US Shares Market Spread Trading Update

Posted on | October 23, 2009 |

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.

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