Intraday Market Update
US equities have been under pressure since yesterday's closing bell after disappointing underlying components of earnings reports from Apple and Dow member IBM, even though headline figures exceeded expectations. Sentiment took another blow after the Peoples Bank of China surprised investors by raising its one year lending and deposit rate by +25 basis points, which marks the first increase in nearly 3 years as the government continues exiting its support from the economy. The S&P 500 gapped about -12 points lower at the open and was down nearly -20 points in early trading, but the buyers stepped in and pared about half of the losses. However, in mid-day trading a report indicating that the NY Fed and Pimco are requesting Bank of America to repurchase mortgages caused the indexes to trade back down and through their lows of the day. All of the major indices are down better than -1.50%. Commodities are getting hit hard as the US Dollar has surged more than +1.50% higher in the wake of China's rate hike. Gold has lost more than -$35 (-2.25%), front month crude is down more than -$2.50 (-3.00%), Copper is off -2.75%, and silver is off -3.25%. Overseas, the Asia-Pacific region posted solid gains but the positive moves came ahead of the PBoC's rate hike. European markets all closed lower.
In economic news, housing starts surprised to the upside but new building permits surprised to the downside. The September annualized pace of 610,000 starts came in above estimates calling for 580,000 starts. Overall housing starts increased +4.1% y/y which was led a +4.4% gain in single-family starts. The multi-family component slid -9.7%, but this follows a +42.3% surge in August. Moving in the wrong direction are new building permits as they dropped -5.6% in September after rebounding +2.4% in August. Overall building permits are down -10.9% y/y. The silver lining in this report is the strength seen in the single-family component with permits and starts both increasing, albeit at depressed levels.
There have been a slew of earnings reports and reactions to them today. AAPL was down nearly $20 (-6%) in the pre-market, despite better than expected earnings after the bell yesterday. Beating earnings is par for the course for AAPL but iPad shipments were below analyst estimates. The company's iPad tablet was thought to be a major growth area for AAPL but the growth estimates are now being revised and it is affecting the stock. AAPL has recovered nicely but is still off -3%. IBM's earnings were mostly in line with estimates but the firm's signed service contracts were down on a y/y and q/q basis, while outsourcing revenues were down sharply over y/y. IBM blamed late signings but investors are still not enthused as shares have lost -3.8%.
Bank of America (BAC) posted a $10.4 billion write-down tied to new financial regulations in their Q3 report, however, on an operating basis BAC earned 27 cents per share which beat estimates, while revenue was in line. CEO Brian Moynihan said the bank continued to see stabilization in its loan book and loan quality across the board. BAC has pared early losses and is down -0.60%. Goldman Sachs has gained +2.50% after their Q3 earnings and revenue beat estimates. It is worth noting that GS's revenue from trading has fallen on q/q and y/y basis for the second straight quarter.
Elsewhere, earnings reports from Dow members Johnson & Johnson (JNJ) and Coca-Cola (KO) were both mostly in line with estimates. JNJ has recovered from its lows and is slightly negative while KO is slightly positive. Lockheed Martin (LMT) is down -1.3% after missing revenue estimates and cut its 2010 outlook. UnitedHealth is down -3.4% despite crushing earnings estimates, beating on revenue and raising its 2010 outlook.
Core Sector List:
Overall reading: 0 sectors advancing, 20 sectors declining
Strongest Sectors: Home Construction (-0.11%)
Weakest Sectors: Gold Miners, Oil Services, Oil, Software
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