Wall Street has been approaching new highs for 2009 so far today, as buoyant metal prices and the release of better-than-expected US quarterly results from several companies attracted investors to equities.

US miners have been having a good day, with Alcoa up 3.54% to $11.40, Century Aluminium 5.2% higher at $28.45 and Newmont Mining 2.3% above its previous close at $40.28.

Energy majors Chevron, ConocoPhillips and Schlumberger advanced 0.7% to $67.56, 1.3% to $43.40 and 0.9% to $52.94, respectively, on the back of a rise in crude oil prices, which bucked the positive trend dominating the sector after disappointing quarterly results.

The largest US oil company reported a 66% drop in second-quarter profits of $3.95 billion, or 81 cents a share – the lowest in more than five years. After excluding one-off items (relating to the 1989 Valdez oil spill) Exxon Mobil’s earnings came in at $4.09 billion, or 84 cents a share, missing Reuters’ average analyst estimate of $1.02. Revenues were also substantially weaker, down by almost half from a year ago, to $74.46 billion.

However, the number of companies producing stronger quarterly results far outnumbered those that didn’t.

MasterCard revealed second-quarter net income of $349 million, or 2.67 a share, against a loss of $747 million a year ago. The latest bottom line figure was also better than Bloomberg’s average analyst estimates of $2.42 a share. Revenues were stronger as well, up 2.7% to $1.3 billion, also above expectations.

Visa Inc, MasterCard’s larger rival, also reported better-than-expected quarter earnings yesterday, primarily as a result of a sharp drop in expenses and the growth in the use of its debit cards. The electronic payment giant had reported a 73% rise in net income, which came in at $729 million, or 97 cents per diluted share, and upped its revenue forecast for the fourth quarter.

Visa and MasterCard are immune to rising consumer defaults prevailing as a result of a rise in unemployment. This is due to the fact that they do not directly take on credit risk; it is the banks that issue their cards that take on this type of risk. Visa and MasterCard provide the banks with an electronic payment technology, which means they stand to benefit from any increase in card transactions.

Shares in MasterCard surged 7.3% to $202.28, while Visa Inc advanced 2.7% to $68.6.

Mobile phone maker Motorola soared 8.7% to $7.14 after surprising the market with a narrower-than-anticipated loss following aggressive job cuts and a revival in handset sales. Excluding certain items, the company’s loss came in at one cent a share against Bloomberg’s median analyst estimate for a loss of four cents a share.

Motorola managed to report net income of $26 million, or one cent a share, nevertheless, following a one-off gain from a legal settlement. Revenues, meanwhile, slumped 32% to $5.5 billion. Equally interesting, however, was Motorola’s revelation that it is planning to introduce phones based on Google’s Android software.

Industrial conglomerate Tyco International was another star performer today – up 5% to $30.24, after its bottom line also exceeded consensus forecasts – coming in at $287 million, or 60 cents a share, substantially higher than Reuters’ expectations of 45 cents a share. Perhaps somewhat disappointing were its revenues, which fell 19% to $4.24 billion. Tyco said it expects its fourth-quarter earnings to come in between 50 cents and 53 cents a share, which is below consensus expectations. However, it has raised its full-year forecast to a range of $2.25 to $2.28 per share, up from an earlier estimate of $2.15 to $2.25.

Colgate Palmolive also made the headlines, with profit-beating estimates for the second quarter amid cost cutting. Sales, meanwhile, fell 5.5% to $3.75 billion for the quarter. Its share price fell nearly 4% to $72.82, despite maintaining its full year guidance.

In the meantime, shares in General Electric surged 7.7% to $13.2 this afternoon, after Goldman Sachs upgraded the conglomerate to ‘buy’, saying that comments made by the chairman of a key congressional committee suggest a decreased chance of a break for the finance arm of the diversified industrial manufacturer. [1]

It is important to note that the quarterly earnings of Walt Disney and MetLife are expected later on today.

By 3.35pm (London time) the Dow Jones Industrial Average had advanced 162.19 points (+1.8%) to 9232.91, while the S&P 500 had climbed 19.98 points (+2.05%) to 995.13. The Nasdaq was also in positive territory, up 28.16 points (+1.76%) to 1627.77.

Source: [1] Reuters News (30 July 2009)

By Anthony Grech, Research Analyst, IG Index.

