The Dow and S&P 500 resumed their descent today, as investors feared that the premature removal of economic stimuli may stall growth and even lead to a double-dip recession.

These concerns were ignited by the Bank of Japan today, which said it will stop buying corporate debt at the end of this year. Australia may also follow suit after raising interest rates last month while Germany’s Axel Weber recently signalled that the ECB may start to withdraw stimulus measures next year.

The message couldn’t be any clearer – central banks are at a stage where they simply can’t afford to continue injecting money into their economies because the outcome of pumping additional stimulus may far outweigh the benefits of adding more.

While such a move is understandable in countries such as Australia, it may be too premature for other economies. This is, not surprisingly, creating some anxiety in the market, with certain renowned investors adding fuel to fire by saying that risks of a double dip recession are now on the rise.

In a speech delivered in Budapest today, billionaire investor George Soros warned that the global economic recovery is ‘liable to run out of steam’ and a ‘double dip’ may ensue in 2010 or 2011.

As a matter of fact, an official government report released by the US Commerce Department this afternoon indicated that American consumer spending stalled for the first time in four months in September, as the effect of the government stimulus programmes started to wane.

The report indicated that personal consumption expenditure declined 0.5% last month, with spending on durable goods sliding 7.2% in September after gaining 6.7% the prior month. Incomes, meanwhile, remained flat. The Reuters/Michigan Consumer Sentiment index was also lower, down to 70.6 this month from 73.5 in September.

On a positive note, the Chicago Purchasing Managers’ Index (PMI), a gauge of regional business activity, surged to a reading of 54.2 in October from 46.1 the month before, suggesting that economic activity in the region expanded this month. PMI readings above 50 are expansionary.

By 3.30pm (London time), the Dow Jones Industrial Average was 89.25 points (-0.90%) lower at 9873.33, while the broader S&P 500 was 10.73 points (-1.01%) below its previous close at 1055.38. The Nasdaq was also in the red, down 12.22 points (-0.71%) at 1699.05.

Crude oil and metal prices were also under pressure this afternoon, as risk aversion bolstered US Dollar demand.

Not surprisingly, shares in energy majors fell today, with Exxon Mobil down 2% to $76.4 and BP 2.3% lower at $56.96 a share after being slapped with a record $87 million penalty for workplace violations linked with the 2005 Texas City refinery blast.

Chevron was dragged down by negative sentiment this afternoon, falling 1.9% to $76.47, despite unveiling better-than-expected quarterly earnings. The energy company reported third-quarter net profit of $3.83 billion, or $1.92 per share.

Although 51% lower than last year’s comparative, it was substantially higher than Reuters’ expectations of $1.47. Third-quarter revenues were a disappointment, however, down 41% to $46.6 billion, slightly below expectations of $47 billion.

Banks were under some stress as well, with the likes of Citigroup, Bank of America, and JP Morgan down by more than 3% to $4.16, $15.09 and $42.87, respectively.

Elsewhere, software company McAfee was another casualty, down 6.8% to $40.82, after reporting revenues that missed estimate. Wireless broadband company Novatel Wireless tumbled a staggering 27% to $8.87 after warning that its sales of mobile wi-fi products may be lower.

Bucking the negative trend was casino company Las Vegas Sands, which jumped 3.2% to $15.23 after unveiling that its Las Vegas convention business is recovering.

Life insurer Genworth Financial was also in demand, up 3.3% to $10.53 after reporting its first profit in six quarters and beating consensus estimates.

By Anthony Grech, Research Analyst, IG Index.

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The Dow and S&P 500 opened higher today, after the US economy grew more than anticipated in the third- quarter.

‘The stock rally is not over yet,’ said Jeffrey Kleintop of LPL Financial. ‘The stock market can celebrate. This news is an important confidence boost, in particular to individual investors.’ [1]

A preliminary report from the Commerce Department revealed that the US economy expanded by a bigger-than-expected annual rate of 3.5% in the third-quarter, bringing to an end the US recession.

The report revealed that third-quarter growth was attributable to a strong upturn in consumer spending, which rose by 3.4%. Residential investment and government spending also contributed to the rise in GDP, with the former surging 23.4% and the latter up 7.9% from the second-quarter.

