Weak earnings keep stocks in check

The indexes struggle to very small gains. US Steel, Lexmark, Cummins and Kimberly-Clark all slump. Ford and Coach both show big gains. The dollar moves higher.

By Charley Blaine Oct 26, 2010 1:50PM
Charley Blaine Updated: 7:15 p.m. ET

Don't blame Ford Motor (F) or Coach (COH), IBM (IBM) or even Bank of America (BAC) for a stock market that spent most of the day running in place.

The foursome were higher today -- spectacularly so in the case of Coach.

The problem was that higher raw-material costs and a weak economy combined to produce disappointing earnings from U.S. Steel (X), engine-maker Cummins (CMI) and Kimberly-Clark (KMB). A disappointing (but not awful) report on home prices offset a surprising gain in consumer confidence.
Lastly, the dollar was higher today, which hit big exporters like Boeing (BA) and Caterpillar (CAT), not to mention gold and crude oil. Both ended the day little changed.

The net of all this churn? Very small gains for the market. The Dow Jones industrials ($INDU) closed up 5 points to 11,169. The Standard & Poor's 500 Index ($INX) was up -- barely -- at 1,866. The Nasdaq Composite Index ($COMPX) added 6 points to 2,497.

When we say the S&P 500 closed barely higher, we're not kidding. It was up two one-hundredths of a point. So, why bother to point it out? It was the fifth straight gain for the index and its longest winning streak since mid-July.

Crude oil settled up 3 cents to $82.44 a barrel. Gold settled down 30 cents to $1,338.60 an ounce. Interest rates were up slightly, with the 10-year Treasury yield hitting 2.636%, up from 2.554% on Monday.

The U.S. Dollar Index settled up 0.8% to 77.91, with the greenback gaining against the euro, the Japanese yen and the Canadian dollar.

Futures trading suggests the market will open modestly higher on Wednesday.

The market got a big boost when chip maker Broadcom (BRCM) easily beat analyst estimates on third-quarter earnings and boosted guidance for the fourth quarter. Shares jumped 10.8% to $41.35 after hours.

Broadcom's chips are used in devices made by Hewlett-Packard (HPQ), Apple (AAPL), Dell (DELL) and others.

Earnings reports due Wednesday include ConocoPhillips (COP), Allstate (ALL), Procter & Gamble (PG) and Whirlpool (WHR).

Microsoft  leads the Dow
Microsoft (MSFT) was the leader among the 30 Dow stocks, up 2.8% to $25.90 in anticipation of a decent earnings report on Thursday, followed by American Express (AXP), up 2% to $40.10, and Walt Disney (DIS), up 1.4% to $35.96. (Microsoft publishes MSN Money.) 

Fifty-four Nasdaq-100 ($NDX.X) stocks were higher, led by Garmin (GRMN), up 6.1% to $34, and Research In Motion (RIMM), up 5.9% to $54.76.

The index was up 6 points to 2,119.

Ford's strong third quarter
Ford earned $2.1 billion, or 48 cents a share, after one-time charges, up from $1 billion, or 26 cents a share, a year ago.  Revenue was off slightly.

Shares were up 1.5% to $14.36.

The results were strong enough that Ford paid down $2 billion in debt in September and planned to pay its remaining obligation to the United Automobile Workers union’s retiree health care trust -- $3.6 billion -- on Friday, in cash.

Ford had not been required to satisfy its debt to the union trust until 2022.

It sees solid profitability in 2011, powered by growth in its North American business.

Energy prices -- New York close
 

Tues.

Mon.

Month chg.

YTD chg.
Crude oil 

$82.55

$82.52

3.23%

4.02%
(per barrel)











Heating oil

$2.2500

$2.2550

-7.79%

6.35%
(per gallon)











Natural gas 

$3.3540

$3.3170

-13.38%

-39.81%
(per mil. BTU)











Unleaded gasoline

$2.0940

$2.0773

2.41%

2.00%
(per gallon)











Retail gasoline

$2.8100

$2.8130

4.50%

6.48%
(per gallon; AAA)












Takeover talk moves some stocks
There was a lot of takeover noise today. It started out with speculation that Apple might acquire Sony (SNE). That sent Sony shares up 3% in Tokyo before they fell back. Sony shares finished up 1% to $33.91 in New York.

There was also talk that Apple might be interested in Netflix (NFLX). That seemed to excite Wall Street more. Netflix was up 6.5% to $177.62.

