Beyond the Number
Apple’s Disappointment Tempered By Positive Blue Chip Earnings
7/25/2012 9:17 AM
The major U.S. index futures are pointing to a mixed opening on Wednesday, with sentiment looking up after three consecutive days of losses. Positive earnings from blue chips such as Boeing (BA) and Caterpillar (CAT) seem to have swayed the tide in favor of the bulls, although Apple’s (AAPL) earnings miss is expected to weigh on the tech space. Also offering some comfort is a let up in the steep rise of Spanish bond yields. With the Dow Industrials nestled between its key 21-day and 200-day moving averages, the nature of the housing report due after the markets open may help decide whether the average breaks above the 21-day MA or retreats back to a support around its 200-day MA.
U.S. stocks declined for the third straight day on Tuesday, as lukewarm earnings reports and euro anxieties continued to weigh on sentiment.
The major averages opened little changed, but declined steadily until late trading after earnings from blue chips such as AT&T (T), UPS (UPS) and Whirlpool (WHR) disappointed to the downside. Although the averages trimmed some of theIR losses in late trading, they ended notably lower.
The Dow Industrials ended down 104.14 points or 0.82 percent at 12,617 and the S&P 500 Index receded 12.21 points or 0.90 percent before closing at 1,338, while the Nasdaq Composite Index closed at 2,863, down 27.16 points or 0.94 percent.
Twenty-six of the Dow components closed lower, with Cisco Systems (CSCO) slumping 5.91 percent and leading the slide. Other notable losers included AT&T (T), Chevron (CVX), DuPont (DD), Hewlett-Packard (HPQ) and United Technologies (UTX).
Resource, transportation, biotechnology and housing stocks were among the worst performing sectors of the session.Currency, Commodity Markets
Crude oil futures are trading up $0.52 at $89.02 a barrel after advancing $0.36 to $88.50 a barrel on Tuesday. The American Petroleum Institute’s inventory report released late Tuesday showed that crude oil stockpiles rose by 1.3 million barrels in the week ended July 20th.
An ounce of gold is currently valued at $1,602.50, up $26.30 from the previous session’s close of $1,576.20 an ounce. On Tuesday, gold slipped $1.20.
Among currencies, the U.S. dollar is trading at 78.23 yen compared to the 78.19 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is valued at $1.2149 compared to yesterday’s $1.2061.Asia
The major Asian markets ended lower, led by Japan and South Korea, as there was no respite from the economic worries haunting the markets.
Japan’s Nikkei 225 average languished below the unchanged line throughout the session before closing down 122.19 points or 1.44 percent at 8,366, its lowest closing level since June 4th. The index was down for the fourth straight session.
The tech sector came under selling pressure following Apple’s disappointing results, with Sharp and Toshiba shedding 10.03 percent and 7.28 percent, respectively. GS Yuasa, Mitsui Engineering, Taiyo Yuden and Tokai Carbon were among the other major decliners of the session.
Australia’s All Ordinaries ended lower, although off its lows of the session. At the close of trading, the index was down 9.80 points or 0.24 percent at 4,151 after trading as low as 4,114 in intra-day trading. Energy stocks declined the most on a day when most stocks, barring healthcare stocks, ended lower.
Hong Kong’s Hang Seng Index slid 25.87 points or 0.14 percent before closing at 18,877.
In economic news, a report released by Japan’s Ministry of Finance showed that the nation recorded a trade surplus of 61.7 billion yen in June compared to expectations for a deficit of 140 billion yen.
Inflationary pressure in Australia eased in the June quarter, according to a report released by the Reserve Bank of Australia. The inflation rate eased to 1.2 percent in the June quarter from 1.6 percent in the March quarter, with the rate the slowest since the June quarter of 1999. Europe
The major European markets are modestly higher after three days of losses. The gains came despite the lingering debt concerns, mixed earnings and a couple of weak domestic economic reports.
A preliminary report released by the U.K. Office for National Statistics showed that the U.K. economy contracted by 0.7 percent sequentially in the second quarter, the steepest decline since the first quarter of 2009. On a year-over-year basis, GDP was down 0.8 percent.
A survey by the Ifo Institute showed that its business confidence index for Germany fell to 103.3 in July from 105.2 in June, marking the third straight month of declines. Economists had expected a more modest drop to 104.5. The current conditions index fell 2.9 points to 111.6, while the expectations index slipped 1.6 points to 95.6.
In corporate news, Arcelor Mittal (MT) saw a decline in its second quarter profits and also warned of tough operating conditions in the second half of the year.
French carmaker Peugeot reported a sharp decline in its first half profits to 4 million euros from 1.16 billion euros last year, while revenues declined 5.1 percent. Germany’s Daimler also reported lower second quarter profits, although it maintained its full year earnings outlook.
U.K. telecom company BT reported that its first quarter core earnings rose modestly despite revenues declining 6 percent. The company also said its outlook for the fiscal year remains unchanged. British American Tobacco reported a 7 percent increase in adjusted earnings per share and a 4 percent increase in underlying sales for the first half despite volumes remaining flat.
