Market Update: Earnings Spirit Gives Dow, Nasdaq a Lift - TheStreet

The major indices popped into the green at the open on a strong round of earnings reports from a wide array of sectors. But traders weren't expecting stocks to stay there.

This morning's action and the fact that yesterday's market held on to gains from last week's spectacular midweek turnaround may reflect improved investor confidence. The major stock market indices have been unable to sustain any rallies since the beginning of September, when a series of earnings warnings began to hit the market. The warnings ignited investor concerns over corporate earnings across the board and, in turn, about stock valuations.

But most market pros don't think the indices have room for much more upside until earnings season and the presidential elections are over. Traders said, in fact, that they are hoping for more sideways (neither up nor down) action this week and next. This would help build the base of what many think looked like a bottom last Wednesday.

Dow Jones Industrial Average stocks were strong all around, but brokerage giant

J.P. Morgan

(JPM) - Get Report

was the blue-chip index's darling, adding some 26 points to the upside. Morgan, up 3.1%, was rising on a wave of buying in the financials this morning. The sector may have gotten a boost from

Ameritrade's

(AMTD) - Get Report

earnings report this morning. The company reported a small quarterly profit -- compared with a year-ago loss -- fueled by increased trading activity, which doubled on the year.

Brokerages and banks plunged in early October on concerns that sector earnings would be hurt by bad junk bonds, or company bonds that are not given credit ratings. It has been trying to regain lost ground in the past two weeks.

But it can't be all good. Drug stocks and semiconductors were getting pinched by some bad earnings news out of their respective sectors. Pharmaceutical darling

Pfizer

(PFE) - Get Report

raised its

forecasts for earnings per share for this year by a penny, but lowered its revenue forecasts.

Schering Plough

(SGP)

reported in-line earnings, but also warned of sales weakness. Pfizer was off 6.3% in early trading, while Schering was off 0.7%.

Yesterday, the drug sector, which has been strong all year, rallied higher after

Merck

(MRK) - Get Report

beat earnings estimates and was upgraded by several analysts. Merck was still in positive territory this morning, up 0.1% to $84.81.

In the semiconductor sector, investors were pointing a finger at

National Semiconductor

(NSM)

, which warned of a possible shortfall in the next two quarters because of "inventory corrections" by some of its customers in the mobile phone market. National Semiconductor was lately down 33.5%. Some traders were worrying that this company could take the Nasdaq out later in the day. Semiconductors helped to lead the rally late last week, because semiconductors (chips) are used to make personal computers and telephones. Investors have been concerned about slowing demand for chips, PCs and handsets this quarter.

Meanwhile, a couple of long-suffering companies are taking measures to put the pieces back together again, but investors are mixed on cheering their efforts.

AT&T

(T) - Get Report

was up 3.2% on reports it plans to spin off its cable-television unit and wireless business into separate companies over the next one to two years.

The New York Times

reported this morning that the telecom's board had approved the plan. Shares of AT&T, the largest long-distance and cable TV company in the U. S., have been limping lower since hitting their all-time high in late March. The value of the company has now been cut almost in half.

TheStreet.com

wrote a separate story about the

spinoff plans.

But beleaguered copy giant

Xerox

(XRX) - Get Report

wasn't getting much mercy from investors. Xerox reported an operating loss for the third quarter that was below already lowered forecasts. But the company also unveiled plans to sell assets and cut costs. TheStreet.com wrote a story about

Xerox's efforts. Xerox was gaining 2% soon after the stock started trading this morning, but was lately down 2.7%.

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Sector Watch

The

Philadelphia Stock Exchange Semiconductor Index

was down 4.1% on weak earnings from National Semiconductor overnight. Semiconductor titan

Intel

(INTC) - Get Report

wasn't taking a hit. But other semiconductor stocks, such as

LSI Logic

(LSI) - Get Report

,

Advanced Micro Devices

(AMD) - Get Report

and

Applied Materials

(AMAT) - Get Report

were all lower, off 7.8%, 4.9% and 5.3%, in that order.

The energy companies were selling despite great earnings from reporting companies today.

Texaco

(TX) - Get Report

was off 0.6% -- even though it beat analyst estimates -- due to surging strength in oil and natural gas prices.

Chevron

(CHV)

was also down, lower by 0.2% after more than doubling analyst estimates.

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Bonds/Economy

After three days of gains, the bond market has pulled back this morning. Investors are less motivated to move to safe investments as recent Middle Eastern unrest seems to be easing.

The benchmark 10-year

Treasury note was down 12/32 at 100 25/32, and yielding 5.644%.

The 30-year

Treasury bond was at 107 19/32, 14/32 lower, to yield 5.716%.

The

BTM Weekly U.S. Retail Chain Store Sales Index

(

definition |

chart ) fell 0.2% in the week ending Oct. 21 after a 0.5% rise in the previous period..

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