Microsoft profit jumps 51%

Updated: 8:08 p.m. ET

Microsoft (MSFT) shares were rising after hours after the software giant reported a 51% increase in net income and saw earnings per share jump 55% in the fiscal first quarter.

The gain came on a 25% increase in revenue. Earnings and revenue beat Wall Street estimates.

Microsoft shares were up 3.4% after hours to $27.18 after rising 0.9% in regular trading to $26.28. (Microsoft is the publisher of MSN Money.)

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The Microsoft report came after stocks ended basically flat on the day.

Investors seemed unwilling to make big bets before Friday's report on gross domestic product and a tumultuous week ahead that includes the midterm elections, a very important Federal Reserve meeting on Tuesday and Wednesday and the October jobless report, due on Nov. 5.

The Dow Jones industrials ($INDU) closed down 12 points to 11,114. But a 6% decline in shares of 3M (MMM) subtracted nearly 46 points from the index alone. The Standard & Poor's 500 Index ($INX) ended up 1 point to 1,184, and the Nasdaq Composite Index ($COMPX) closed up  4 points to 2,507. 

Futures trading suggests a flat open on Friday.

Windows 7 powers Microsoft growth

Microsoft earned 62 cents a share, up from 40 cents a year ago and ahead of the Street estimate of 55 cents. Revenue was a record $16.2 billion, up from $12.92 billion a year ago. The Street had expected $15.5 billion.

Net income rose 51% to $5.4 billion.

 

Results were fueled by a 66% revenue gain to $4.79 billion in the company's Windows and Windows Live division and a 124% profit gain for the business to $3.3 billion.

Server and tools, which includes Windows Server, Microsoft SQL Server, Windows Azure and other cloud and server offerings, saw a 12% revenue gain and a 32% profit gain.

The Microsoft Business Division, which includes the Office family of software, saw a 14% revenue gain and a 20% operating profit gain. Revenue for the Entertainment business was up 27% to $1.8 billion. Profit grew 47% to $382 million. Sales of the new  version of its Halo video game hit $350 million in the quarter.

Its Online business, which includes the Bing search tool, saw revenue grow 8% to $527 million. But the loss widened to $560 million.

On a conference call with analysts, Chief Financial Officer Peter Klein said the company believes unit sales for personal computers were up 9% to 11% for the quarter. Consumer sales were up in the single digits; business PC sales were up "in the mid-teens," Klein said. Online advertising was up 13% in the quarter, driven mostly by search.

A close above $27 on Friday would be the first for Microsoft's shares since May 20. While shares are down 13.8% this year, they are up 7.3% this month, second-best among the 30 Dow stocks after Walt Disney (DIS), whose shares are up 10.3%.

Energy prices -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Crude oil			$82.18			$81.94			2.76%			3.55%
(per barrel)
Heating oil			$2.2435			$2.2383			-8.05%			6.05%
(per gallon)
Natural gas			$3.8900			$3.7630			0.46%			-30.19%
(per mil. BTU)
Unleaded gasoline			$2.1139			$2.1020			3.38%			2.97%
(per gallon)
Retail gasoline			$2.8080			$2.8070			4.43%			6.40%
(per gallon; AAA)

A toppy market
While the wait for certainty to emerge next week is a big factor, the market also has been looking toppy.

A chart of the S&P 500 shows this nicely. The index hit an intraday high of 1,196 on Monday. But it hasn't come close to hitting that level since, let alone closing above 1,200 for the first time since April 26.

That's a real sign of resistance -- meaning all attempts to get above that level will trigger waves of buying.

It's possible that the market will fall back in the next few weeks. 

The dollar's off, so gold rises
The dollar was lower against major currencies today after three days of gains. That gave gold a reason to move higher, and it did, reaching $1,342.50 an ounce, up $19.90, or 1.5%.

Interest rates were lower, with the 10-year Treasury yield falling to 2.658% from 2.712% on Wednesday. That was partly the result of a strong auction of 7-year Treasury notes today.

GM will buy back shares from US
Automaker General Motors said today it is paying down a big chunk of debt and has secured a $5 billion, five-year revolving credit facility.

GM will pay back $2.8 billion borrowed from the United Auto Workers.

The moves are in advance of an initial public offering expected next month. The company will use the proceeds from the IPO to buy back $2.1 billion in preferred stock owned by the government and  make a $6 billion contribution to worker pension plans.
 
A big day for earnings

The lack of movement in the market is ironic because several hundred companies reported quarterly results today, including 3M, Exxon Mobil (XOM), Royal Dutch Shell (RDS.A) and Microsoft.

Shares of Exxon Mobil and Royal Dutch Shell were up 0.8% to $66.22 and 1.7% to $63.79, respectively, today after earnings for both beat analyst estimates. They were also benefiting from a lower dollar and higher crude oil prices today.

