IBM, Apple results batter stocks

The dollar rises after a surprise Chinese rate hike. Bank of America's loss widens. Johnson & Johnson, Coca-Cola and Goldman Sachs beat estimates.

By TheStreet Staff Oct 19, 2010 7:56AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 12:25 p.m. ET

 

Stocks were sharply lower Tuesday as investors absorbed China's surprise rate increase and as Apple (AAPL) and IBM (IBM) shares fell. Bank of America (BAC) also said its third-quarter loss widened.

 

At 12:25 p.m. ET, the Dow Jones Industrial Average ($INDU) was down 98 points, or 0.9%, at 11,045. The S&P 500 ($INX) was falling 10 points, or 0.8%, to 1,175, and the Nasdaq ($COMPX) was down 24 points, or 1%, at 2,457.

 

Shares across basic materials and energy sectors were getting hit the hardest as the dollar index jumped 1.5% higher.

 

Investors had a lot on their plates Tuesday amid an influx of key earnings reports and news that China's central bank had hiked lending rates by 25 basis points for the first time in three years. The unexpected move came in response to Chinese concerns about inflation.

 

"The surprise move out of China is causing a lot of risk aversion so there's a strong rebound in the dollar. That's hitting commodities and equities," said Peter Cardillo, chief market strategist at Avalon Partners.

 

Despite beating analysts' top-line and bottom-line expectations late Monday, Apple and IBM were leading the market down, as investors were disappointed by Apple's iPad sales and IBM's tech services business. Apple shares were falling 1.9% to $312, while IBM's stock was off by 3% at $138.58.

 

Bank of America (BAC) said its loss widened to $7.3 billion, or 77 cents a share, in the third quarter. Excluding a $10.4 billion charge, the bank earned $3.1 billion, or 27 cents a share, surpassing estimates for 16 cents a share. The shares were up 0.6% to $12.41 in midday trading.

Goldman Sachs (GS) said its third-quarter earnings dropped 40% to $1.9 billion, or $2.98 a share, beating expectations for a per-share profit of $2.32, according to Thomson Reuters. Shares were gaining 3.7% to $159.38 Tuesday.

 

Johnson & Johnson's (JNJ) third-quarter net income rose 2.2% to $3.42 billion, or $1.23 per share, as sales declined less than 1% to $14.98 billion. Analysts had expected the health care giant to earn $1.15 a share on $15.2 billion in revenue, according to Thomson Reuters. Shares of JNJ were down 0.7% to $63.44.

 

State Street (STT) reported third-quarter operating earnings of $540 million, or $1.08 a share, which marked an increase of $327 million, or 66 cents a share, over a year earlier. Excluding certain items, third-quarter earnings were 86 cents a share, compared with 71 cents a share a year ago. Analysts polled by Thomson Reuters had expected earnings of 83 cents. State Street shares were falling 0.5% to $41.02.

 

Coal miner Massey (MEE) is considering several strategic options, including a sale, according to a Wall Street Journal report. The options could include selling to another coal miner or a private-equity firm, buying another company or remaining independent, the report said. Massey stock was climbing 6% to $37.70.

 

Coca-Cola's (KO) third-quarter net income increased 8.4% to $2.1 billion, or 88 cents, as revenue rose 5% to $8.43 billion. Excluding certain items, the company earned 92 cents, beating the 89-cent average estimate. Shares were up 0.5% at $60.31.

 

UnitedHealth (UNH) said third-quarter earnings rose 23% to $1.14 a share on sales of $23.67 billion. Analysts had projected earnings of 84 cents on sales of $23.31 billion.  UNH shares were falling 2.3% to $35.41.

 

Bank of New York Mellon (BK) swung to a third-quarter profit but fell short of analysts' estimates. The company reported earnings from continuing operations of 51 cents a share, compared with estimates for 54 cents. Shares were down 0.5% to $26.49 Tuesday.

 

Shares of EMC (EMC) were rising 1.1% to $21.02 on record third-quarter sales of $4.21 billion and earnings of 30 cents a share that were in line with analysts' estimates.

