After hearing a constant drumbeat of earnings warnings and fears about a possible recession, Wall Street got an unexpected and positive update from IBM today. "Big Blue's" surprise had the market on the positive side for the entire day with the Dow picking up more than 170 points.
Today’s Market
The Dow Jones Industrial Average rose 171.85 points, or 1.36% to 12778.15, the Standard & Poor’s 500 index gained 15.23 points, or 1.09% to 1416.25 and the Nasdaq Composite Index rose 38.36, or 1.57%, to 2478.30. The consumer-friendly Fox 50 picked up 11.71, or 1.16%, to 1022.16.
IBM's announcement this morning raised hopes on Wall Street that tech and other companies may meet or even beat current earnings estimates.
In contrast to trading in recent days, Wall Street held onto its gains and traded in a relatively tight range. It marks the Dow's third 100-point gain over the past four trading days. Those rallies were badly needed as the industrial average has lost more than 3% of its value so far in 2008 on fears of a slowing economy.
IBM (IBM: 102.93, +5.26, +5.38%) impressed traders with a surprise preliminary earnings announcement before the opening bell. "Big Blue" said it expects to report a 24% improvement in its fourth-quarter earnings and a 10% increase in revenue. The computer and technology giant would easily beat the street, with earnings of $2.80 a share, 20 cents higher than analysts expected.
For the full year IBM reported an expected 18% rise in earnings to $7.18 a share. Shares of IBM jumped 5% on the day.
That news also lifted the other three tech giants on the Dow, with Intel (INTC: 23.08, +1.09, +4.95%), Microsoft (MSFT: 34.39, +0.48, +1.41%) and Hewlett-Packard (HPQ: 46.13, +1.13, +2.51%) seeing significant increases in their stock prices.
Business software maker SAP (SAP: 50.03, +2.02, +4.20%) also added to the good news, with the company saying it expects a 10% rise in sales in the fourth quarter and revenue to top current estimates.
Issuing a far less impressive financial outlook was Sears Holding Company (SHLD: 91.38, -4.79, -4.98%), which warned weak sales and margins across most categories will cause the company to miss fourth-quarter earnings expectations by as much as 51%. Shares of Sears lost 6% in trading today.
Sears now sees fourth-quarter earnings between $2.59 and $3.48 a share. Just a year ago Sears earned $5.33 per share. Analysts polled by Thomson Financial had estimated the company to earn $4.43 a share.
More talks and reports came over the weekend that Citigroup (C: 29.06, +0.50, +1.75%) is again seeking cash influxes from sovereign wealth funds and foreign investors. The Kuwait Investment Authority could invest $3 billion in Citi, The Financial Times reported. Saudi Prince Alwaleed bin Talal could make another major investment in the bank, The Wall Street Journal reported.
However, a plan for China Development Bank, an arm of the Chinese government, to invest $2 billion could be in jeopardy, the Journal reported today.
Citi, Merrill Lynch (MER: 55.97, +1.28, +2.34%) and J.P. Morgan Chase (JPM: 41.36, +0.50, +1.22%) will all be in focus this week, as the three banks are expected to further disclose the impact of losses related to the subprime mess in earnings statements.
"Given the uncertainty about write-downs and other related issues, investors will be looking to the numbers in order to help quantify the problems. Trading is likely to remain somewhat tentative until the results are in," said Frederic Ruffy, an analyst at Optionetics.
Last week gold surpassed the $900 an ounce mark for the first time ever. Gold futures have jumped in 2008 because concerns of a slumping U.S. economy and a weakening dollar have sent investors to trade in their stocks and bonds for a tangible asset like gold.
Gold gained $9.30 to $907.00 an ounce in New York. Oil, which hit the $100 a barrel mark at the very beginning of the year, has pulled back somewhat. Oil gained $1.54 to $94.23 a barrel in New York.
Corporate Movers
Sprint (S: 12.36, +0.11, +0.89%) plans to lay off several thousand employees, The Wall Street Journal reported citing unnamed sources. It would be one of the first major moves for new CEO Dan Hesse.
Genentech (DNA: 70.64, -0.86, -1.20%) posted fourth-quarter earnings of 59 cents a share, compared with 55 cents a year ago. Excluding charges, the biotech company earned 69 cents a share. Analysts polled by Thomson Financial estimated earnings of 67 cents. However, shares of Genentech fell on underwhelming sales for three of the company's drugs.
China Mobile (CHL: 84.21, -0.86, -1.01%) the largest cell phone company by number of subscribers in China, said today it has ended talks with Apple (AAPL: 178.78, +6.09, +3.52%) to launch the iPhone in China. Traders will be focused in on news coming out this week from Macworld, the company's premier products and software expo. Apple Chief Executive Steve Jobs typically unveils the company's newest products at Macworld.
Merrill Lynch (MER: 55.97, +1.28, +2.34%) is facing an investigation into the illegal practice of front-running, the Journal reported today. Front-running occurs when a brokerage or trader buys or sells a stock for their own account ahead of orders from clients which will likely influence the price.
Sovereign Bank (SOV: 10.63, -0.05, -0.46%) said it will likely take a fourth-quarter charge of $1.61 billion due to the ongoing turmoil in the financial markets. Sovereign also announced it has halted its auto loan lending in the Southwest and Southeast. The bank reports its earnings on January 23.
Microsoft (MSFT: 34.39, +0.48, +1.41%) is feeling some heat from European Union regulators again. The EU has opened two new cases against the company over alleged monopoly abuses, according to Dow Jones Newswires.
M&T Bank (MTB: 72.42, -1.33, -1.80%) hit a 52-week low after posting a 70% drop in net income, mostly attributed to losses due to the subprime mess. The company earned 60 cents a share, compared with $1.88 a share a year ago and well short of analyst estimates for net income of $1.63 a share.
Fidelity Investments announced plans to reopen its Magellan mutual fund to new investors effective Tuesday. The well-known and large mutual fund had been closed to new investors since 1997 but has been under the management of Harry Lange since 2005, the company said.
Merck (MRK: 59.78, -0.77, -1.27%) and Schering-Plough (SGP: 25.52, -2.21, -7.96%) were in negative territory after releasing disappointing results of a study on their cholesterol drug Vytorin.
Mosaic (MOS: 109.54, +10.33, +10.41%) rose 10% and hit a new 52-week high after Standard & Poor's Ratings Services upgraded the agricultural company's credit rating to "BB+" from "BB." Mosaic has reduced its debt by $1 billion since May.
Northwest Airlines (NWA: 16.01, +0.20, +1.26%) was upgraded from an analyst at Credit Suisse (CS: 58.32, +1.32, +2.31%) to "outperform" from "neutral." The stock has been boosted in recent days by talk of a potential merger with Delta (DAL: 15.30, -0.18, -1.16%) or another rival.
World Markets
Major European markets have made advances today. The Dow Jones Euro Stoxx 50, a index tracking the 50 largest companies of Europe, gained 11.37 points, or 0.27%, to 4236.68. The FTSE 100, London's benchmark index, rose 13.70, or 0.22%, to 6215.70.
France's CAC 40 Index rose 32.10 points, or 0.60%, to 5403.51 and Germany's DAX gained 14.07, or 0.18%, to 7732.02.
Asian markets were not so positive. Japan's Nikkei 225 Index fell overnight, dropping 277.32 points, or 1.93%, to 14110.79. The index is now at a 19 month low. Hong Kong's Hang Seng Index dropped 398.88, or 1.48%, to 26468.13.
0 comments:
Post a Comment