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The FTSE remained up this afternoon, reaching 4549.55 by 3pm despite failing to hold on to all of this morning’s gains. Meanwhile, on Wall Street, commodities prices tumbled and negative manufacturing figures weighed on hopes of a recovery.
The FTSE’s slight slip backwards was reflected by some of the index’s winners and losers. Schroders’ share price may have lost 1.15% since this morning, but was still top of the leaderboard, with its share price up by 4.21% at 817p. Aviva fared better, adding to this morning’s gains to achieve a rise of 3.46% and a share price of 343.5p. Other afternoon winners included RSA Insurance Group with a 3.89% rise to 128.20p, and Eurasian Natural Resources which rose 3.43% at 830p.

On Wall Street, the markets opened down for the second day, as oil and other raw material producers saw their share prices tumble. Gains were seen in the finance and retail industry, with Bank of America gaining 1.50% to $13.54, American Express rising 1.19% to $28.01, and Wal-Mart adding 0.87% to $49.35. Coca-Cola was also up 0.85% at $49.81.

The morning’s biggest losses were concentrated on mining firms, with Caterpillar losing 3.03% at $41.60, Alcoa dropping 2.93% to $10.93, DuPont E I De Nemours falling 1.93% at $29.52 and Chevron losing 1.82% at $67.10. This decline has been attributed to a fall in Chinese share prices, which was based on an expectation of government spending cuts. Liam Dalton, chief executive officer of Axiom Capital Management said: ‘China has been the epicentre for marginal growth in the global economy, so weakness there would take the edge off sentiment around the world.’ [1]

Also today, US durable goods orders slumped by 2.5% – 1.9% more than the predicted decline of 0.6%. This has sparked further worries about an economic recovery. [2] However, on orders excluding the embattled automobile industry, figures defied expectations to increase by 1.1% – their highest level in four months. Dean Maki, chief US economist at Barclays Capital in New York, called this: ‘an important reason why we expect the overall economy will begin to grow.’ [3]

Source: [1] Bloomberg News (29 July 2009)
Source: [2] Reuters News (29 July 2009)
Source: [3] Bloomberg News (29 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

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US markets were back in the red today, as investors continued to take profits on the back of last week’s rally.

Data released today revealed that rising US unemployment has lead to a sharper-than-expected drop in US consumer confidence data. This exacerbated declines on Wall Street because it indicates that household spending is likely to slowdown, a phenomenon that would exert further pressure on future revenue and bottom line growth.

The Conference Board’s confidence index dropped for a second month to 46.6 in July from 49.3 in June. This was worse than Bloomberg’s expectations for a drop to 49.

Not all data released this afternoon was negative, however. The S&P Case Shiller Index showed further signs of stabilisation in US house prices in May - the index rose 0.5% on the month while the annual drop narrowed from 18.1% in April to 17.1% - the smallest year-on-year decline in nine months. The majority of economists surveyed by Bloomberg predicted an annual drop of 17.9% in May.

‘The pace of descent in home-price values appears to be slowing,’ said David Blitzer, the chairman of the index committee at S&P, in a statement. ‘This could be an indication that home-price declines are finally stabilizing.’ [1]

The housing data was predominantly shrugged off, however. By 3.35pm (London time), the Dow Jones Industrial Average had declined 40.36 points (-0.44%) to 9068.15, while the broader (more representative) S&P 500 had lost 6.52 points (-0.66%) to 975.66. The Nasdaq was also in negative territory, down 7.05 points (-0.44%) to 1592.26.

US Steel was in focus today, unveiling a second straight quarterly loss today. Its net loss for the second quarter came in at $392 million, or $2.92 a share, compared with a profit of $668 million, or $5.65 per share, the same quarter a year ago. Excluding one-off items, US Steel’s loss per share was $3.28, below the $3.45 loss expected by Reuters. Revenues were also weaker, down 75% to $2.13 billion. US Steel also warned that its business was likely to operate at a loss in the third quarter as well. Its share price dropped 2.2% to $40.37 this afternoon.

Viacom also made the headlines, reporting a 32% drop in second quarter profits, while revenue fell 14% to $3.3 billion, missing consensus estimate of $3.5 billion. Its share price has remained practically unchanged at $24.40 so far.

Perhaps more encouraging were the results of Amgen, the world’s largest biotechnology company, which reported second-quarter earnings that were substantially ahead of expectations. The company explained that its bottom line was helped by a rebound in sales of its rheumatoid arthritis drug and a tax benefit.

Amgen posted a net profit of $1.27 billion, or $1.25 per share, compared with a profit of $906 million, or 84 cents per share, a year ago. The net profit was helped by a $115 million tax benefit. When adjusting for one-off items, Amgen’s profits came in at $1.29 a share, beating the $1.17 forecast expected by Reuters.

Separately, Amgen also announced that it has entered into a deal with GlaxoSmithKline. It appears that the British drugmaker will commercialise Amgen’s experimental osteoporosis drug, Denosumab, in Europe and in emerging markets.