There is mounting concern that GDP growth has been predominantly driven by government spending. According to the White House’s Council of Economic Advisers, the government’s stimulus added over 2% to real GDP growth in the third-quarter.

‘A lot of this is thanks to government support,’ said Kathleen Stephansen of Aladdin Capital Holdings in an interview on Bloomberg Television. ‘We still have major headwinds for the consumer. That worries me. The consumer, in fact private demand in general, is not ready yet to pick up the growth baton from the government.’

International trade and business spending were among the components stunting GDP growth; US exports rose by 14.7% while imports increased 16.4% in the third quarter. Meanwhile, business spending reduced GDP by 0.24 percentage points, falling by 2.5% on the quarter.

Economists at Goldman Sachs believe that the US economic recovery will be ‘sluggish’ with inflation and interest rates remaining low. They warned that small businesses are still underperforming and that the American labour market is still weak.

A separate report released today also helped stock market sentiment. The Labour Department revealed that fewer Americans filed for first-time jobless benefits last week. The report showed Initial jobless claims falling by 1,000 to 530,000, while those continuing to claim jobless benefits for more than week dropped by 148,000 to 5.8 million.

By 3:30pm (London time), the Dow Jones Industrial Average was 81.77 points (+0.84%) above its previous close at 9844.46, while the broader S&P 500 was 11.86 points (+1.14%) higher at 1054.49. The Nasdaq, meanwhile, fared relatively better, rising 21.26 points (+1.25%) to 1703.02.

The upbeat GDP report helped commodities rally as well, with December crude oil futures climbing as much as 3% to $79.45 a barrel. December gold futures rose 1.2% to $1042.4 per troy ounce while December high grade copper surged 3% to $3 per pound. Commodity prices were bolstered by a renewed bout of US Dollar weakness.

A rally in metal prices helped US mining companies advance this afternoon. Barrick Gold jumped 6.13% to $36.7 a share while Newmont Mining, the largest US gold producer, advanced 3.7% to $43.06 after reporting third-quarter profits of 79 cents a share, beating Bloomberg’s expectations for a 55 cent per-share profit by over 40%. The company’s bottom line was helped by higher bullion prices and lower production costs.

Banks were also in demand, with the likes of Citigroup up 3.7% to $4.23, Bank of America gaining 2.5% to $15.38 and Wells Fargo 1.7% higher to $27.92.

US mobile phone-maker Motorola was among the day’s top performers as well, up 12% to $8.92 reporting third-quarter profits that were ahead of expectations. Procter & Gamble, the world’s largest consumer-products company, gained 3.6% to $59.29 after reporting first-quarter earnings that topped consensus estimates. The company also raised its full-year forecast for organic sales growth.

Bucking the positive trend was energy giant Exxon Mobil, which slid 1.4% to $72.82 after reporting third-quarter net income of 98 cents a share, trailing Bloomberg’s median estimates by 4 cents.

First Solar was another casualty, tumbling 15.2% to $128.42 after unveiling smaller-than-expected third-quarter sales of $480.9 million.

Although Wall Street is experiencing a bit of a breather, there are still those who believe that a correction may ensue.

The S&P 500 yesterday closed at 1042.63, below its 50-day moving average of 1050.282 – technical analysts see this as a bearish signal which suggests that Wall Street may extend their retreat.

‘A close below the 50-day moving average is certainly a negative sign,’ John Murphy, a chief technical analyst told Bloomberg. ‘If it’s broken, it simply indicates the market is going into somewhat of a deeper correction.’

Morgan Stanley was also bearish, saying that the global stock market rally may end once government spending slows. ‘Such echo rallies are never as big as the original one and we will see it fading away,’ said Ruchir Sharma of Morgan Stanley. ‘The rally will end as the effects of the stimulus begin to fade and the credit bubble caused by easy money disappears.’ [2]

Source: [1], [2] Bloomberg News (29 October 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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The Dow was down again this afternoon as global markets continued to slump following the release of downbeat economic data.

It was announced today that new home sales in the US fell by 3.6% in September, creating expectation that the housing market may slow down once the government’s tax credit scheme expires.

