Tuesday, April 20, 2010

Markets waffle after Glodman Sachs earnings call

Dow doesn't know what to do once again so its drifting higher. Dow's up 24, but advancers are ahead of decliners better than 3-1 & NAZ rose 11. Banks continue to do well despite the looming financial legislation bringing more regulation. The Financial Index has recovered most of its setback on Fri.


% Change

The Alerian MLP Index gained 3 to about 315, flirting with a new 2010 high. The REIT index was up pennies. Junk bond funds were firmer, near or at yearly highs & the yield on the 10-year Treasury bond went up 1 basis point to 3.82%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Bargain hunters bought oil but it's still in its 80-85 zone. Gold had a modest gain.

CLK10.NYM...Crude Oil May 10...82.75 ...Up 1.30

GCJ10.CMX...Gold Apr 10...1,140.80 1...Up 5.60

Goldman Sachs (GS) reported Q1 earnings almost doubled as its trading business again surpassed the rest of the financial industry. GS earned $5.59 a share on revenue of $12.8B, easily beating expectations. This was the 2nd most profitable qtr since GS went public in 1999 (topped only by Q4 last year). But earnings were overshadowed by the SEC civil fraud lawsuit filed on Fri. Also, Britain's financial regulator launched an investigation into Goldman Sachs International. GS set aside $5½B in Q1 to pay employee salaries & bonuses, up 17% from last year. However, the percentage of revenue set aside for compensation in Q1 fell from 50% last year to 43%. The stock dropped 2.34, the selling pressure is not going away. Its claim about not misleading investors is not playing well with the public!

Goldman Says It Didn't Mislead Investors

Goldman Sachs --- 2 years

IBM (IBM), Dow stock, reported Q1 earnings that topped forecasts & boosted guidance above expectations. It guided 2010 earnings of “at least” $11.20 per share (analysts had predicted earnings of $11.12). Q2 revenue is expected to come in at $24B, a 4.1% increase from Q2 last year. EPS in Q1 was $1.97 per share compared $1.70 last year. Revenue rose 5.3% to $22.9B but revenue was flat when adjusting for currency changes. Like Google (GOOG), its earnings were not well received, the stock fell 3.24.

Big Blue Beats Street; Raises Guidance
at Fox Business

IBM --- 2 years

Photo: Bloomberg

Coca-Cola (KO), Dow stock & Dividend Aristocrat, saw profits climb 19% from continued rapid growth overseas, offsetting persistent weakness in the US. Results were weaker than expectations. The company earned 69¢ in Q1 (below estimates of 75¢) but up from 58¢ last year. Revenue rose 5% to $7.53B. Worldwide case volume was up 3%, with intl case volume growing faster at 5%. The stock fell 82¢.

Coca-Cola Profit Rises 20% as Sales in Latin America Advance

Coca Cola --- 2 years

Johnson & Johnson (JNJ), another Dow stock & Dividend Aristocrat, reported Q1 EPS rose to $1.62 per share, mainly due to a one-time gain from litigation. Excluding that gain, net income increased 3.1% to $1.29 per share. Sales were up 4% to $15.6B due to a 4% boost from the impact of currency exchange rates. US sales were down 5%, while intl sales rose 14.4% (nearly 2/3 of that increase was due to favorable exchange rates). Also, J&J lowered its 2010 profit guidance to $4.80 - $4.90 per share versus a forecast of $4.85 - $4.95 (excluding one-time items & the impact of the health care overhaul) in Jan. The stock fell 12¢.

Johnson & Johnson First-Quarter Adjusted EPS $1.29 Vs Est. $1.27

Johnson & Johnson -- 2 years

Markets are hanging in quite well considering the the Goldman story is not going away soon & has the potential to get uglier. The pres is coming to Wall Street on Thurs when he will talk to the American public, not local traders. GS will not be treated favorably. Earnings have not been getting a warm reception. US results are muddy at best. Overseas business is generally strong, but changing foreign exchange rates blur the picture.

Dow Jones Industrials --- 2 weeks

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