International Business Machines (IBM) was also in the news today. The company said it plans to acquire SPSS, a provider of predictive analytics software, for $1.2 billion in cash, equivalent to $50 a share – that’s 42.5% higher than Monday’s closing price of $35.09.

IBM said the deal will help it expand its Information on Demand software portfolio and business analytics capabilities. It is important to note that the deal still requires approval from the shareholders of SPSS and regulatory clearances. The deal is expected to close in the second half of this year. Shares in IBM traded 0.60% lower at $116.94.

IBM also said it acquired Ounce Labs, a maker of software that helps companies reduce risks and costs associated with security and compliance concerns. The terms of the deal remained undisclosed, however.

In the meantime, Sprint Nextel announced plans to acquire Virgin Mobile USA in a share transaction that values the smaller mobile phone company at $483 million (£293 million). The third largest US mobile services company also agreed to pay off Virgin Mobile USA’s outstanding debt once the deal closes.

Source: [1] Bloomberg News (28 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street was struck by a bout of profit taking today, as Aetna and Honeywell’s disappointing full-year earnings forecasts weighed on market sentiment.

This could be due to the fact that the stronger-than-expected second-quarter earnings were completely priced into the market last week. Equity analysts may now be beginning to focus on the third- and fourth-quarter and full-year earnings of US companies in order to understand whether there is anymore upside left in the market.

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Aetna, the third-biggest health insurer in the US, plunged 5.71% to $24.93 a share this afternoon, after surprising the market by slashing its full-year earnings forecasts for a second time in two months on the back of higher-than-expected medical costs.

‘We continued to see upward pressure on medical costs beyond what we projected in early June, which we believe is driven in part by changing provider behaviour in the face of a deep recession,’ said its Chief Executive Officer Ronald Williams. ‘This is disappointing, but it can be fixed.’ [1]

Aetna said it expects full-year earnings to come in between $3.55 and $3.70 a share, down from initial forecasts of $3.85 to $3.95. The company’s second-quarter net income wasn’t encouraging either, however, down almost 28% to $346.6 million, or 77 cents a share. Excluding one-off items, second-quarter earnings were 68 cents a share, substantially lower than Reuters’ expectations of 78 cents.

Revenues over the period were up by nearly 10% to $8.7 billion, nevertheless, roughly in line with Reuters’ average analyst forecast of $8.6 billion.

In the meantime, Honeywell International, the world’s biggest maker of cockpit electronics, eased 0.3% to $33.89 a share after revealing a 38% drop in earnings and foreseeing full-year earnings at the lower end of its expectations.

The company predicts that its 2009 net profits will come in at $2.85 a share, down from an earlier forecast of between $2.85 and $3.20. Honeywell also said that third-quarter earnings are likely to come in between 70 cents and 75 cents a share, below Reuters’ analyst projections of 79 cents.

Its second-quarter income, meanwhile, came in at $450 million, or 60 cents per share, down 38% from the $723 million, or 96 cents per diluted share, delivered a year earlier. Revenues fell 22% to $7.57 billion, trailing expectations.

Elsewhere, Verizon Communications made the headlines, announcing quarterly profits of $3.16 billion, down 7% from $3.4 billion a year ago. Revenue increased to $26.86 billion from $24.1 billion as a result of wireless subscriber growth. Its shares fell 2.6% to $30.67.

Electronics retailer Radioshack delivered second-quarter earnings of $48.8 million, or 39 cents a share, well ahead of Reuters’ expectations of 29 a cents a share and the previous year’s earnings of 32 cents a share.

Radioshack’s second-quarter revenues fell 2.9% to $965.7 million, while same-store sales declined 4% on the quarter. The retailer blamed the decline on weaker consumer spending on wireless accessories, digital-to-analogue converter boxes, GPS products, music players and digital cameras. Its shares tumbled 7.5% to $14.85 a share.

The US macro front was very upbeat; purchases of new homes surged 11% to an annual pace of 384,000 in June, the biggest gain in eight years, suggesting that the US housing slump that began in 2005 has continued to stabilise.

New house purchases were also ahead of Bloomberg’s average forecasts for a 2.9% rise to 352,000, yet the better-than-expected housing data failed to have any significant effect on the market; by 3:30pm (London time), the Dow Jones Industrial Average had fallen 33.7 points (-0.37%) to 9059.54, while the S&P 500 had declined 4.03 points (-0.41%) to 975.23. The Nasdaq was the worst performer, however, down 13.61 points (-0.85%) to 1585.45.

