Dow up 114; Amazon soars on strong earnings

Amazon.com's profit beats Street estimates. Starbucks shares drop on Europe weakness. Investors applaud Bernanke's promise of Fed support in a market panic. March pending home sales are the best in 2 years. Exxon and UPS results disappoint.

By Charley Blaine Apr 26, 2012 1:37PM
Charley BlaineUpdated: 9:43 p.m. ET

Stocks rallied for the third day in a row today as a surprising gain in an index of pending home sales in March offset disappointment in Exxon Mobil's (XOM) earnings and the government's weekly report on jobless claims.

In theory, stocks have a decent chance for a gain on Friday afterAmazon.com (AMZN) shares jumped 14.7% to $224.70 after hours as earnings, while down from a year ago, nonetheless beat Street estimates.

Starbucks (SBUX) shares, however, were off nearly 5% to $57.64 after hours after reporting 40 cents a share in earnings, just ahead of the Street estimate of 39 cents. The issue for investors was that the company's full year guidance of $1.81 to $1.84 a share was lower than the Street's consensus of $1.90. The shares had finished at $60.66, up $1.16, in regular trading.

The Dow Jones Industrial Average ($INDU) very nearly ended the day with a gain for April, and the Standard & Poor's 500 Index ($INX) had its highest close since April 3, finishing just below 1,400. Stocks were also boosted by investor relief from Federal Reserve Chairman Ben Bernanke's assurances Wednesday that the Fed would support markets again if global weakness or other economic forces threatened their stability.

The Dow closed up 114 up to 13,205. That's 8 points below the March 30 finish. The S&P 500 gained 9 points to just below 1,399.98, and the Nasdaq Composite Index ($COMPX) climbed 21 points to 3,051. Apple (AAPL) was down $2.30 to $607.70. But the Nasdaq-100 Index ($NDX) was up 16 points to 2,725. Apple represents about 17% of the index's market capitalization.

Article continues below.
The Dow ended the day down just 0.06% for the month. S&P 500 and Nasdaq are down 0.6% and 1.3%, respectively for the month. The Dow and the S&P 500 enjoyed their best first-quarter gains since 1998; the Nasdaq's first-quarter gain was its best since 1991.

Friday brings the government's first estimate of gross domestic product for the first quarter. Most analysts are predicting the economy grew at an annualized 2.5% rate.

Earnings are due Friday from Ford Motor (F), Chevron (CVX), Procter & Gamble (PG), Simon Property Group (SPG) and Goodyear Tire & Rubber (GT).

The market may also take a cue from a Standard & Poor's downgrade of Spain -- two notches, to BBB+ from A. The Spanish downgrade also included a negative outlook. The ratings agency expects "Spain's budget trajectory will likely deteriorate against a background of economic contraction in contrast with our previous projections."

Futures trading suggests a modestly lower open for U.s. stocks.

Amazon.com earnings surge on North American results
Amazon.com shares moved up from a regular close of $195.99, which was up $1.57 on the day. The online retailer reported earnings of 28 cents a share, or $130 million, for the first quarter, down from 44 cents, or $201 million a year ago.

But the per-share earnings were well ahead of the consensus estimate of 7 cents. Revenue grew 33.8% to $13.18 billion from $9.86 billion a year; analysts had expected $12.89 billion.

North American sales were up 35.9% from a year ago to $7.43 billion, with operating income up 20.3% to $349 million. Sales in Europe, the Middle East and Africa were up 31% to $5.76 billion, but operating income fell 72% to $49 million.

The company expects sales of between $11.9 billion and $13.3 billion, up between 20% and 34% from the second quarter  of 2011. It sees operations generating a loss of as much as $260 million or up to a profit of $40 million.

Amazon has been under fire from many analysts because of the heavy investments it has been making in new fulfillment and server centers to back up the company's business in music, video and e-books. But the investments will continue.

Crude oil moves up
Crude oil (-CL) settled up 43 cents to $104.55 a barrel. Brent crude was up 75 cents to $119.87. Natural gas (-NG) finished down 4.4 cents to $2.126 per million British thermal units. The price is up 5.5% this week alone.

The retail price of gasoline dropped a penny from Wednesday to $3.83 a gallon, according to AAA's Daily Fuel Gauge Report.

Gold (-GC) settled up $18.20 to $1,660.50 an ounce.

Interest rates were lower, with the 10-year Treasury yield falling to 1.944% from 1.984% Wednesday. The dollar was lower against major currencies.

A better pending-home-sales report may mean higher sales ahead
The National Association of Realtors said its pending-home-sales index rose to the highest level in nearly two years, and it revised higher its estimate of pending home sales in February.

The report boosted  homebuilding stocks. PulteGroup (PHM), up 88 cents to $9.58, reported a smaller-than-expected loss thanks to cost-cutting and higher prices for home sold.

The National Association of Realtors' pending-home-sales index, which measures the number of contracts homebuyers have signed, rose 4.1% in March after February's revised gain of 0.4%.


Economists had expected a 1% increase for March. The trade group originally said its index fell 0.5% in February. The index jumped to 101.4, the highest level since April 2010, when it was boosted by the homebuyer tax credit. To find a better number without policy assistance you have to look back to April 2007, noted Ian Shepherdson, chief U.S. economist at High-Frequency Economics.


Low interest rates have helped propel home sales in a sluggish economy. The Federal Reserve said Wednesday it will keep its overnight lending rate near zero while the economy remains sluggish, potentially until late 2014.


A caveat, HFE's Shepherdson noted: "March was much warmer, relative to normal, than February, and that could easily have lifted the index." Weather aside, he noted, the trend in home sales is now rising.


Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$104.55

$104.12

1.49%

5.79%
(per barrel)











Heating oil (-HO)

$3.1984

$3.1669

0.89%

9.75%
(per gallon)











Natural gas (-NG)

$2.1260

$2.1700

0.00%

-28.87%
(per mil. BTU)











Unleaded gasoline (-RB)

$3.1328

$3.1191

-5.30%

17.89%
(per gallon)











Brent crude 

$119.86

$119.12

-2.46%

11.62%
(per barrel)











Retail gasoline

$3.8300

$3.8400

-2.42%

16.91%
(per gallon; AAA)












Exxon net drops on production decline; UPS sees Asian export weakness

Exxon Mobil missed Wall Street estimates on first-quarter earnings because of its biggest first-quarter production decline in four years and lower natural gas prices. Exxon, down 78 cents to $86.07, was the worst performer among the 30 Dow stocks.


UPS shares fell $1.40 to $78.25. The package shipper said first-quater earnings rose 6% to $1 a share, but missed analysts' estimates by 1 cent a share. Revenue also fell short of estimates as weakness in Asian exports continued. Revenue rose 4% to $13.1 billion. Analysts had estimated $13.3 billion. 
 
PepsiCo (PEP) reported first-quarter earnings of $1.13 billion, or 71 cents a share. Excluding one-time gains, the profit was 69 cents, beating analysts’ expectations for 67 cents. Revenue rose 4% to $12.4 billion. Shares were off 30 cents to $66.37.

Aetna (AET) fell $4.05 to $45.31. The third-largest U.S. health insurer reported first-quarter earnings excluding some items of $1.34 a share, falling short of the average analyst estimate of $1.40. The health insurer said claims payments were larger than expected.

Akamai Technologies (AKAM) declined $5.60 to $33.15. The operator of a server network said Chief Executive Officer Paul Sagan will leave by the end of 2013.

Crocs (CROX) fell $1.78 to $20.26. The plastic-clogs maker projected second-quarter adjusted earnings of no more than 63 cents a share, falling short of the 65-cent consensus estimate.


A total of 24 Dow stocks ended higher, led by Wal-Mart Stores, up $1.59 to $58.95, after several days of declines in the wake of The New York Times' report of alleged bribery in Mexico. Exxon was the laggard.


Citrix Systems (CTXS), a developer of networking software, was the top S&P 500 performer, up $9.59 to $86.76 after very strong earnings. The company also boosted its guidance. PulteGroup was second. A total of 395 stocks in the index were higher. The laggards were Akamai Technologies and MetroPCS Communications (PCS), down 86 cents to $7.08. Earnings missed estimates.


Citrix was also the top performer among Nasdaq-100 stocks, followed by O'Reilly Automotive (ORLY). Akamai and Celgene (CELG) were the laggards. Sixty-two Nasdaq-100 stocks were higher.


Jobless claims and Europe are a worry
The market was bothered by the jobless claims report. The Labor Department said 388,000 news claims were filed in the latest week. That was down 1,000 from the prior week.

But the prior week had been revised up from an initial estimate of 386,000. In fact, jobless claims have been revised higher from their initial estimates for 41 straight weeks.

The worry is that jobless claims won't fall much further and, as a result, unemployment won't drop either.

A second issue today was Europe. Economic confidence in the euro region declined more than economists had forecast in April, as the region's slump showed signs of deepening.

An index of executive and consumer sentiment in the 17-nation eurozone fell to 92.8 from a revised 94.5 in March, the European Commission in Brussels said today. Economists had forecast a drop to 94.2 from a previously reported 94.4, the median of 29 estimates in a Bloomberg News survey showed.

Europe’s economy is faltering as spending cuts across the region undermine hiring and consumer confidence. Deutsche Bank AG, Germany’s largest bank, today reported a 33% drop in first-quarter profit, with Chief Executive Officer Josef Ackermann calling investors' "risk appetite markedly lower."

Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%  0.090%

28.57%  800.00%
5-year Treasury note 

0.838%  0.841%

-19.65%  0.96%
10-year Treasury note

1.959%  1.984%

-11.60%  4.70%
30-year Treasury bond

3.135%  3.146%

-6.28%  8.52%
Currencies











U.S. Dollar Index

79.001  79.111  -0.17%  -1.89%
British pound

1.6197  1.6176  1.17%  4.24%
(in U.S. $)

          
U.S. $ in pounds

£0.617  £0.618  -1.15%  -4.07%
Euro in dollars

$1.32  $1.32  -0.77%  2.20%
(in U.S. $)

          
U.S. $ in euros

€ 0.755  € 0.756  0.77%  -2.15%
U.S. $ in yen 

80.97  81.32  -2.43%   5.02%
U.S. $ in Chinese

6.31  6.30  -0.19%  -0.28%
yuan

            
Canada dollar

$1.017  $1.017  1.44%  3.63%
(in U.S. $)

          
U.S. dollar 

$0.984  $0.983  -1.41%  -3.50%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,660.50

$1,642.30

-0.68%

5.98%
(per troy ounce)











Copper (-HG)

$3.767

$3.700

-1.52%

9.63%
(per pound)











Silver (-SI)

$31.2070

$30.3560

-3.93%

11.79%
(per troy ounce)











Wheat (-ZW)

$6.3550

$6.2650

-3.82%

-2.64%
(per bushel)











Corn (-ZC)

$6.0750

$6.010

-5.67%

-6.03%
(per bushel)











Cotton 

$0.9211

0.908

-1.93%

0.47%
(per pound)











Coffee

$1.7585

1.7675

-4.95%

-23.43%
(per pound)











Crude oil (-CL)

$104.55

$104.12

1.49%

5.79%
(per barrel)










 

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