Goldman Sachs was also downbeat on the US economy today, cutting its third-quarter US gross domestic product growth forecast from 3% to 2.7%.

There was some positive news, however, as orders for US durable goods rose by 1% in September – the fourth time in six months and an improvement on the previous month’s 2.6% drop. Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said: ‘It’s an encouraging bounce back.

In the current quarter, the economy will be supported by a pickup in business investment. The recovery has some legs, albeit weak ones.’ [1]

By 3.30pm (London Time) the Dow Jones Industrial Average was at 9860.55 (-0.22%) while the S&P 500 was at 1053.94 (-0.89%). The Nasdaq was also down at 2087.08 (-1.37%).

There were some winning stocks all the same, particularly in the communications sector. Verizon rose 2.23% to $29.85 while AT&T rose 1.83% to $26.07. Coca-Cola and Kraft also rose to $53.94 (+0.90%) and $26.92 (+0.71) respectively.

On the losing side, Alcoa fell 0.47% to $12.34; Walt Disney lost 2.48% to hit $27.47; American Express dipped 2.31% to $35.12 and General Electric was down 2.14% at $14.61.

In the UK, the FTSE continued to decline this afternoon, reaching 5105.12 (-1.84%) at 3.50pm. Afternoon winners included Friends Provident at 81.55p (+3.29%) and Diageo at 970p (+1.15%).

Supermarkets were also represented, with Tesco rising to 402.70p (+1.73%) and Morrison’s gaining 1.39% at 277.70p. Mining firms dominated the losers, with Lonmin and Xstrata both dropping 7.45% and Kazakhmys losing 6.86%.

Source: [1] Bloomberg News (28 October 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 fluctuated between gains and losses, as investors weighed up better-than-expected housing figures and earnings with disappointing manufacturing and consumer confidence data.

Stock market sentiment at the start of the US trading day was bolstered by the S&P/Case-Shiller home price indices, a gauge of home prices in 20 US cities, which rose 1% in August after gaining 1.2% in July.

The US housing data being released lately seems to suggest that prices are stabilising on the back of an improvement in demand. In my view, the real test for the US housing market will come when government’s first-time buyer tax credit expires in November, however.

Builders benefited from today’s housing data, with Lennar Corp advancing 0.5% to $13.65, and D.R. Horton climbing 0.8% to $12.03

Better-than-expected results from the likes of industry bellwethers BP and Visa also helped lift morale today.

BP’s share advanced 4.8% to $58.14 on the New York Stock Exchange after reporting a narrower-than-expected 50% drop in third-quarter profits of $4.67 billion. The company’s results encouraged investors to buy rival energy majors Exxon and Chevron, which gained 1.9% to $74.62 and $76.87 respectively.

Oil services firms also benefited, with Schlumberger up 1.1% to $64.99 and Halliburton 1% higher at $30.

Technology shares were also on the move, with Verizon, the second-largest US phone company, gaining 1.8% to $29.15 after Wells Fargo upgraded the company to ‘outperform’. [1]

International Business Machines (IBM) was also in vogue, rising 1% to $121.31, after its board approved an additional $5 billion share repurchase, bringing the company’s buyback programme up to $9.2 billion. IBM said it will repurchase shares on the open market or in private transactions from time to time, depending on market conditions.

Market morale was tainted by disappointing US manufacturing and consumer confidence data, however.

The Richmond Federal Reserve’s manufacturing index fell to a reading of seven this month from 14 in September, suggesting economic activity in the region has expanded at a substantially slower pace than the previous month.

In addition, the Conference Board’s consumer confidence index turned decidedly more pessimistic in October, dropping to 47.7 this month from a revised 53.4 in September.

The consumer expectations index, a gauge of economic activity in six months time, plunged to 65.7 in October from 73.7 the previous month, suggesting consumers are becoming less optimistic about the economy and are likely to rein in on spending.

By 3.30pm (London time) the Dow Jones Industrial Average was 59.93 points higher (+0.61%) at 9927.89, while the broader S&P 500 was 2.35 points (+0.22%) above its previous close at 1069.30.

In contrast, the Nasdaq was 10.36 points (-0.59%) lower at 1736.39, after shares in Baidu, the Chinese search engine company, slumped nearly 11.3% to $384. Investors sold Baidu after it warned that the transition to its new system to sell advertising will weigh on revenue over the first quarter of next year.

