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.
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