Crude settled at $82.18 a barrel, up 24 cents from Wednesday.

Halliburton (HAL) shares were off 8% to $31.68 after the presidential commission investing the Gulf of Mexico oil spill said the company and BP (BP) knew that the cement mixture they planned to use to seal the bottom of the well was unstable but still went ahead with the job. BP was up 1.3% today to $40.60.

Elections and Fed and jobs, oh my!
The pause noted at the start of this post appears to have set in starting on Monday. The Dow and S&P 500 are basically flat on the week. The Nasdaq is up about 0.9% -- and is in the midst of its best September-October performance since 1982.

One reason for the pause is interest in Friday's report on gross domestic product for the third quarter. The Commerce Department will report results at 8:30 a.m. ET. The consensus is the economy will show 2% annualized growth, Reuters said today.

More importantly, however, many investors don't want to make big bets before it's clear how the bitterly fought elections will turn out. Polls suggest the Republicans will take control of the House of Representatives, while Democrats hold on to the Senate, barely.

At the same time, the Fed is looming large over the market because no one knows if it will start a new program of quantitative easing, basically buying in Treasury securities to boost the economy.

Some good news on jobs
The jobs picture remains tough, although there was some good news today.

Initial claims for unemployment dropped to a seasonally adjusted 434,000 in the week ended Oct. 23  from 455,000 a week earlier.

That drop was a surprise. Most economists had expected a small increase. The claims rate was the lowest since the week of July 10.

The four-week moving average, which smooths out the volatility, was down to 453,250, the lowest level since peaking at 488,000 in the week ending on Aug. 21.

Today's earnings: Motorola, Potash, Colgate, AstraZeneca

Shares of Motorola (MOT) were up 0.5% to $8.13 after climbing as high as $8.71. The company reported a third-quarter profit of 16 cents a share, topping expectations for earnings of 11 cents a share. Strong Android phone sales helped revenue rise 6% to a better-than-expected​ $5.8 billion.

 

Shares of Potash Corp. of Saskatchewan (POT) were off  3.3% to $142.53 on concerns about BHP Billiton's (BHP) hostile bid to buy the company. Potash's third-quarter profit of $1.32 a share beat expectations of $1.16. Sales of $1.58 billion surpassed revenue expectations for $1.3 billion.

 

Dow Chemical (DOW) shares dropped 1.1% to $30.86, despite the company's reporting third-quarter earnings of 54 cents  a share, beating estimates.

 

Colgate-Palmolive (CL) shares were down 0.8% at $74.92, after the consumer-goods company's third-quarter sales of $3.94 billion missed expectations for $4.03 billion. The company's $1.21-per-share profit beat estimates and it forecast double-digit earnings growth for the year.

 

Drugmaker AstraZeneca (AZN) said its quarterly profit dropped after it set aside nearly half a billion dollars to settle claims of harmful side effects related to one of its anti-psychotic drugs. AstraZeneca shares slid 1% to $50.43.

Material from The Street.com was incorporated in this post.

Short hits from the markets -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.130%			0.130%			-13.33%			160.00%
5-year Treasury note			1.237%			1.304%			-4.40%			-53.95%
10-year Treasury note			2.661%			2.712%			5.43%			-30.76%
30-year Treasury bond			4.054%			4.041%			9.66%			-12.65%
Currencies
U.S. Dollar Index			77.503			78.377			-1.82%			-0.92%
British pound			$1.5939			$1.5783			1.39%			-1.47%
(in U.S. $)
U.S. $ in pounds			£0.6274			£0.6336			-1.37%			1.49%
Euro in dollars			$1.3930			$1.3774			1.98%			-2.81%
(in U.S. $)
U.S. $ in euros			€ 0.7179			€ 0.7260			-1.94%			2.90%
U.S. $ in yen			81.23			81.70			-2.92%			-12.65%
U.S. $ in Chinese			6.71			6.68			-0.11%			-1.69%
yuan
Canada dollar			$0.980			$0.973			0.86%			3.08%
(in U.S. $)
U.S. dollar			$1.021			$1.027			-0.86%			-2.99%
(in Canadian $)
Commodities
Gold			$1,342.50			$1,322.60			2.51%			22.47%
(per troy ounce)
Copper			$3.7875			$3.7755			3.72%			13.18%
(per pound)
Silver			$23.8750			$23.4040			9.41%			41.73%
(per troy ounce)
Wheat			$7.1825			$7.0275			6.57%			32.64%
(per bushel)
Corn			$5.7900			$5.7725			16.79%			39.69%
(per bushel)
Crude oil			$82.18			$81.94			2.76%			3.55%
(per barrel)