Google fell 0.5% to $551.37 and Yahoo declined 0.6% to $16.76.

Source: [1] Bloomberg News (27 October 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 in positive territory, as better-than-expected quarterly earnings at technology firms bolstered equity market sentiment.

‘We’ve had a stellar earnings season,’ said Tom Wirth of Chemung Canal Trust Co. ‘Fundamentals are improving and that should give support for the stocks rally we’ve seen since March.’ [1]

Shares of Verizon Communications, the second-biggest US phone company, advanced 0.52% to $29 this afternoon after unveiling third-quarter profits that exceeded analysts estimates.

Profits, excluding one-off items, came in at 60 cents a share, beating Bloomberg’s average analyst estimate of 59 cents a share. The company managed to exceed expectations by making over 4000 jobs redundant over the quarter. Sales were also better than expected, coming in 10% higher than last year’s comparative at $27.3 billion.

Verizon said it will start selling Research In Motion’s BlackBerry Storm2 this week; the smart phone is expected to go for $179.99 with a two year service contract. Verizon also intends to shed an additional 4000 jobs this quarter.

Electronics retailer RadioShack was also in demand today, rallying over 14% to $17.88 a share, after reporting third-quarter sales of $990 million. This beat Bloomberg’s average analyst estimate by 3.2%.

Chip designer Marvell Technology advanced 4.9% to $15.29 after raising its third-quarter revenue outlook.

The company said it now expects its fiscal third-quarter net revenue to come in between $760 million and $775 million, up from earlier projections of $680 million to $730 million. Marvell said it stands to benefit from a one-time tax benefit of 5 cents a share for the current quarter.

Corning Inc, a speciality glass maker for flat screen TVs, was also in the limelight today after unveiling third-quarter profits (excluding one-off items) of 42 cents a share. This beat Thomson Reuters’ average estimate of 39 cents a share.

The company said it expects the LCD glass market to grow by 15% in 2010 and TV sales to rise by 20%.

Microsoft Corp was also in vogue today, up 3% to $28.86 after JPMorgan Chase raised its price target by 50% to $30 a share. [2]

In contrast, financials traded in the red this afternoon, after Dick Bove of Rochdale Securities downgraded a number of US regional banks; Mr Bove recommended selling shares of Fifth-Third Bancorp and SunTrust Banks. He also downgraded US Bancorp’s shares from ‘buy’ to ‘neutral’. [3]

Shares of Fifth-Third Bancorp plunged 7.5% to $9.56 and SunTrust Banks tumbled 6.1% to $19.71. US Bancorp fell 3.6% to $24.06.

Bank of America and Citigroup were also under pressure, with the former down 5.7% to $15.3 and latter 3.6% lower to $4.3.

The mixed sentiment eventually took its toll on the Dow and S&P 500 today. By 3.30pm (London time) the Dow Jones Industrial Average was 27.66 points (-0.28%) lower at 9944.52, down from an earlier high of 10072.32, while the broader S&P 500 fell 1.27 points (-0.12%) to 1078.33. Not surprisingly, the technology-based Nasdaq was more resilient, up 5.61 points (+0.32%) at 1759.24.

Investors should also be aware of some of the downbeat comments being made today. Robert Doll of BlackRock today told CNBC that he expects some ‘digestion’ in the market after recent gains. Meanwhile, Andrew Smithers, an economist, told Bloomberg that the Standard & Poor’s 500 Index is around 40% overvalued, meaning the S&P 500’s price may fall to 648 given Friday’s close of 1079.6.

He explained that the impetus behind the S&P’s drop would be the US government’s eventual stimulus withdrawal. Mr Smithers also said that banks may require additional capital to shore up their balance sheets.

Source: [1] Bloomberg News (26 October 2009)
[2] Bloomberg News (26 October 2009)
[3] Market Watch (26 October 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.

The Dow and S&P 500 fluctuated between gains and losses this afternoon, as investors digested a barrage of mixed quarterly reports.

US energy majors were under pressure after the price of crude oil slipped below $81 a barrel. The drop came when Schlumberger, the world’s biggest oilfield services company, said global oil and gas demand will be limited by high unemployment and surplus energy supplies.