Source: [1] Bloomberg News (27 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street has been shedding some of yesterday’s gains this afternoon, as disappointing results from Microsoft, Amazon and American Express knocked the shine off US equities.

Microsoft plunged 10.6% to $22.85 within the first hour of trading after failing to live up to the market’s expectations. The world’s largest software maker last night revealed that its fourth-quarter sales slumped 17% to $13.1 billion from the same quarter a year ago – the first decline in sales since the company went public in 1986, and below Bloomberg’s expectations of $14.5 billion.

Quarterly net profits also trailed consensus forecasts, slumping 29% to $3.1 billion, or 34 cents a share. The company, which makes most of its profit by selling its Windows operating system and business software such as Office, explained that its results were attributable to weaker global demand for personal computers.

A closer look at Microsoft’s report revealed that sales across all of Microsoft’s main revenue generators suffered, with sales in its Windows division plunging 29% to $3.11 billion – this is the third straight quarterly decline in sales from this unit.

‘Our business continued to be negatively impacted by weakness in the global PC and server markets,’ explained Chris Liddell, the chief financial officer at Microsoft. He highlighted progress the company had made in cutting costs. ‘In the light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.’ [1] Mr Liddle also warned of continuing pressure on profit margins throughout the year.

Internet advertising company Yahoo, which is said to be in discussions with Microsoft over the combining of their internet search operations, also was also in the red today, down 1.44% to $17.11.

Amazon, the world’s largest Internet retailer, which recently announced that it will acquire online shoe retail Zappos.com, was also among the casualties, dropping 7.8% to $86.58 a share after reporting sales that trailed expectations.

The company’s second quarter results, which were released afterhours last night, revealed that net income fell 10% to $142 million, or 32 cents a share, and sales tumbled 14% to $4.65 billion. Although profits were in line with Bloomberg’s median analyst forecast, sales were below the $4.7 billion average estimate. The concern here is that Amazon’s bottom line growth may start to suffer on the back of weaker revenues.

In the meantime, credit card company American Express fell 1.6% to $28.99 after unveiling a 48% plunge in its second-quarter net income from continuing operations, which came in at $342 million, equivalent to 9 cents a share. Revenues were also hit, down 18% to $6.1 billion. Also disconcerting was the surge in net charge offs (a gauge of bad loan write offs caused by consumers defaulting on credit card payments) which climbed to a record 10%, from 8.5% in the previous quarter.

The release of disappointing figures from some US bellwethers may have enticed investors to think twice about buying into a rally, perhaps on the fear that a sharp correction is about to ensue. By 3.30pm (London time), the Dow Jones Industrial Average was 19.2 points lower (-0.21%) to 9050.09, while the S&P 500 was 5.4 points (-0.55%) below its previous close at 970.89. The Nasdaq was, not surprisingly, the biggest loser, down 14.59 points (-0.91%) to 1586.93.

[1] Source: Times Online (24 July 2009)

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By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened stronger today, as the majority of earnings released so far today topped consensus estimates.

The focus was on Ford Motors today, which delivered better-than-expected bottom line results, predominantly owing to the restructuring of its debt.

The only major US automaker to avoid government support today reported a second-quarter after-tax operating loss of $638 million (excluding special items). This is equivalent to a loss of 21 cents a share, which is substantially better than Bloomberg’s average estimate for a loss of 50 cents per share and the prior year’s loss of $1.4 billion.

Net income at Ford also surprised the market, coming in at $2.26 billion, equivalent to a profit of 69 cents a share, thanks to gains related to debt restructuring. Ford also managed to cut its debt to $26.1 billion from $32.1 billion a year ago and reduce it dependency on cash, using only $1 billion compared to $3.7 billion during the year before. Revenues were arguably in line with what the industry is currently experiencing, down 29% to $27.2 billion from $38.2 billion a year ago. The automaker also said that it had gained market share in all regions it operates in.

‘Ford delivered a very solid quarter, and our transformation plan remains well on track,’ said Lewis Booth, Ford’s executive vice president and chief financial officer in a statement today. ‘We strengthened our balance sheet, reduced cash outflows and improved our year-over-year financial results despite sharply lower industry volumes.’ [1] Shares in the US automaker were up by 7.8% to $6.88 a share so far today.

Online auctioneer eBay rallied 10% to $21.4 a share after unveiling second-quarter earnings that topped analyst projections and forecasting revenue in the next three months to come in between $2.05 billion and $2.15 billion, also ahead of expectations. Rival Amazon, which is scheduled to release its results later today, announced that it is close to a $928 million deal to acquire a privately-held online shoe retailer Zappos.com, meanwhile. Its share price climbed 5.5% to $93.67 this afternoon.

