Tuesday, July 17, 2007

Earnings, Politics Swing Markets

For the nest two weeks, market movements are likely to be a function of 2nd quarter earnings reports, though Tuesday may have been an exception.

Of the major reports flowing from corporate offices, the following:

  • Forest Labs (FRX): Net income rose to $268.2 million, or 83 cents per share, in the fiscal first quarter ended June 30, from $200.6 million, or 62 cents per share, a year earlier. Analysts had expected 77 cents per share.

  • Johnson & Johnson (JNJ): Net income, $3.1 billion, $1.05 a share, up from $2.8 billion, or 95 cents, earned in the second quarter last year. Analysts were calling for $1 a share.

  • Merrill Lynch (MER): Net earnings rose to $2.14 billion, or $2.24 a diluted share, compared with $1.63 billion, or $1.63 a share, in the year-earlier period. Analysts sought 2.02 per share.

  • Coca-Cola (KO): Profits, on a continuing operations basis, were $1.98 billion, or 85 cents a share, cleanly beating Wall Street's call of 82 cents a share.

  • Wells Fargo & Company (WFC): Net revenue of $2.28 billion, or 67 cents per share for the 2nd quarter, compared with net income of $2.09 billion, or 61 cents per share, a year earlier. The numbers were in line with expectations of 0.67 per share.

  • CSX Corporation (CSX): Reported earnings of $324 million, or 71 cents per share. Last year the company reported second quarter earnings of $390 million, or 83 cents per share which included a one-time 25 cent gain, so analysts were only looking for 64 cents and the company delivered handily.

  • Intel Corporation (INTC): The company reported revenue of $8.7 billion and earnings per share of 22 cents in the second quarter including a tax item that boosted EPS by 3 cents. The resulting 19-cent-per-share profit figure was in line with analyst expectations.

  • Yahoo, Inc. (YHOO): Net income for the second quarter fell to $161 million, or 11 cents per diluted share, from the year-earlier quarter's $164 million (0.11). Results were in line with lowered expectations of 11 cents per share.

Note that all of the companies listed above either beat or met expectations, but the overall market barely budged.

Dow 13,971.55 +20.57; NASDAQ 2,712.29 +14.96; S&P 500 1,549.37 -0.15; NYSE Composite 10,170.36 -17.82

Why? Could it be the price of crude oil, which hit a high of $75.35 earlier in the day before being hammered down to $74.02, a loss of 13 cents? Or the shifting political tides in Washington, which look to put Bush & Co. out of business in a matter of months? There's a storm brewing, and impeachment and military failure in the field (which has already occurred) are not likely to aid the mood on Wall Street.

Oil will slide to less than $60 per barrel if an end to the Iraq situation is found soon and it's looking more and more like that will be the case, but Wall Street isn't so sure, plus, the finality of the Bush administration may mean closer scrutiny of corporate governance and possibly even an SEC with real investigative and subpoena powers.

So, politics are moving the markets, even while corporate earnings are about as solid as one would like.

Decliners beat out advancing issues by an 11-9 margin and the gap narrowed again, with new highs checking in at 430 to 211 new lows.

On tap for tomorrow (company, ticker, expectations):

  • CIT Group (CIT) 1.35

  • eBay (EBAY) 0.32

  • Gannett (GCI) 1.21

  • Pfizer (PFE) 0.50

  • Piper Jaffray (PJC) 0.74

  • Southwest Airlines (LUV) 0.22

  • United Technologies (UTX) 1.15

Gold and silver were both marginally lower. No surprise there.

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