It was all about earnings on Friday. The stock market's rally has stalled a bit as investors digest another big plate of corporate earnings news from the technology and financial sectors. Markets seemed to ignore the two hotel bombings in Indonesia last night. Traders are also making bets on the fate of CIT, which teeters on the edge of bankruptcy. Meanwhile the U.S. dollar is ticking higher but it's not stopping a rally in crude oil.
Asian markets were up. News that two bomb blasts hitting the Ritz-Carlton and Marriott hotels in Jakarta, which killed nine people, did not seem to have much of an effect on stocks. The Japanese NIKKEI gained 0.5% and the Hong Kong Hang Seng rose 2.4% with both markets stretching their gains to four days in a row. The Chinese Shanghai index added almost 0.2% and set another new one-year high. Across the world in Europe the rally continued. All the major markets marked their fifth gain in a row thanks to strength in financials, energy and mining stocks. The French CAC-40 rose 0.59%. The English FTSE gained 0.62%. The German DAX rose 0.4%.
It was definitely a heavy earnings day with a lot of headline names delivering their second quarter results. As of this morning the tech-heavy NASDAQ looked like it was going to stretch its gains to seven days in a row thanks to better than expected earnings from technology giants IBM and Google. IBM, which actually trades on the NYSE, reported earnings last night that were 30 cents better than the $2.02 estimate. Revenues were a little bit light but IBM raised their earnings guidance for the rest of 2009. The stock gapped open higher and is trading with a 3.2% gain near $114.25. Google (GOOG) also reported earnings last night. The company said this was their strongest results ever with a second quarter profit of $5.36 a share, which was 27 cents higher than Wall Street's forecast. Investors seem to be a little worried at the slowing pace of revenue growth, which came in at +4.5% to $4.07 billion for the quarter. Shares of GOOG are down 3.3% at $4.27.65.
This morning it was all about bank earnings with results from Bank of America (BAC) and Citigroup (C). Wall Street was expecting BAC to earn a profit of 28-cents a share. The company beat expectations with 33 cents or $2.42 billion. Revenues for BAC jumped more than 60% from a year ago. Management remains very concerned about the consumer and rising unemployment. BAC's non-performing assets jumped from $9.75 billion a year ago and $25.6 billion last quarter to $31 billion in the second quarter. Shares of BAC are down 2.3% at $12.86.
Analysts were expecting Citigroup to report a loss of 37 cents a share. Imagine their surprise when the company announced a 49-cent profit ($3 billion). Most of the gain was due to a $6.7 billion after-tax gain on the sale of its Smith Barney unit. Without that sale Citigroup actually lost $2.4 billion for the quarter. Shares of C are down 0.33% as it bounces around the $3.20-3.00 zone.
One stock that has been trading like a financial is General Electric (GE). GE's financial unit, the GE Capital division, has been the focus for investors over the last few months. Wall Street has been worried that GE Capital's exposure to potential loan losses would capsize the entire company. Today's results should be good news. The GE Capital unit managed to post a profit of $590 million for the quarter. The whole company announced a second quarter profit of 24 cents a share, which was a penny ahead of Wall Street's estimates.
The troubled commercial finance company CIT Group (CIT) is still in the spotlight today. As of yesterday the market was worried that CIT would fail to get short-term financing and end up filing for bankruptcy. Thus far there's not bankruptcy news and shares have just doubled from 40 cents to 80 cents. The big rally appears to be on news that CIT is talking to both J.P. Morgan (JPM) and Goldman Sachs (GS) about potential financing. As of 1:15 p.m. CIT is up 119% at .90 a share.
The bounce in crude oil is picking up speed with oil up $1.87 to $63.85. Normally when the U.S. dollar is up oil and commodities are down. Not today. Today's 3% rally in oil is not having too much of an affect on the energy stocks. The OIX oil index is only up 0.1% and the OSX oil services index is up 0.9%. Looking at other commodities the GLD gold ETF is barely positive with a 0.09% gain and the JJC copper ETF is up 1.3%.
Currently the S&P 500 index is down less than three points at 938 as shares seem to hover near 940 and its exponential 200-dma. The NASDAQ Composite is down about 3.5 points at 1881 and hovering near the 1880 level. The Dow Industrials are up almost 12 points to 8724. The small cap Russell 2000 is down less than three points at 519. After a massive four-day rally stocks are short-term overbought and due for a dip but if you look at the intraday charts I suspect stocks might close higher on Friday.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Looking for movers on the OptionInvestor.com play list I see that LEAP is breaking down from its sideways consolidation and has hit our trigger to buy puts. Meanwhile SHLD appears to be forming a failed rally pattern. The rest of our plays are trading sideways with the market indices.