In the meantime, strong sales of Apple’s iPhone helped telecommunications firm AT&T beat second-quarter expectations as well. The company’s stock advanced 3.3% to $25.65.

Not all companies produced better-than-expected earnings today, however. McDonalds posted an 8.4% decline second-quarter net income, which came in at $1.09 billion, equivalent to 98 cents a share. Earnings excluding gains related to an asset sale were 94 cents a share, nevertheless, lower than the 97 cent a share median estimate forecast by Bloomberg. McDonalds blamed the drop in profits on currency fluctuations, which, it said, at around 9 cents off its earnings per share. Revenues at the fast food group were also disappointing, coming in 7% lower at $5.65 billion, trailing Bloomberg’s expectations of $5.69 billion.

Qualcomm, the world’s biggest maker of mobile-phone chips, was another casualty, sliding 4.7% to $46.17 after forecasting fourth-quarter sales that fell short of expectations. There was also other negative news weighing on the company today. It has emerged that South Korea’s antitrust regulator is planning hit the company with a record 260 billion won ($208 million) fine for breaching anti-competitive practices.

Lingering in corporate news was CIT Group, which plunged 16.6% to $0.726 a share this afternoon after unidentified sources told Bloomberg that advisers are urging its creditors to push the company into Chapter 11 bankruptcy following a debt swap next month.

US macroeconomic news was somewhat mixed today, with existing home sales surging 3.6% to an annual rate of 4.89 million in June, spurred by tax incentives and lower borrowing costs. Economists polled by Bloomberg were expecting the figures to rise to an annual rate of 4.84 million on average.

In the meantime, a separate report revealed that the number of Americans claiming first-time unemployment benefits (initial jobless claims) climbed 30,000 to 554,000 in the week ending July 18, roughly in line with Bloomberg’s expectations for a rise to 557,000. The four-week moving average for initial jobless claims, a less-volatile measure, declined 19,000 to 566,000, the lowest level since January.

The total number of Americans claiming unemployment benefits for more than a week (continuing jobless claims) decreased by 88,000 to 6.23 million in the week ending July 11, the lowest since April and the jobless rate among people eligible for benefits, which tends to track the unemployment rate, remained unchanged at 4.7%.

By 4pm (London time) the Dow Jones Industrial Average climbed 138.6 points (+1.56%) to 9019.86 while the broader S&P 500 jumped 16.1 points (+1.69%) to 970.17. The Nasdaq also put on decent gains, up 22.25 points (+1.42%) to 1587.25.

[1] Ford Motors website (23 July 2009)

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By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened slightly lower today but soon rebounded as investor sentiment fluctuated due to mixed results announcements from companies across key sectors.

By 4pm (London time) the Dow Jones Industrial Average was up a notch at 8920.33 (+0.5%), and the wider S&P 500 was down to 954.42 (-0.02%). In contrast, the Nasdaq was steadier and stayed positive at 1919.26 (+0.16%).

Despite the Steve Jobs effect, Apple recorded the best June quarter figures in the company’s history, with net profits up 15% to $1.23 billion. By 3.15pm (London time) shares in Apple were up to $158.17 (+4.8%).

Behind these impressive figures lay sales of 5.2 million iPhones in the third quarter and the increasingly solid sales performance of their personal computers. With year-on year iPod sales some 7% weaker, though, it’s perhaps pretty clear where future growth potential lies.

’We expect our traditional MP3 players to decline over time as we cannibalise ourselves with the iPod Touch and iPhone,’ said CFO Peter Oppenheimer, adding: ’Even so, the traditional iPod business should still last for many, many years.’ [1]

Yahoo struggled, yet exceeded analysts’ expectations, posting profits of $76 million – a 25% fall on the same period last year. The company largely blamed currency fluctuations and an online advertising slump but insisted the figures were otherwise ‘solid’. At 3.15pm (London time) its shares had dropped to $16.58 (-1.01%), suggesting that perhaps investors thought otherwise.

In what was indicative of the day’s early trading, Pfizer, one of the world’s largest pharmaceutical companies, posted a 19% fall in second-quarter earnings, its share price at first dipping two cents to $15.68 but then rebounding to the front of the leaderboard to $16.15 at 3.30pm (London time).

Results in the banking sector were disappointing too. Morgan Stanley posted its third consecutive quarterly loss of $159 million – much bigger than analysts expected and worse than its major competitors. In early trading its share price dropped 4.6% to $26.28. Keycorp, Bank of New York Mellon and US Bancorp all fared worse than expected too.