Schlumberger’s shares sank 3% to $66.53 this afternoon, despite unveiling a smaller-than-expected 48% drop in third-quarter earnings. The company managed to beat consensus expectations by slashing its expenditure.

Third-quarter net income at Schlumberger came in at $787 million, equivalent to earnings of 65 cents a share, just ahead of Bloomberg’s median forecasts of 61 cents a share. Revenues, meanwhile, were $5.43 billion in the third-quarter, representing a 25% decline from last year’s comparative. The drop in revenue was caused by lower energy prices.

Rival oil services firm Halliburton declined 1.8% to 30.84, while energy producers Chevron and Exxon fell 0.6% to 76.82 and 1% to $73.66 respectively.

Bucking the negative trend were financials, especially credit-card company American Express and Capital One Financial Corp, which delivered upbeat quarterly results.

Shares of American Express, the biggest US credit-card issuer, climbed nearly 1% to $36.80 after unveiling third-quarter income from continuing operations of $642 million, or 54 cents a share. This beat Bloomberg’s median analyst estimate of 38 cents a share by over 40%.

The company expects its fourth-quarter loan loss provisions to improve and said it believes the US recession is close to the end. I must warn that Amex’s credit-card defaults were still relatively high, however. They also said ‘there is still reason to be cautious about high unemployment levels’.

Capital One Financial Corp fared substantially better, surging nearly 9.7% to $42.04, after posting profits that exceeded consensus expectations. Third-quarter net income came in nearly 14% higher than last year’s comparative at $425.6 million, or 94 cents a share, beating Bloomberg’s estimates of 17 cents a share.

Analysts at Fox-Pitt Kelton upgraded the company from ‘inline’ to ‘outperform’ and provided a price target of $48 a share.

Citigroup’s share price advanced 1.8% to $4.55 this afternoon and JPMorgan Chase climbed 0.44% to $45.90. In contrast, Bank of America fell 0.5% to $16.43 and Goldman Sachs declined 0.6% to $182.5.

Technology shares were very much in vogue today, with Amazon.com surging 22.2% to $114.17 after unveiling third-quarter earnings of 45 cents a share, well up from last year’s comparative of 27 cents and Bloomberg’s expectations of 33 cents a share. Net sales were also substantially better, up 28% to $5.45 billion. The company also provided a bullish outlook.

Synaptics, a maker of touch pads for digital music players and electronic devices, was another star performer today. Its shares rallied 4.5% to $24.73 after reporting profit excluding certain items of 48 cents a share in the fiscal first quarter. This exceeded Bloomberg’s average analyst estimate by 14%.

US existing home sales data was also encouraging, with purchases in September jumping by a bigger-than-expected 9.4% to a 5.57 million annual rate. This was the highest level in more than two years. The rise came as homebuyers rushed to take advantage of an $8000 tax credit, which is due to expire at the end of next month.

By 3:30pm (London time), the Dow Jones Industrial Average was trading 43.68 points (-0.43%) in the red at 10037.63, while the broader S&P 500 was 4.52 points (-0.41%) lower at 1088.39. The Nasdaq bucked the negative trend, however, up 2.55 points (+0.14%) to 1765.70.

Back in the UK, the FTSE 100 was 1.2% higher at 5267.01, despite official government figures unveiling that Britain was still in a recession during the third-quarter.

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.

US equity markets continued to sink this afternoon, as concerns over China’s economy and mixed domestic economic figures countered better-than-expected quarterly earnings at McDonalds Corp and AT&T.

The S&P 500 has rallied 60% since the depths of March and is now trading at over 20 times reported operating profits – the highest valuation in five years – so it’s not surprising to see a bout of profit-taking dominating Wall Street at the start of today’s trading session.

One of the biggest fears everyone has at the moment is that China will withdraw its stimulus measures over the coming months. Although this potential development may help the world’s biggest importer of raw materials avert domestic asset bubbles, it certainly doesn’t bode well for other export-driven countries which are still struggling to recover.

Meanwhile, official data released today from China’s customs bureau revealed that the Chinese economy expanded 8.9% in the third quarter from a year ago – this was in line with expectations.

