Today's Market: Stocks Popping After Oracle's Positive Outlook
(Updated from 9:42 a.m.)
Investors this morning were celebrating software giant
Oracle's
(ORCL) - Get Report
earnings report as a sign that the
corporate profits slowdown has bottomed.
After two weeks of profit warnings and seven sessions of losses on the
Nasdaq Composite Index, the Comp was trading higher this morning by 62.3 points to 2051. The
Dow Jones Industrial Average was also rising, by some 84 points to about 10,730; and the
S&P 500 was up 17.2 points to 1226. The S&P 500 fell over the past three sessions, while the Dow rebounded yesterday from its own three-day losing streak.
Oracle said last night that business was looking up, and the company didn't change its performance targets for the next quarter. That news was welcome on Wall Street. Many high-profile companies have issued profit warnings recently, and investors feared Oracle would do the same. It's confession season after all, when companies lower earnings and revenue forecasts if they expect to miss them.
In an interview with
TheStreet.com
, Oracle's CFO said he thinks profits hit a bottom in the company's fiscal fourth quarter. "It feels like things are picking up a little bit," Jeff Henley said. "If we're right, then I think we would see a gradual improvement in business conditions, and then by the end of the calendar year, things getting back to normal."
Oracle also reported earnings that beat estimates, and it narrowly missed revenue forecasts. The company's shares were jumping 13% to $16.77 in early trading.
The news was also buoying a wide swath of tech stocks this morning, including
JDS Uniphase
(JDSU)
, up 4% to $11.02,
Ciena
(CIEN) - Get Report
, up 0.6% to $39.06, and
Siebel Systems
(SEBL)
. Siebel also was upgraded and had its price target upped this morning by
Salomon Smith Barney
; it was trading up by 10.7% to $42.35.
Elsewhere, officials at telecommunications giant
AT&T
(T) - Get Report
denied the company plans to cut jobs. But a person close to AT&T told
TheStreet.com
the telco
could cut between 10,000 and 15,000 jobs in the consumer and business services divisions. Another source who is familiar with staffing decisions said AT&T usually assesses its size and plans adjustments in June. The Big T was trading up by 1.3% to $20.98.
And after its board met yesterday,
Honeywell
(HON) - Get Report
reaffirmed its interest in merging with
General Electric
(GE) - Get Report
. That news could give a lift to Honeywell and the Dow, which counts both companies among its 30 components. Honeywell dropped sharply last Thursday after GE submitted its "final" offer, which included divestiture of some of Honeywell's businesses, to the
European Commission
. That proposal didn't meet the European regulators' demands for approval of the deal. Honeywell was down 3.3% to $38.67 so far today; while GE was up 1.5% to $49.74.
Cause for Optimism?
Investors may also be encouraged today by optimism about the economy from U.S. Treasury Secretary Paul O'Neill, who said he expects U.S. economic growth to pickup in the coming months. "I think there is a real possibility that the U.S. economy will see an upward movement in the rate of growth in the second half of this year, especially in the fourth quarter," O'Neill reportedly said Monday evening in an broadcast interview with Charlie Rose.
Wall Street was able to brush off some weak housing data released this morning. That data showed housing began to decline in May, the first sign of easing in what has been a very strong market. Privately owned housing starts, fell 0.4% to 1.622 million units. Weakness was concentrated in the Northeast, while the Midwest saw an important increase. April housing starts were revised up to 2.3% growth from a previous estimate of 1.5%.
Wall Street has been betting on a reacceleration of earnings growth by the fourth quarter. But if earnings outlooks continue to conflict with that scenario, investors could do more damage to stock prices.
Several companies with fiscal quarters ending in May reported earnings before the bell today. That list includes two major brokerages:
Lehman Brothers
(LEH)
and
Goldman Sachs
(GS) - Get Report
. Lehman beat earnings estimates like a rug. The company reported profits up 14% in the second quarter with $1.38 per share. Analysts had been expecting $1.14 per share. And Goldman reported second-quarter earnings that met analyst estimates. The company earned $1.06 per share for the quarter, down 24% on the year. Lehman was rising 5.4% to $70.95 in early action; Goldman Sachs was up 2.3% to $90.52.
Jabil Circuit
(JBL) - Get Report
has yet to report; it was up 5.2% to $24.79 this morning.
Back to top
Bonds/Economy
Bond prices were falling this morning following the release of weak housing data. The benchmark 10-year
Treasury note was down 5/32 to 97 28/32, yielding 5.281%. The 30-year note was losing 7/32 to 95 3/32, yielding 5.721%.
Back to top
International
European markets were moving higher in early trading on strength in banking and software stocks. The
FTSE 100
was up 61.4, or 1.08%, to 5733.0. The Paris
CAC-40
was rising 76.46, or 1.48%, and Frankfurt's
Xetra Dax
was climbing 97.49, or 1.66%, to 5966.53.
The euro was lately trading lower at $0.8594. The greenback was higher to 123.41 yen.
Asian markets closed mixed overnight. Tokyo's
Nikkei 225
slid 123.5 points, or 0.97%, while Hong Kong's
Hang Seng
rose 184.9 points, or 1.43%.
Back to top
As originally published, this story contained an error. Please see
Corrections and Clarifications.