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.

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