The market didn’t digest the Commerce Department’s jobless claims figures particularly well today either. The government report showed that the number of Americans claiming first-time unemployment benefits (initial jobless claims) rose by 11,000 to 531,000 in the week ending October 17. In addition, the prior week was revised to show a 6000 increase in initial jobless claims.

On a more positive note, however, the four-week average for initial jobless claims, an indicator that smoothes out weekly volatility, fell by 750 to 532,250, the lowest level since January 17. In addition, the total number of Americans continuing to claim unemployment benefits for more than a week fell by 98,000 to 5.923 million, the lowest since March 28.

The Conference Board’s leading economic indicators index, a gauge of the economic outlook for the next three to six months, was also encouraging, rising by a more-than-expected 1% in September. This beat Bloomberg’s median forecast for a 0.8% increase.

But the Federal Housing Finance Agency’s housing price index didn’t fare as well as expected, unfortunately, falling by a seasonally adjusted 0.3% in August. The index was down 10.7% from its April 2007 peak.

Also weighing on stock market sentiment were the remarks of Steven Hess, the head US analyst at credit ratings company Moody’s, who told Reuters that the United States may lose its sovereign triple-A rating if the US budget deficit isn’t cut within the next three to four years.

By 3.30pm (London time), the S&P 500 Index was 2.74 points (-0.25%) below yesterday’s close at 1078.66, while the technology-based Nasdaq Index was 7.93 points (-0.45%) in the red at 1745.63. The blue-chip Dow Jones Industrial Average managed to buck the negative trend and advance by 21.31 points (+0.21%) to 9970.67, however.

The Dow Jones rose after AT&T, one of its components, unveiled third-quarter profits (excluding one-off items) of 53 cents a share, beating Bloomberg’s average analyst estimate by 3 cents. The country’s second largest wireless company said its bottom line benefited from a bigger-than-expected rise in iPhone subscribers, which came at 3.2 million. AT&T’s shares climbed 2.1% to $26.49.

Fast food restaurant group McDonald’s, another Dow component, was also in vogue after unveiling better-than-expected third-quarter earnings of $1.15 a share. This beat Bloomberg’s average analyst estimate of $1.11 a share. The company was also confident about its future, saying it starts its fourth-quarter from a position of strength and that it expects sales in restaurants open at least a year – an important gauge of a restaurant’s performance – to remain positive in October.

Third-quarter revenues at McDonalds fell 3.5% to $6.05 billion, yet grew by 2% when eliminating currency fluctuations.

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.

The Dow Jones Industrial average opened higher today as positive results in the US banking sector outweighed some more bad news for Boeing.

After a mixed morning for the FTSE and the gloom of the housing data yesterday, investors and traders would have been glad to switch their focus today to certain key US company earnings announcements – hoping to find reassurance that the global economy is indeed rebounding.

Boeing, however, released difficult third-quarter results, posting a $1.56 billion loss which was worse than analysts had expected. Yesterday, the troubled aviator’s stock price fell 2.9% after a downgrade from Morgan Stanley – making it the Dow’s worst performer. Today its shares fell 1.6% to $51.07 in early trading.

Chief Executive of Boeing, Jim McNerney tried to be upbeat: “The 787 cost reclassification and the 747 charge for increased costs and difficult market conditions clearly overshadowed what continues to be otherwise solid performance,”. [1]

The banking sector was also under the spotlight today and earnings generally beat those forecasted.

Wells Fargo & Co. recorded a record third-quarter profit of $3.24 billion which beat analysts’ expectations. The banking giant’s favourable results were due to it limiting loan defaults and the acquisition of troubled Wachovia. Its share price gained 22 cents to $30.68 in early trading.

Shares in Morgan Stanley rose a healthy 5.5% to $34.30 as it posted a $757 million third-quarter profit – its first positive figures in a year. John Mack its Chief Executive adding, “As we made important progress in executing key strategic initiatives, Morgan Stanley continued to build momentum across our business this quarter.” [2]

This was just what analysts had predicted and Douglas Ciocca, a manager at Renaissance Financial Corp. was realistic: “There will be a general sigh of relief,” he said.