Budget airline easyJet reported third quarter revenues that rose 10.5 percent to 1.03 billion pounds and also issued fairly upbeat profit guidance. Chipmaker ARM Holdings (ARMH) reported a 23 percent increase in its second quarter adjusted pre-tax profit, while its sales growth was also solid.U.S. Economic Reports
The Commerce Department is due to release its new home sales report for June at 10 am ET. The consensus estimate calls for new homes sales of 370,000.
U.S. new home sales rose 7.6 percent month-over-month to a seasonally adjusted annual rate of 369,000 in May from 343,000 in April. Regionally, new home sales were higher in the Northeast and South but fell in the Midwest and South.
Inventories of new homes as measured in terms of the months of supply fell to 4.7 months from 5 months in the previous month. The median price of a new home rose 5.6 percent year-over-year, although it fell 0.64 percent month-over-month to $234,500.
The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended July 20th at 10:30 am ET.
Crude oil stockpiles edged down by 0.8 million barrels in the week ended July 13th to 377.4 million barrels. Inventories remained above the upper limit of the average range.
Gasoline inventories fell by 1.8 million barrels and were in the lower limit of the average range. Meanwhile, distillate stockpiles rose by 2.6 million barrels, remaining in the lower limit of the average range. Refinery capacity utilization averaged 92.3 percent over the four weeks ended July 13th, flat with the levels in the four weeks ended July 6th.
5-year note auctionStocks in Focus
Apple (AAPL) reported third quarter earnings of $9.32 per share on revenues of $35 billion. The company also said it expects fourth quarter earnings of $7.65 per share on revenues of $34 billion. The results and the guidance trailed estimates. The company also declared a dividend of $2.65 per share.
Altera’s (ALTR) second quarter net income rose to 50 cents per share from 35 cents per share in the year-ago period. Sales rose 21 percent to $464.8 million. The results beat estimates. The company’s third quarter revenue guidance was positive.
Boeing’s (BA) second quarter profit increased from the year-ago quarter and were above Wall Street view. Revenues improved 21 percent and were also above the consensus estimate. The company also raised its guidance for fiscal 2012.
Eli Lilly (LLY) second quarter adjusted earnings per share were above Wall Street view. Worldwide total revenue declined 10 percent, driven by Zyprexa patent expirations, partially offset by significant growth in other products. The company maintained its 2012 revenue forecast and raised its earnings forecast.
Ford Motor (F) reported better than expected second quarter results, while AOL (AOL) swung to a profit in its second quarter and its revenues exceeded estimates.
Caterpillar (CAT) also reported better than expected results.
Linear Technology (LLTC) reported fourth quarter non-GAAP earnings of 50 cents per share, down from 76 cents per share last year. Revenues fell to $330.01 million.
Broadcom (BRCM) reported second quarter non-GAAP earnings of 72 cents per share on revenues of $1.97 billion. The results were ahead of estimates.
Cabot Oil & Gas (COG) reported second quarter adjusted earnings of 5 cents per share on operating revenues of $265.66 million, up from $240.70 million in the year-ago period. The results trailed estimates.
Owens & Minor (OMI) updated its 2012 financial outlook and now expects sales growth to be below its previous guidance of 3-5 percent growth. The company also said it expects adjusted earnings of $2.04-$1.98 per share.
American Greetings (AM) said its board has authorized the repurchase of up to $75 million worth of Class A common shares.
Netflix (NFLX) reported fourth quarter earnings of 11 cents per share compared to $1.26 per share last year, while its revenues rose to $889 million from $789 million. The results exceeded estimates. The company cautioned that it may be tough to meet its U.S. streaming subscriber addition target for the year unless third quarter subscriber growth is strong.
RFMD reported (RFMD) first quarter non-GAAP earnings of 1 cent per share on revenues of $202.7 million. For the second quarter, the company expects break-even results to earnings of 1 cent per share on flat to a 5 percent sequential drop in revenues. The results exceeded estimates, while the guidance was bleak.
Juniper’s (JNPR) second quarter non-GAAP net income fell 39 percent to 19 cents per share, while revenues fell 4 percent to $1.07 billion. For the third quarter, the company expects non-GAAP earnings of 15-18 cents per share on revenues of $1.04 billion to $1.08 billion. The results beat expectations, while the outlook was weak.
Rock-Tenn (RKT) reported third quarter adjusted earnings of 95 cents per share, lower than $1.25 per share last year. Net sales improved to $2.30 billion. The results were below estimates.
L-3 Communications (LLL) said the U.S. Army Contracting Command has awarded it a contract worth $1.98 billion for the maintenance and logistics for over 600 helicopters.
Akamai Technology (AKAM), Western Digital (WDC), Visa (V), Symantec (SYMC), Ruby Tuesday (RT), LSI Logic (LSI), Logitech (LOGI), Las Vegas Sands (LVS), Lam Research (LRCX), Flextronics (FLEX), Everest Re (RE), Crocs (CROX), Cliffs Natural (CLF), Citrix Systems (CSX) and Cheesecake Factory (CAKE) are among the notable companies due to release their earnings after the markets close.