The saga of the CIT Group continued, with news that it has agreed to somewhat generous interest-rate terms on an essential rescue loan from bondholders; amounting to some 25 times Libor according to some analysts. ’The terms are egregious,’ said Dwayne Moyers, chief investment officer at Fort Worth, and then added: ’They ripped the faces off everyone with those terms.’ [2]

Brighter news came from Starbucks, though, who reported better-than-expected third-quarter profits and whose share price gained 12% to $16.51 in early trading.

In a transparent example of how some same sector stocks can behave similarly, PepsiCo today followed fellow beverage giant Coca-Cola with better-than-expected results but like their rival yesterday, the beverage giant saw its share price fall to $56.05 (-0.62%) at 3.15pm (London time).

It will be interesting to see if tomorrow’s employment figures due out in the US and retail sales figures in the UK can add weight to the recovery argument. As the US earnings season gathers pace look out, too, for results from McDonald’s Corp, AT&T and Amazon.com.

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[1] Source: Bloomberg (22 July 2009)
[2] Source: Bloomberg (22 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened higher today, as the growing list of US companies producing better-than-expected quarterly earnings encouraged investors to buy equities.

However, trading is beginning to appear somewhat cautious, with the S&P 500 struggling to maintain gains above the 950 level so far today.

Caterpillar, a major manufacturer of industrial equipment, soared 12% to $41.07 a share this afternoon after surprising the market with earnings of 72 cents a share which was substantially above Bloomberg’s analyst’s estimates.

The company explained that it was cost cutting, the US government’s stimulus programs, improved credit markets and the stabilising in demand for bulldozers and excavators that had helped the company’s bottom line.

Caterpillar said it now expects its full-year earnings to come in between $1.15 and $2.25 a share and revenues to range from $32 billion to $36 billion. Once again, above Bloomberg’s expectations of $1.12 a share; while revenues were in line with forecasts.

Although Caterpillar’s second-quarter results were stronger than expected, they compare less favourably with the previous years; second-quarter net income more than halved to $371 million or 60 cents a share, from $1.11 billion or $1.74, the year before. In addition, its quarterly revenues sank 41% to $7.98 billion, trailing Bloomberg’s average estimate of $8.7 billion.

Drug maker Merck also produced stronger-than-expected earnings today, which have led investors to believe that the recent stock market rally may have a healthy foundation after all.

Merck, a Dow component, advanced 5.5% to 29.47 a share after unveiling second- quarter earnings of 82 cents a share, beating Reuters estimates of 77 cents a share. The drug maker’s net income came in at $1.59 billion, or 74 cents a share, down 10% from the $1.77 billion, or 82 cent earnings per share, the year before. Its second-quarter revenues, meanwhile, sank 3% from a year ago to $5.9 billion.

The company’s bottom line was helped by a rebound in sales for asthma drug Singulair as well as a 10% decline in marketing and administration expenses. It also benefitted from favourable tax settlements. Merck also said that it expects its acquisition of Schering-Plough to close in the fourth quarter.

Going forward, Merck maintained its full-year 2009 profit forecasts of $3.15 to $3.3 a share and said that its full-year revenues are likely to come in between $23.2 billion and $23.7 billion.

Chemical maker DuPont and beverage giant Coca-Cola also produced earnings that exceeded analyst estimates, yet the former traded 0.2% lower at $28.28, and the latter declined 0.80% to $50.60 a share.

Technology shares were also trading lower, with Apple, which scheduled to release its second-quarter results later today, down 0.9% to $151.65 and Texas Instruments 3.35% lower at $22.82 – after management failed to provide a convincing outlook this year. The company reported second-quarter net income of $260 million, equivalent to 20 cents a share. This was marginally higher than Bloomberg’s 19-cent average projection but more than half of last year’s $588 million, or 44 cent a share profit. The chip maker said it expects earnings to come in between 29 and 39 cents a share this year.

United Technologies was among the casualties, meanwhile, declining 1.5% to $54.11 after posting a 23% drop in profits. The company lowered its 2009 full-year earnings on the back of weaker-than-expected demand for equipment.

By 3:30pm (London time), the Dow Jones Industrial Average had advanced 59.03 points (+0.67%) to 8907.18, while the wider S&P 500 had edged 0.94 points higher (+0.10%) to 952.07. The Nasdaq, meanwhile, had declined 1.41 points (-0.09%) to 1542.59.

It is also important to note that Federal Reserve Chairman Ben Bernanke was in focus today. At his semi-annual congressional testimony held this afternoon, Mr Bernanke said the US economy was showing ‘tentative signs of stabilisation’. He also indicated that the Fed will start to tighten monetary policy once the economy starts to show greater signs of recovery, mentioning falling unemployment as one of the perquisites. He also spoke about exit strategies and mentioned that the country’s record deficit needs attention, as it poses a threat to recovery.