The turnaround was due, in part, to the expansion of its retail brokerage unit and the aggressive hiring of traders. However, with a collection of spluttering real estate investments continuing to trim profits, many analysts are predicting they will continue to lag behind healthier competitors until a more sustainable solution is found. “Building their foundation on a firmer footing is taking a little bit more time” Douglas Ciocca, again. [3]

U.S. Bancorp – which has been aggressively acquiring distressed bank assets – posted a better-than-expected third-quarter profit of $603 million. The bank pointed to an increase in revenue, including fee revenue, and, bemoaned the continuing cost of credit-loss provisions. Its share price was up.1.52% at $25.32.

By 3.30pm (London time), the Dow Jones Industrial Average was trading up 49.96 points (+0.50%) at 10091.44, while the broader S&P 500 was also up 7.71 points (+0.71%). The Nasdaq was also in positive territory, up 20.17 points (+0.93%) to 2183.64.

Look out for when the Federal Reserve releases its latest Beige Book later today and for e-commerce giant eBay’s latest quarterly results after the bell.

[1] Source: Bloomberg News (21 October 2009),
[2] Source: FT.com (21 October 2009),
[3] Source: Bloomberg News (21 October 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 fell from a one-year high today, despite opening a notch higher, after a disappointing US housing market report encouraged investors to take profits.

Wall Street fell from a one-year high today, despite opening a notch higher, after a disappointing US housing market report encouraged investors to take profits.

Risk aversion struck equity markets after official government data released this afternoon suggested that the US housing market may be at the brink of a relapse.

The report revealed that US builders started construction on fewer homes than anticipated in September; housing starts rose by only 0.5% to an annual rate of 590,000 last month while building permits, a sign of future construction, declined 1.2% to an annual rate of 573,000 in September – the second decline in the past three months.

A Bloomberg survey expected housing starts to rise to a 610,000 annual rate and permits to rise to 595,000 in September.

The weaker housing figures suggest that house builders are still cautious over housing demand – the recession has left a glut of unsold homes and the US government’s $8,000 tax credit for first-time homebuyers comes to an end in November.

The weaker US housing data overshadowed some exceptionally good quarterly results, however.

iPod maker Apple, and Texas Instruments, the second largest US chip maker, released their quarterly earnings after the closing bell last night. Both companies saw their share price surge, 5.2% to $199.77 and 2% to $23.99 respectively, after unveiling fourth-quarter sales and profits that exceeded analysts’ estimates.

And today, industry bellwether Caterpillar unveiled third-quarter earnings and full-year forecasts which were ahead of consensus expectations.

Shares of the world’s largest maker of bulldozers jumped 3.7% to $60 a share after unveiling third-quarter profits of $404 million, equivalent to 64 cents a share. This was substantially better than Bloomberg’s average analyst estimate of 5 cents a share. Profits were, nevertheless more than 50% lower than last year’s comparative quarterly of $868 million.

‘We believe the third quarter marked the low point for Caterpillar sales and revenues in what has been the toughest recession since the 1930s,’ Chief Executive Officer Jim Owens said in the statement accompanying the results. ‘We are seeing encouraging signs that indicate a recovery may be under way.’

Caterpillar said it expects full-year earnings to come in at $1.85 to $2.05 a share, beating Bloomberg’s average analyst prediction of $1.48 a share by at least 25%.

BlackRock, the biggest publicly traded US asset manager, also made the headlines after reporting a 46% surge in third-quarter net income of $317 million, thanks to higher fund sales and gains on the company’s investment portfolio.

The company benefited from a change in New York City tax law, however, which added 33 cents a share to net income. After excluding these gains and other one-off items, BlackRock third-quarter earnings came in at $2.10 a share, beating Bloomberg’s expectations of $1.9 a share by over 10%.

BlackRock unveiled a 4% rise in assets, which rose to $1.43 trillion during the quarter as investors deposited $11.9 billion into equity funds and $3.5 billion into bond funds.

Also today, Invesco Ltd said it will acquire Morgan Stanley’s retail investment management business for $1.5 billion in stock and cash. This announcement lifted Invesco’s share by 3.4% to $23.92. Morgan Stanley, meanwhile, edged 0.03% higher to $33.12.

