Dow Jones Index Trading Update

Posted on | July 22, 2009 |

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.

Also see Dow Jones Spread Betting.

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

By Anthony Grech, Research Analyst, IG Index.

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