By Anthony Grech, Research Analyst, IG Index.

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The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US equity markets opened in positive territory today as bankruptcy risks haunting troubled commercial lender CIT Group subsided after bondholders threw the company a $3 billion lifeline.

Investors cheered after CIT Group, the century-old lender to nearly one million small- to mid-sized businesses, rallied 90% to $1.33 a share after a group of bondholders offered the company a $3 billion loan. Unidentified sources have told Bloomberg News that the loan will be for at least two-and-a-half years and CIT will be charged an interest of 10 percentage points over three-month LIBOR (London interbank offered rate or the rate at which banks lend to each other).

CIT Group had initially tried to obtain capital from the US government. The application was, however, refused despite arguments that its failure may ‘precipitate a crisis’ for as many as 300,000 retailers – perhaps the US government had lost faith in the company after having already given it $2.33 billion of TARP funding in December when it converted to a bank holding company.

Better-than-expected earnings results from Halliburton also boded well for investor sentiment today. The second-biggest oil field services provider has unveiled a second-quarter net income of $262 million, equivalent to earnings of 29 cents a share. Although that’s nearly 50% lower than the $504 million net profit (55 cents a share) registered a year ago, this was better than Bloomberg’s average analyst estimates of 27 cents a share. Revenues at Halliburton, meanwhile, sank 22% to $3.49 billion.

David Lesar, the company’s chief executive, has warned that North American natural gas markets are likely to remain weak: ‘We believe it is unlikely that there will be a meaningful recovery in natural gas prices and, consequently, drilling activity for the remainder of the year.’ [1] Halliburton’s share price climbed nearly 2% to $21.80 a share this afternoon.

Eaton Corp also announced second-quarter earnings that topped consensus estimates. The maker of circuit breakers and fuel pumps has reported second-quarter earnings of $29 million, or 17 cents a share. After excluding one-off items, earnings came in 23 cents a share, better than Bloomberg’s average of 15 cents.

Investors didn’t seem to pay much attention to the fact that earnings were 91% lower than the $333 million reported in the second quarter of last year. Second-quarter revenues were also weaker, down 32% to $2.9 billion.

The company expects full-year profits (excluding extraordinary items) to come in between $2 and $2.20 a share, exceeding Bloomberg’s average estimates of $1.89 a share. The firm also said it will pay a quarterly dividend of 50 cents a share. ‘It isn’t pretty, but the numbers were a little better than expected,’ said Eli Lustgarten of Longbow Research in Independence. ‘Everyone expected the guidance to come down, but it didn’t come down as much and they maintained the dividend.’ [2] Shares in Eaton Corp advanced 4.8% to $47.12.

Among the best performing US stocks today was Nadsaq-listed Human Genome Sciences, which, skyrocketed 191% to $9.65 after reporting positive results for its experimental lupus drug – a development that surprised the market because it was previously thought the drug was worthless.

The latest results indicate that patients who took the drug, Benlysta, demonstrated a statistically significant improvement in symptoms as compared to those taking a placebo.

Elsewhere, Walt Disney rose 1.4% to $24.86 and CBS rose 5.6% to $7.13 after Morgan Stanley upped its recommendation on both companies to ‘overweight’. The broker also upgraded its rating on US media shares to ‘attractive’. [3]

Financial news provider Barons, meanwhile, has flagged Walt Disney, Time Warner and News Corp, saying that shares are cheap. Barons also said that Goldman Sachs could move as high as $200 a share in the next year if it continues to report strong quarterly results.

Shares in Time Warner traded 1.6% higher at $26.57, News Corp added 1.4% to $10.96 and Goldman Sachs climbed 1.5% to $156.28.

In the meantime, Bank of America fell 3.3% to $12.47 and Citigroup tumbled 5.6% to $2.85 this afternoon.

By 3.30pm (London time) the Dow Jones Industrial Average had climbed 30.53 points (+0.35%) to 8774.47 while the S&P 500 had gained 2.09 points (+0.22%) to 942.47.

Goldman Sachs raised its year-end target for the benchmark S&P 500 Index from 940 to 1,060, a rise of 12.4% from its current level, as corporate earnings continue to improve.

