Stocks Mixed on Mixed Earnings

The Nasdaq follows eBay higher, and blue chips continue to struggle.
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Updated from 4:02 p.m. EDT

It was a tale of two markets again Thursday, as the

Nasdaq

followed

eBay

(EBAY) - Get Report

higher while blue chips slumped on lackluster earnings from some industrial bellwethers.

The

Dow Jones Industrial Average

closed down 21.17 points, or 0.21%, to 9865.76, having come within striking distance of its 2004 low of 9804 in morning trading. The

S&P 500

added about 2.83 points, or 0.26%, to 1106.49, while the Nasdaq jumped more than 20.65 points, or 1.07%, to 1953.62. The 10-year Treasury note was down 5/32 in price, to yield 4.00%, a new six-month low. The dollar crossed an eight-month low against the euro.

Volume was moderate to heavy on the

New York Stock Exchange

, where 1.7 billion shares traded and advancers beat decliners 2 to 1. At the Nasdaq, 2 billion shares changed hands with advancers leading decliners by a margin of 3 to 2.

Bond prices fell for the first time this week, although the yield remains stuck at the low end of a range that has prevailed since mid-August. The recent rally is a "reaction to the belief that the

Fed

is not going to raise interest rates on Dec. 14," said Robert Pavlik, portfolio manager at Oaktree Asset Management.

"The high price of oil is probably dictating to the Fed that it cannot raise rates on its original timetable because higher oil prices are taking discretionary funds out of consumers' pockets," Pavlik said.

Nymex crude for December delivery closed up 6 cents at $54.47 in a volatile session. The price swings follow a 3.4% reversal rally in the expiring November future Wednesday that occurred after the U.S. Department of Energy reported a greater-than-expected drawdown in stocks of oil distillates, which include home heating oil.

The Dow was held down by losses in

American International Group

(AIG) - Get Report

,

Caterpillar

(CAT) - Get Report

,

United Technologies

and

SBC Communications

(SBC)

. Still, it's ability to bounce from lows encouraged some observers.

"The opportunity for a decent rally exists. It's just that we've got to get past some of these uncertainties," said John Hughes, managing director at Epiphany Equity Research.

Hughes said that any rally likely would be led by the technology sector. "There's been a relative outperformance from technology in the past few months, and that's starting to accelerate a little bit here. For whatever reason, maybe the safe haven here is technology."

Pavlik disagreed, saying that he had not seen any fundamental changes in the overall sector to prove that it was "more than just a value play."

Neverthless, tech shares marched forward on strength in the semiconductor sector. The Philadelphia Semiconductor index rose 0.8% Thursday.

Altera

(ALTR) - Get Report

jumped over 12%,

Xilinx

(XLNX) - Get Report

added 7.9% and

Novellus

(NVLS)

was up 3.6%.

eBay rose after saying third-quarter earnings were $182.4 million, or 27 cents a share, up from $103.3 million, or 16 cents a share, last year. Adjusted earnings of 28 cents a share in the latest quarter beat estimates by a penny.

Sales jumped 52% to $805.9 million. Looking ahead, the online auction house put fourth-quarter adjusted earnings at 32 cents a share on higher-than-expected sales of $915 million. It put 2005 earnings at $1.50 a share before charges, about a dime worse than forecasts. Still, the stock was up $8.23, or 9%, to $99.59.

On the economic front, the Labor Department announced that initial jobless claims fell 25,000 to 359,000 during the week ended Oct. 16, down from a revised 354,000. Economists had forecast a fall to 345,000.

Elsewhere, the government said that the index of leading indicators fell in September for a fourth consecutive month. The index fell 0.1%, in line with analysts' estimates, after falling 0.3% in the prior month.

The Philadelphia Federal Reserve Bank reported that its manufacturing index jumped to 28.5 in October, from 13.4 in the prior month. Economists had expected the index to increase to 19.2.