Add to that speculation from London that banking giant HSBC (HBC) might bid $65 a share for Northern Trust (NTRS). The latter, a Chicago bank, was up 5.3% to $50.57. Volume was 6.6 million shares, 3.6 times their 13-week average 

Shares of the asset manager have struggled this year, and Rochdale Securities analyst Dick Bove thinks a merger with HSBC "would be close to perfect."

HSBC is "more likely to attract the investment funds of the new Asian billionaires than any other company in the world, one might imagine," Bove wrote today. "Northern Trust has proven itself to be the best bank in the world to service the needs of billionaires."

Stocks seeing big moves, good and bad
  • Coach, up 11.9% to $49.78. The leather-goods retailer earned 63 cents a share in its fiscal first quarter, up 43% from a year ago and better than Street estimates of 55 cents. Revenue jumped 19.7% to $911.7 million. The company sees a big holiday season.
  • Bristol-Myers Squibb (BMY), down 1.1% to $26.86. While third-quarter earnings of 59 cents a share beat estimates, guidance for the fourth quarter -- $2.10 to $2.20 a share -- was only in line with the Reuters consensus estimate of $2.13.
  • Kimberly-Clark, down 5.8% to $62.61. The maker of Huggies diapers and Kleenex tissues said third-quarter earnings fell 19% on higher costs for materials. Adjusted earnings were $1.14 a share; below the $1.28-a-share estimate. Revenue of $4.98 billion was just shy of the estimate of $4.99 billion. The company cut its earnings forecast to $4.60 to $4.70 a share from $4.80 to $5.
  • U.S. Steel, down 3.4% to $40.85. The steel maker lost 35 cents a share in the third quarter, compared with the consensus estimate of 23 cents a share in earnings. Shipments were lower as the economy slowed, the company said. It sees more of the same in the fourth quarter.
  • Lexmark International (LXK), down 21% to $37.71. Third-quarter revenue missed Street estimates, and its fourth-quarter forecast was tepid. CEO Paul Curlander is retiring. Several analysts said the company is losing market share to Hewlett-Packard (HPQ).
  • Royal Caribbean (RCL) and Carnival (CCL), up 14.5% to $40.23 and 6.4% to $43.08, respectively. Royal Caribbean raised its 2010 earnings forecast and predicted record earnings in 2011. 
Disappointing home-price report; rising confidence
Home prices in 20 markets drifted lower in August from July, the Standard & Poor's /Case-Shiller Index showed. The numbers were disappointing to S&P's chief economist but less so to others.

Prices had shown signs of stabilizing in the 20 markets and were in fact higher than a year ago. But prices slipped in 19 of the 20 markets, probably a reflection of the expiration of homebuyer tax credits and worries about a softening economy.

The forward prognosis is a bit tricky, many experts believe, because the glut of foreclosures in many markets is so huge. The biggest problems appear still to be Phoenix and Las Vegas. 

But consumer confidence moved higher in September, The Conference Board said. The big reason appears to be the stock market, up more than 11% since the Dow closed at 9,986 on Aug. 26. That suggests consumers think the economy will improve in the next six to nine months.

But huge worries about job stability remain.

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

Mon.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.130%

0.120%

-13.33%

160.00%
5-year Treasury note 

1.247%

1.173%

-3.63%

-53.57%
10-year Treasury note

2.636%

2.554%

4.44%

-31.41%
30-year Treasury bond

3.727%

3.727%

0.81%

-19.69%
Currencies







 

 
U.S. Dollar Index

77.91

77.303

-1.30%

-0.40%
British pound

$1.5840

$1.5733

0.76%

-2.08%
(in U.S. $)











U.S. $ in pounds

£0.6313

£0.6356

-0.75%

2.12%
Euro in dollars

$1.3877

$1.3959

1.60%

-3.18%
(in U.S. $)











U.S. $ in euros

€ 0.7206

€ 0.7164

-1.57%

3.28%
U.S. $ in yen 

81.50

80.77

-2.61%

-12.37%
U.S. $ in Chinese

6.69

6.65

-0.48%

-2.05%
yuan











Canada dollar

$0.976

$0.981

0.44%

2.65%
(in U.S. $)











U.S. dollar 

$1.025

$1.019

-0.44%

-2.58%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,338.60

$1,338.90

2.21%

22.11%
(per troy ounce)











Copper

$3.8690

$3.8630

5.96%

15.61%
(per pound)











Silver

$23.8300

$23.5440

9.21%

41.47%
(per troy ounce)