 

Boston Scientific (BSX) and Yahoo! (YHOO) will report earnings after the closing bell. Analysts expect profits of 6 cents a share and 15 cents a share, respectively, according to Briefing.com.

 

Homebuilders began work on 610,000, or 0.3%, more homes in September, the Commerce Department said. Economists had expected to see 579,000 housing starts, according to consensus estimates listed on Briefing.com. The figure compares with a revised pace of 608,000 reported for August.

 

Applications for building permits fell 5.6% to 571,000, less than the 565,000 economists had projected. Still, the decline suggests that future homebuilding activity will decrease.

 

The American Petroleum Institute will issue its weekly report on crude oil inventories this afternoon. According to analysts polled by Platts, crude supplies are projected to increase by 2.1 million barrels in the week ended October 15.

 

The U.S. Treasury Department said it plans to sell another 1.5 billion shares of Citigroup (C) over the next few months as it continues to reduce its holdings in the bank. The government currently has a 12% stake. Citi shares were down 0.5% at $4.15.

 

Crude oil for November delivery was losing $2.15 at $81.65 a barrel. The stronger U.S. dollar was sending the December gold contract plunging $30.70 to $1,341.40 an ounce.

 

The benchmark 10-year Treasury note fell 1/32, increasing the yield to 2.516%. 

 

The FTSE in London was slipping 0.7%, while the DAX in Frankfurt was down by 0.3%. Hong Kong's Hang Seng gained 1.3%, and Japan's Nikkei added 0.4%.

 

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66Comments
Oct 19, 2010 10:38AM
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Again with the job killing tax increase how the hell do people really believe taxes to corporations and the rich kill jobs? Its just plain common sense that if you don't have to pay taxes on more money you will keep said money. And no matter what your taxes are you will not create jobs if your product is not selling. And that savings never has trickled down to wages EVER! The only wages it ever helped was ceo and executive wages all labor is paid pre profit taxes do not mean a thing to labor pay. All execs are paid from profit so less taxes just means more money left to pay execs since its a percentage based pay 18% of non taxed money is of course more than after taxes. JOB KILLING TAXES IS A REPUBLICAN LIE! The main thing that's has me wondering if its time to change how I vote.
Oct 19, 2010 1:15PM
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I know in my case, I got an extra $8 per paycheck. That doesn't cover the increase in groceries and energy costs that have been going on.

Whoopee!!!

Eye-rolling

Oct 19, 2010 1:10PM
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deklen, lowering the withholding rate does not lower taxes. Since 47% of the country doesn't pay any income taxes and the next 25% pay very little, maybe that's where his tax cuts went.
Oct 19, 2010 1:12PM
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Deklen, it's like SS. I would rather opt out but since I had my $ taken regardless of my opinion, I will have my hand out later to GET BACK WHAT I PUT IN.
Oct 19, 2010 1:10PM
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Deklen,

 

Changing the withholding rates does not alter that amount of taxes you owe.  You still pay the same amount of tax to the government.  It only affects how much they withhold from your pay to use toward what you owe.

 

If they take out more than you owe, you get a refund.  If they take out less than you owe, you have to pay.

 

It's amazing to me how many people don't understand this.

Oct 19, 2010 11:14AM
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I get so tired of hearing the phrase:  The party of no.  I pose this question.  Will those that throw out that acronym also throw it out to the Democrats when the Reps take over the House?  And possibly the Senate? 

 

If someone is driving down a highway at 100MPH during rush hour and wants to go faster, the passenger that is not in control keeps saying NO, this is not a good idea why are we blaming the passenger if the passenger is right?

 

I have to agree that, based on the actual results of Congress over the last 4 years, nothing economically positive has been legislated. 