American International Group's third-quarter earnings rose 7% to $2.51 billion, or 95 cents a share, on a 25% jump in revenue to $25.41 billion. Before capital gains, the company earned 97 cents a share, matching estimates. AIG's quarter showed storm-related losses of about 19 cents a share.

Of more concern to investors, the insurance giant said the U.S. attorney general in Indiana has opened an investigation into "nontraditional insurance" products that prosecutors have previously described as tools to help companies smooth their earnings. AIG previously settled an

SEC

probe of the same matter for $10 million. Shares closed $1.15, or 2% lower.

Amgen

(AMGN) - Get Report

eased despite reporting third-quarter earnings that beat analysts' estimates. The biotech giant earned $236 million, or 18 cents a share, in the three months ended Sept. 30, down from $612 million, or 46 cents a share, last year. The decline reflected an acquisition-related charge, before which the company earned 64 cents a share, 2 cents better than forecast.

Investors sold the stock down moderately on concerns about a 1% sequential sales decline in Amgen's anemia treatment, Aranesp. Amgen guided its full-year earnings estimate up to $2.38 to $2.43 a share from the previous $2.30 to $2.40 a share.

Shares of Amgen lost nearly 4% Thursday, weighing on the Amex Biotechnology Index, which fell 1.2%. The decline was assisted by

MedImmune

(MEDI)

, down 2.8%, and

Celgene

(CELG) - Get Report

, which plunged 6.7% despite raising guidance and beating Wall Street estimates by a nickel Thursday.

Shares of blue-chip Caterpillar fell Thursday despite reporting that low interest rates and higher coal prices more than doubled revenue and beat Wall Street estimates by a nickel. The industrial-machinery maker said third-quarter earnings were $498 million, or $1.41 a share, well ahead of the prior year's $222 million, or 62 cents a share. Analysts surveyed by Thomson First Call had expected EPS of $1.36. Caterpillar stock dropped $3.76, or 4.7%, to $77.03.

German software maker

SAP

(SAP) - Get Report

said third-quarter profit rose 15% from a year ago to about $366 million, in line with estimates. Sales rose 8% to $2.19 billion on a 13% gain in software sales, and the company left full-year guidance intact. Shares rose $1.28, or 3.1%, to $42.54.

AT&T

(T) - Get Report

reported a gaping third-quarter loss, the result of previously reported asset writedowns and restructuring charges. The telecom giant lost $7.1 billion, or $8.95 a share, in the quarter, compared with earnings of $418 million, or 53 cents a share, last year. Adjusted earnings were 75 cents a share, including a 42-cent benefit from lower depreciation. Analysts had been forecasting operating earnings of 49 cents a share. Despite the news, shares closed 22 cents higher at $15.80.

Schering-Plough

(SGP)

managed a small profit Thursday, noting strength in cholesterol and anti-inflammatory markets. The company announced a profit of $26 million, or 1 cent a share, up from a loss of $265 million, or 18 cents a share, in the same period last year. Analysts had expected a loss of a penny a share. Schering rose 26 cents, or 1.6%, to $16.98.

Elsewhere,

Merck

(MRK) - Get Report

said that the withdrawal of Vioxx from the market cost the drugmaker an estimated 25 cents a share. The company posted earnings of 60 cents a share. Analysts had expected earnings of 71 cents a share. By the close, shares fell 14 cents to $31.26.

Shares of

Eli Lilly

(LLY) - Get Report

fell $1.90 Thursday, despite third-quarter revenue rising 4%. The drugmaker reported a profit of $755 million, or 69 cents a share, up 6% from the prior year and a penny better than analysts' estimates of 68 cents a share. Eli Lilly's stock dropped $2.46 to $52.64.

Overseas markets were mixed, with London's FTSE 100 gaining 0.1% to 4626.60 and Germany's Xetra DAX lost 0.2% to 3915.17. In Asia, Japan's Nikkei fell 0.9% overnight to 10,789, while Hong Kong's Hang Seng added 0.1% to 13,015.