Stocks Gain Before the Close
NEW YORK (TheStreet) -- Major U.S. stock averages pushed above the flatline late Tuesday as investors digested a handful of earnings reports and economic data, and looked to results from search giant Google (GOOG).
The Dow Jones Industrial Average was up 62 points, or 0.46%, at 13,712. The blue-chip index remained on pace for its biggest monthly gain since October 2011.
"Notwithstanding some of the negatives, investors have continued to bid stocks higher in recent weeks," Russ Koesterich, BlackRock's global chief investment strategist, said in a client note.
Koesterich said that U.S. equities are up around 4% so far for the year, as are markets in Europe and much of Asia. He said that some of this can be attributed to temporary enthusiasm and seasonal strength "and we do expect stocks to experience tougher going in February."That said, a continuation of 2% economic growth combined with low inflation is "not a bad environment for stocks." Koesterich said that equity valuations remain reasonable, particularly outside the U.S., so "we would view any near-term volatility as a potential buying opportunity." Breadth was positive as winners were edging losers 22 to eight. The biggest percentage decliners on the Dow were Cisco (CSCO), Boeing (BA), Coca-Cola (KO), American Express (AXP) and Johnson & Johnson (JNJ). Boeing shares slid 1.2% on ongoing 787 aircraft safety concerns. Japanese and U.S. investigators have begun an investigation into the maker of the lithium-ion batteries used in Boeing's grounded 787 jets, The Associated Press reported. Caterpillar (CAT) shares increased 0.10% after the heavy machinery maker said it would take a $580 million fourth-quarter charge due to accounting misconduct at its recently acquired company Siwei. Johnson & Johnson reported fourth-quarter earnings of $1.19 a share on revenue of $17.6 billion, compared with the average analyst estimate of earnings of $1.17 a share on revenue of $17.7 billion, as worldwide consumer sales fell 2.9%. Overall, domestic sales and international sales declined amid negative currency effects. The company announced full-year earnings guidance of $5.35 to $5.45 a share. Analysts are forecasting full-year earnings of $5.49 a share. Shares were off 0.74%. Top Dow gainers included Travelers (TRV), UnitedHealth (UNH), Bank of America (BAC) and Alcoa (AA). Property insurer Travelers recorded fourth-quarter net income of $304 million, or 78 cents a share, a sharp decline from $618 million, or $1.51 a diluted share, in the prior year due to the impact of Hurricane Sandy. Operating income was 72 cents a share versus the average analyst estimate of 14 cents a share. Shares closed up 2.2%. Verizon (VZ) reported fourth-quarter earnings of 38 cents a share on revenue of more than $30 billion, compared with the average analyst estimate of earnings of 50 cents a share on revenue of $29.83 billion. Including the impact of pension items and charges connected to super storm Sandy, which offset growth in its wireless business, Verizon suffered a loss of $1.48 a share in the quarter. Shares added 0.94%. DuPont (DD) posted fourth-quarter earnings of 11 cents a share on sales of $7.3 billion, topping the average analyst estimate of earnings of 7 cents a share on revenue of $7.26 billion. The company said its 2013 outlook for operating earnings is $3.85 to $4.05 a share, an increase of 2% to 7% over the prior year. First half 2013 operating earnings are expected to decline modestly on a year-over-year basis. Shares rose 1.8%. "DuPont stands stronger today than it did a year ago. Our segments delivered innovation, productivity and integration cost synergies. This, coupled with a record year in new product introductions, has strengthened our market position," said Ellen Kullman, CEO of DuPont. "However, weakness in markets served by Performance Chemicals and Electronics & Communications provided significant challenges in 2012. We've adjusted our plans to meet the changing market environment and grow our businesses in a slow-growth world economy." The S&P 500 climbed 7 points, or 0.44%, at 1493. The Nasdaq increased 8 points, or 0.27%, at 3143. Sectors were trading mixed in the broader market. The only decliner was consumer cyclicals. The biggest advancers included basic materials, utilities and transportation. Volumes totaled 3.54 billion shares on the New York Stock Exchange and 1.78 billion shares on the Nasdaq. Advancers were outpacing decliners by a ratio of 2.3-to-1 on the Big Board and 1.7-to-1 on the Nasdaq. Google reported income of $2.89 billion, or $8.62 a share on revenue in its core internet business at $12.91 billion. Shares of the search giant were rising more than 4% in the after-hours session. Google lost 0.23% during Tuesday's regular session. Analysts expected the search giant to post fourth-quarter earnings of $10.50 a share on revenue of $12.4 billion. Kevin Pleines, an equity market analyst at Birinyi Associates, said in a note that Google's comparable headline number will likely be lower than estimates given the sale of the Motorola home division; Pleines referred to the recent comment by Google's treasurer and chief accountant Brent Callinicos that a majority of Wall Street analysts who cover the company have not reflected the business as discontinued operations in their estimates. Pleines also noted that in looking at historical patterns, Google after a beat has traded higher following the report and continued in that direction into the open. When Google misses the stock tends to gain back ground after-hours following the initial negative reaction. The next day, from the open to the close, the stock is down 62% of the time regardless of whether Google beats or misses on