‘Improvement in ex-financial earnings per share, stabilisation in profit margins and higher forward EPS guidance all point to a rising market through 2009,’ wrote David Kostin of Goldman Sachs today. [4]

[1] Source: Bloomberg News (20 July 2009)
[2] Source: Bloomberg News (20 July 2009)
[3] Source: Bloomberg News (20 July 2009)
[4] Source: Bloomberg News (20 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Sentiment on Wall Street was tempered by General Electric’s results, which countered the optimism emanating from Citigroup and Bank of America’s better than expected quarterly results.

US bellwether General Electric tumbled 4.8% to $11.80 a share this afternoon after unveiling a disappointing 17% slump in second quarter revenues, which came in at $39.1 billion – trailing Bloomberg’s average analyst estimate of $41.95 billion.

Earnings over the period slumped around 47%, as recessionary pressures hit its finance, healthcare and NBC Universal units. Net income from continuing operations came in at $2.87 billion, or 26 cents a share, slightly better than Bloomberg’s average estimate for a profit of 24 cents a share. That compares with profit of $5.39 billion, or 54 cents a share, in the same period last year.

Internet advertising giant Google was also trading lower this afternoon, despite unveiling results that topped forecasts last night, as investors were disappointed to learn of slowdown sales growth. Google’s share price slid 2.9% to $429.82 per share.

Banks bucked the negative trend on Wall Street, however, with Citigroup rising 2.3% to $3.10 and Bank of America up 0.2% to $13.19 after their second-quarter results led the market to believe that these two banks may, in fact, survive the crisis.

Citigroup today reported second-quarter profits of $4.28 billion (equivalent to 49 cents a share) thanks to a $6.7 billion (after tax) gain related to the combination of its Smith Barney brokerage operations with those of Morgan Stanley.

The exclusion of that one-off gain left Citigroup with an operating loss of 27 cents a share, which was narrower than Bloomberg’s average analyst estimate for a loss of 33 cents a share and the prior year’s second quarter loss of 55 cents a share.

The bank’s revenues were also stronger, up 71% to $30 billion, but the rise was mainly due to gains from Smith Barney and net write ups.

Citigroup’s balance sheet was substantially stronger at the end of the second quarter; its Tier 1 Capital Ratio stood at 12.7%, up from 8.7% in the year before and 11.9% at the end of the first quarter. That also compares favourably with JP Morgan’s Tier 1 Capital ratio, which stood at 9.7%.

It is also worth noting that Citigroup is expected to start converting $33 billion worth of preference shares and the government’s $25 billion bailout stake into common stock this month - a development the would leave the US government with a 34% stake in the company.

In the meantime, Bank of America also released its second quarter results today. The biggest US bank by assets also unveiled a quarterly profit that beat consensus expectations, with net income coming in at $3.22 billion, or 33 cents per diluted share, topping Bloomberg’s expectations for earnings of 18 cents a share.

Bank of America’s net income was, nevertheless, 5.5% lower than a year ago and its Card Services division had swung a loss of $1.62 billion from a $582 million profit the year ago, as rising unemployment left borrowers unable to service their credit card repayments. This has been a recurring theme with banks reporting lately – rising unemployment is exerting pressure on credit card divisions and raising bad debts, but banks have been able to counter this weakness through cost cutting and record revenues and profits generated from other divisions.

Shares in JPMorgan Chase added nearly 2% to $36.83 a share while Goldman Sachs edged 0.3% higher to $157.28.

Elsewhere in the financial sector today, shares in embattled US commercial lender CIT Group soared nearly 40% to $0.571 after announcing that it is in talk with potential lenders to secure funding.

Toy maker Mattel was also in earnings news today. It share price advanced 4.6% to $16.93 after unveiling an 82% rise in second-quarter net income of $21.5 million, or 6 cents a share. That compares with $11.8 million, or 3 cents a share, a year earlier. The company managed to bolster its profitability, despite a seeing a 19% decline in revenues, which came in at $898.2 million.

On the macro front, data released this afternoon showed US housing starts rising by 3.6% in June to a seasonally adjusted annualised rate of 582,000 in June, the highest level since November and better than Bloomberg’s expectations for a drop to 530,000 from 562,000. In addition, US building permits rose 8.7% to an annual rate of 563,000 in June, the highest level of the year.

‘Builders are beginning to see some opportunities to get back to work,’ said Mark Vitner of Wells Fargo Securities. While a strong rebound is not likely to occur for some time, ‘it seems clear that housing starts bottomed in the first quarter.’ [1]

By around 4pm (London time) the Dow Jones Industrial Average was 13.23 (-0.15%) lower at 8698.59 while the wider (more representative) S&P 500 declined 4.28 points (-0.45%) to 936.46. The Nasdaq was also lower, down 2.26 points (-0.15%) to 1516.61.

[1] Source: Bloomberg News (17 July 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.