain for the American public.  Of course, their failed efforts will only lead to more pain down the road as they dig a deeper hole.

Excessive consumption was the problem in the first place.  A house should never be used as an ATM machine for discretionary consumer consumption.   

 

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