Oct 19, 2010 9:53AM
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Quite a few years ago, I had an auto loan through B of A.  I paid off the loan early and they sent me the title.  For the next 14 months, they continued to send me monthly car loan "bills" that said my balance was zero and that my payment of zero dollars was due on the 15th of the following month.  Imagine if they do this with a couple of hundred thousand loans every month - sending bills for no reason.  How much would that take away from the bottom line? I would certainly get a loan from B of A again, but I definitely won't deposit any money in their bank, nor will I buy their stock.
Oct 19, 2010 3:50PM
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Deklen, looks like the voting on here will be similar to the projected results on 11/02. Should help you adjust to the losses.
Oct 19, 2010 1:50PM
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I say leave all the income tax rates the same,BUT make all personal income subject to social security and medicare taxes.We all should pay on 100% of our income,not just the middle class.That would shore up our S.Security system.And we Must make our public employees work more years for their pensions.

Oct 19, 2010 1:49PM
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I think deklen has proprietary rights on terrybr.
Oct 19, 2010 1:19PM
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Deklen, it's called logical thinking. Sorry that is beyond your understanding.
Oct 19, 2010 12:35PM
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The upward spiraling cost of health care will continue to keep our economy in shackles unless something is done about it.  And with an aging boomer population, it is only going to get worse as time goes on.

 

This is not doom and gloom, it's simply facts that most Americans and our politicians continue to keep their heads in the sand about (or some part of their anatomy).

 

Unless the root causes of rising health care costs are addressed, they will continue to spiral out of control.

 

Insurance is just a non-glamorous term for financing.  To the degree that health insurance provides all the financing for the out of control health care costs, requiring everyone to have insurance simply just adds fuel to an already burning inferno.

 

The formula is <health insurance=<health care cost.  And the opoiste is also true:

>health insurance=>healthcare cost.

Oct 19, 2010 11:19AM
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Tumbleweed

I think that is why health care reform should have been and be addressed. The insurance and pharma inductry alone have a lot of issues driving up costs. Maybe letting the insurance companies go national to better pool thier money would be something to look at. Also looking to see if there are any efficiencies that could be gained for the pharma folks to bring new meds to market. I like the idea of a larger pool of people paying into the health insurance pool. It might change, the emergency room is free primary care physicians. 

Oct 19, 2010 10:05AM
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Well it looks like we basically got positive news on earnings. The ecomonic news is not bad either. It looks like a little selling on the good news profit taking going on. It started last night after apple and IBM delivered some good earnings. Probably time for a pullback. We have a great run recently....
Oct 19, 2010 9:46AM
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BofA attempted to make up all of their bad loan losses through zapping everyone with as many fees as they could think of over the last couple of years. Who better to screw than their customers. That along with having one of the top 10 worst customer services, proves you get what you deserve. A total management issue. It's no wonder they have had so much turnover at the top. But that won't cut the executive bonus's will it? So now it's the stock holders turn.
Oct 19, 2010 8:40AM
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Housing starts are actually up and that's quite "unexpected.  On the other hand, building permits are down much more than "expected".  I'm guessing weather traditionally plays a part this time of year in lower starts and permits, especially in the northern states.  But regardless, first you get the permits, then you start building, so a big drop in permits doesn't bode well for the short term.



Oct 19, 2010 2:04PM
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Helicopter Ben and his Boys are well on their way to create the next stock market crash! He is a student of our first Great Depression and he is setting us up for the next one!! But him and his Wall St  Chronies will come out unscathed!! God Bless America !
Oct 19, 2010 1:19PM
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Deklen,

 

You posted a good point.  Unfortunately we measure our Reps performance on a "what have you done for me lately" mentality.

 

When the bacon is being dolled out, if our reps don't bring some home to their districts, they're bums and aren't likely to get re-elected.

 

Great examples of this are Barney Frank, Ted Kennedy and John Kerry.  They've brought you lots of bacon, but at the expense and untold harm of our nation.

 

The entire system is corrupt and inept.

 

 

Oct 19, 2010 12:44PM
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Cowboy, how much did Obama cut taxes and where? Can you give any specifics?
Oct 19, 2010 12:42PM
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The solution to underfunded Social Security appears to be to do nothing to save Medicare.  No health care, no medicine, and nature takes its course.
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