Investors were disappointed with the earnings report from Johnson & Johnson (JNJ) this morning but the market has recovered from its lows of the session. Some M&A news in the tech sector has buoyed the NASDAQ. The banks are struggling a bit after a high-profile downgrade. Gold futures are hitting new all-time highs as the dollar hits new 14-month lows. Yet the focus today is corporate earnings and we'll see more announcements after the closing bell.
Asian markets were up on Tuesday. The Japanese NIKKEI gained 0.6%. The Hong Kong Hang Seng rose 0.79%. The Chinese Shanghai index rallied 1.4% but traders are concerned that the Shanghai index might fail at resistance near 3,000 again. The mood in Europe was more somber. The major indices were down and accelerated their losses on the JNJ earnings news. The English FTSE lost 1.08%. The French CAC-40 gave up 1.15%. The German DAX fell 1.19%.
Dow-component JNJ reported earnings before the opening bell. Analysts were looking for a profit of $1.13 a share on revenues of $15.22 billion. JNJ beat the earnings estimate with a profit of $1.20 but revenues only came in at $15.08 billion. Last quarter investors were willing to accept an earnings beat on cost cutting but this quarter the market wants to see sales improvement. Investors ignored good news that JNJ raised their fiscal year 2009 guidance to $4.54-4.59 compared to analysts' estimates at $4.52. The stock is off 2.3% near $61.00.
Technology stocks are not immune to the market's dip today but the mood was a bit more optimistic thanks to merger news. Tech giant Cisco Systems (CSCO) is buying Starent Networks (STAR) for $2.9 billion. CSCO is offering $35 a share and the deal is expected to close in the first half of 2010. Shares of CSCO are up 0.4% at $23.90. STAR is up 16.8% at $33.92.
The financial stocks are being weighed down by a major downgrade this morning. Influential analyst Meredith Whitney downgraded Goldman Sachs (GS) from a "buy" to a "neutral". Essentially the stock is up more than 150% from its March lows and Meredith thinks investors may want to lock in some gains. Shares of GS gapped open lower and they're currently off about 2.1% at $186.
Gold futures are poised to set another new record high as the dollar sinks again. Gold is up more than $7.00 to $1,064.60. Golf futures tagged $1,069.70 earlier in the day. The strength here is powering some gains for the mining stocks. Silver prices are higher but copper is under performing. The dollar weakness has pushed crude oil to new relative highs with oil up four days in a row.
Healthcare stocks are tumbling on breaking news that republican senator Olympia Snowe, a member of the senate finance committee, will vote in favor of the Baucus version of the senate's $829 billion healthcare reform bill. This version of the bill does not have a public healthcare option but healthcare stocks are down anyway. Investors are worried this is just one step closer to a bill that does include some sort of public option.
After the closing bell tonight we'll get earnings reports from semiconductor giant Intel Corp. (INTC) and railroad company CSX Corp. (CSX). Analysts are looking for INTC to report a profit of 28 cents a share and CSX to deliver a profit of 71 cents a share. Banking titan JP Morgan Chase (JPM) reports earnings on Wednesday morning before the bell and the street is expecting a profit of 49 cents a share. Goldman Sachs (GS) reports on Thursday morning. IBM and GOOG report on Thursday night. Bank of America (BAC) reports on Friday morning.
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:
A quick survey of the OptionInvestor.com play list doesn't reveal anything out of the ordinary. Most stocks are ticking lower following the S&P 500's minor decline.