earnings per share expectations. Stephen Guilfoyle, chief economist at sarge986.com, said in a morning note that while a there are a bevy of important earnings releases Tuesday morning and afternoon and money can be made in any number of those names, "we all know that the real bets are being placed on Google and IBM (IBM)," which release their earnings after the close and can be volatile. "Actual dough will be made and lost on these two, especially Google," Guilfoyle noted. "The whispers in both cases are higher than the expectation, and many traders are already set up, or taking a pass." According to Thomson Reuters data, the blended estimate for the fourth quarter, which reflects reported results and analyst expectations, is for year-over-year growth of 2.5% for the S&P 500, up from 0.1% in the third quarter. Thirteen percent of S&P 500 companies have reported so far. "As a firm we will continue to monitor corporate earnings but don't feel that there are an significant announcements next week that would change our view of the current market conditions," said Paul Pagnato, managing director and partner at HighTower's Pagnato-Karp Group. "We will be paying particular attention to the economic data that will be released." The National Association of Realtors reported Tuesday that existing-home sales fell to a seasonally adjusted annual rate of 4.94 million in December from a downwardly revised 4.99 million in November, but still well above year-ago levels. The upward momentum in home prices continued amid limited inventory, according to the NAR. Economists surveyed by Thomson Reuters expected existing-home sales to rise to an annual rate of 5.1 million units in December. "Overall, this report points to some modest relapse in what has otherwise been a steady rebound in housing market activity since the summer months, and the drop in sales may have been due in part to the impact of elevated concerns at the time about the impact of the fiscal cliff," said Millan Mulraine, an economist at TD Securities. "Given this, we anticipate that sales activity could rebound in January following the tax deal, given the very supportive buying conditions and the increasing incentive for first-time buyers (who are currently sitting on the fence) to slowly move into the market as prices begin to firm." The Chicago Federal Reserve's National Activity Index on Tuesday showed a decrease to 0.02 in December from 0.27 in November, indicating a moderation of economic growth last month. The report also suggested subdued inflationary pressure from economic activity over the coming year. Hong Kong's Hang Seng closed up by 0.29%, and the Nikkei in Japan finished down 0.35% after the Bank of Japan introduced a widely expected open-ended asset purchase program and set a 2% inflation target. Geoffrey Yu and Gareth Berry, research analysts at UBS, said that to them the additional easing announced "does not seem commensurate with the challenge ... disappointingly, the BoJ announced its intention to buy only JPY10 trillion worth of assets throughout the whole of 2014. That's over three times slower than the current pace of asset accumulation -- totally inadequate in our view given the enormity of the challenge of generating 2% inflation." European markets were weak after Monday's advances, though pared losses after a better-than-expected ZEW economic sentiment reading from Germany and Spanish debt auction results. The FTSE closed down 0.03% and the DAX in Germany finished off 0.68%. Gold for February delivery rose $6.20 to settle at $1,693.20 an ounce at the Comex division of the New York Mercantile Exchange, while March crude oil futures added 64 cents to close at $96.68. The benchmark 10-year Treasury inched up 1/32 to push the yield up to 1.845%. The dollar was slipping 0.20%, according to the U.S. dollar index. IBM (IBM) posted income of $5.39 a share on revenue of $29.3 billion. Wall Street expected the IT company to report earnings of $5.25 a share in the fourth quarter on sales of $29.1 billion. Shares were adding more than 2.5% in after hours, but rose just 0.83% during the regular session. Chipmaker Texas Instruments (TXN) is seen earnings 34 cents a share in the fourth quarter on revenue of $2.95 billion. Shares lost 0.18%. Shares of Research In Motion (RIMM) surged to a 13-month high on Monday in Toronto after CEO Thorsten Heins told a German newspaper the company could sell its handset business or license its software to rivals following the launch of its new BlackBerry 10 operating system, according to reports. Shares jumped 13% Tuesday. "The main thing for now is to successfully introduce Blackberry 10. Then we'll see," said Heins in the newspaper interview. Synovus Financial (SNV) shares sank 1.9% after the company booked better-than-anticipated fourth-quarter sales. Satellite TV provider Dish Network (DISH) is reportedly planning to shutter about 300 Blockbuster stores across the U.S., reducing its headcount by about 3,000. Shares were down 1.1%. Viacom (VIAB) shares have been raised to buy from neutral at Goldman Sachs, which cites strength in fundamentals and a ratings boost from fresh programming at Nickelodeon. Shares were up 1.8%. Waters (WAT) shares slipped 0.67% after the analytical instrument manufacturer posted fourth-quarter earnings of $1.59, beating estimates by a penny. But revenue missed expectations at $521.77 million; analysts were expecting sales of $522.23 million. TD Ameritrade (AMTD) shares popped 3.1% after the company booked better-than-expected quarterly results amid record new client assets. -- Written by Andrea Tse and Joe Deaux in New York.
>To contact the writer of this article, click here: Andrea Tse.
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