By 3:30pm (London time) the Dow Jones Industrial Average had fallen 39.6 points (-0.39%) to 10052.59 while the broader S&P 500 was 4.39 points (-0.40%) in the red at 1093.52. The Nasdaq was, however, faring relatively better, up 2.74 points (+0.2%) at 1759.42.

Wall Street’s negative sentiment may have been attributable to weakness in resource shares and worse-than-expected quarterly results from the likes of beverage maker Coca-Cola and disappointing 2010 forecasts from defence giant Lockheed Martin.

Coca Cola are trading around 2.5% lower at $53.38 while United Technologies slumped 5.3% to $72.92.

Downgrades may have added to negative sentiment. Boeing lost 3.5% to $51.56 after Morgan Stanley cut its rating on the shares from ‘equal-weight’ to ‘underweight’, saying Boeing ‘may face downward pressure given likelihood for further delays on the 787, negative 2010 cash flow, poor aircraft order demand and negative EPS revisions ahead.’ [1]

In the meantime, shares of Freeport-McMoRan Copper & Gold fell nearly 0.90% to $78.32 and Newmont Mining slid 2.4% to $45.87.

[1] Source: Bloomberg News (20 October 2009)

By Anthony Grech, Research Analyst, IG Index.

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Wall Street opened modestly higher this afternoon as investors re-entered the market in search of value following Friday’s brief sell-off.

Sentiment was bolstered by better-than-expected quarterly results from US newspaper publisher Gannett and Eaton Corp, a manufacturer of circuit breakers and fuel pumps.

Gannett’s shares advanced 1.8% to $13.23 after it unveiled third-quarter earnings of 44 cents a share (excluding certain one-off items), beating its own forecasts of 39 cents to 42 cents a share.

The publisher of USA Today reported an overall net income of $73.8 million, or 31 cents a share, in the third quarter, representing a 53% plunge from the prior year’s comparative of $158.1 million. Third-quarter revenues, meanwhile, slumped 18% to $1.34 billion.

Although weaker, the company’s quarterly results were pointing to some sort of turnaround; revenues generated from newspaper advertisements fell 28% in the third quarter after sliding 34% and 32% in the first two quarters.

Eaton Corp was also in the limelight after reporting a net income of $193 million, or $1.14 a share in the third quarter. Although this was 39% lower than last year’s comparative of $315 million, its third-quarter earnings (excluding one-off items) of $1.21 a share beat Bloomberg’s median analyst estimate of 95 cents by 27%.

The company also raised its full-year profit target (excluding special items) to $2.40 to $2.50 a share, up from earlier forecasts of $2 to $2.20 a share and Bloomberg’s average analyst estimate of $1.99 a share.

‘We’ll have lots of earnings reports this week,’ said Tom Wirth of Chemung Canal Trust. ‘The trend so far has been positive and there’s expectation that will continue. That’s positive for stocks. It’s very possible that we will near 1200 on the S&P 500 by the end of the year.’ [1]

By 3.30pm (London time) the Dow Jones Industrial Average was 43.76 points (+0.44%) higher at 10039.67 while the broader S&P 500 was 4.2 points (+0.40%) above its previous close at 1091.88.

US mining companies were in demand this afternoon following further gains in underlying metal prices – copper, nickel, silver and gold all gained after the Bank of Japan said its economy, the world’s second-biggest, was rebounding.

Aluminium producer Alcoa added 1% to $14.19 and Freeport McMoRan Copper & Gold climbed 2.4% to $77.53.

Elsewhere, low-fare airline AirTran Holdings jumped 5% to $5.37 after JPMorgan raised its recommendation on the company’s shares from ‘neutral’ to ‘overweight’. It also upped its price target from $9.5 to $11, citing lower costs, higher profits, better liquidity and a cheaper valuation. [2]

Finally, it is important to note that Apple is releasing fourth-quarter results at the end of the closing bell today. Analysts at Broadpoint believe that Apple may have to deliver quarterly earnings of at least $1.60 a share to push the stock higher. [3]

[1] Source: Bloomberg News (19 October 2009)
[2] Source: Bloomberg News (19 October 2009)
[3] Source: Bloomberg News (19 October 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.