Wheat 

$6.9200

$6.7400

2.67%

27.79%
(per bushel)











Corn

$5.7100

$5.6875

15.18%

37.76%
(per bushel)











Crude oil 

$82.55

$82.52

3.23%

4.02%
(per barrel)










 

11Comments
Oct 26, 2010 4:05PM
avatar
The consumer confidence index gets its data from consumer purchases.  Right the index is up because people are paying more for gasoline, food and home energy.  The index was up 1.6% from a revised downward 48% in September.  They are right in the reporting , the consumer is spending more because the commodity speculators on Wall Street are pumping up the costs of food and gasoline.
Oct 26, 2010 2:33PM
avatar

Island with a palm treeI am watching the market , notice the VIX creeping up, dollar strengthening , weakening gold and equities, this is all pointing to a correction. I am long in my holdings just doing some hedging here, selling some covered calls 3 months out. I am bullish 2nd quarter 2011. Stocks to consider AAPL, bby, C ( bought call 50 contract of C, strike price $4-exp. Jan.21,2012, it  cost me less as opposed to buying on its current price of $4.18/sh.). thinking about buying etf(GLD) after the dip.Sleeping half-moon

 

Happy trading or investing everybody hope we all make money.AutoBeer mug

 

 

Oct 27, 2010 10:04AM
avatar

Comrade ActiveRIA...

 

Why must we raise 70 Billion in new taxes next year on those that earn over 250K?   70 Billion will not even cover the CBO's current estimate of the Healthcare laws cost overruns...

 

Like a typical Demcorat, you think taking from the wealthy to support governments out of control spending is the answer.

 

I will go along with DOUBLING the 70 billion in new taxes to 140 billion if the Democrats will SLASH 1,230 Billion in deficit spending they insist upon out of their 1.3 trillion dollar deficit....

 

If they can't make the tough choices, then for certain they should be voted out Nov 2nd...

 

You cannot tax, borrow and spend your way to prosperity, no matter what the Donkeys say...

Oct 27, 2010 12:58AM
avatar

I know what I would do.  I would run out and buy gold and silver, right now!  They are at,  or are near historical highs...

Oct 26, 2010 7:26PM
avatar
SHHHHHHHHHHHHAAAAAAAAAZZZZZZZZAAAAAAAAMMMMMMMMMMMMMMMM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!CryingCrying
Oct 26, 2010 7:07PM
avatar

Indy,

 

If the Bush tax cuts expire, I will pay about $4k in additional taxes. I make about 100k for a family of four. Everyone is going to pay more, the bottom tax rate goes to 15% from 10%, a fifty percent increase.

 

So if you have taxable income of 8K single your tax rate is up 50%.

 

Also the AMT is projected to go from 4M folks to 28M.

Point is it does not just affect the "wealthy".

My prediction, no lame duck session they expire.

Oct 26, 2010 5:25PM
avatar

WEAK EARNINGS....hmmmmm so a double dip shouldn't be expected with 9.5% unemployed, 99 weeks of unemployment insurance running out quick on how many people, few million plus 1 million plus another 1 million plus all the new comers to the ranks of unemployed......!

X-mas time is here, can't wait to see the figures of the spending spree that'll not be happening; more lay-off's!!

10.5 if not 11.5% unemployed by march of 2011 as obooma will be a stubborn mule and still be rejecting GOP plans to stimulate the work place!!!

"YES" ma'm i'd like two more Martini glassOpen-mouthedMartini glassand serve one up for deklen heshe will need it after waking up from the stupor or kool-aid hangover

Oct 26, 2010 4:12PM
avatar
Hey Re-tog.  Hate to get too excited, but EQIX is up over 80 afterhours, which can mean nothing until she opens tomorrow.  Here's hoping, I made the right decision?  Take care.  Opps 83 now.
Oct 26, 2010 2:55PM
avatar
FrEdddd, the naptha worked. Took three weeks but it flows.
Oct 26, 2010 2:35PM
avatar
consumer confidence up because of the stock market? Since the stock market has little to do with the american economy anymore I doubt that will last.
Oct 26, 2010 6:18PM
avatar
Don't worry.  The wealthiest 1% are doing quite well with record bonuses on Wall Street.  Some of it is bound to trickle down to the rest of us.  But wait, what if they don't extend the Bush tax cuts and they are forced to pay an additional 3% (OMG - that's $30K on $1M in earnings)?  How will they survive?
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