From Briefing.com: 4:30 pm : Market participants had to wade through a heavy flow of earnings announcements this morning. None of the reports inspired an immediate change in sentiment, though, leaving stocks to trade in mixed fashion for much of the session. Still, the major indices were able to put together a broad-based advance and finish with strong gains.
Merck (MRK 30.24, +1.81) and Schering-Plough (SGP 18.91, +1.44) each announced this morning better-than-expected earnings results, driving pharmaceutical stocks 2.8% higher. Archer Daniels Midland (ADM 27.65, +0.15), Emerson Electric (EMR 33.60, +1.90), Automatic Data Processing (ADP 39.04, +2.40), and Tyco (TYC 24.27, +3.93) also beat earnings estimates. The reports seemed to help their stocks more than the broader market.
Investors also got their share of disappointments. UPS (UPS 45.00, +2.58), Dow Chemical (DOW 11.35, +0.30), Aflac (AFL 22.63, -0.40), SanDisk (SNDK 8.66, -2.62), Avon Products (AVP 21.00, +1.66), Motorola (MOT 4.04, -0.50), and PNC Financial (PNC 29.85, -2.33) all failed to meet analysts' earnings estimates.
With many big banks and financial institutions having already reported quarterly results, PNC's announcement gave investors a reminder that the financial sector remains strained. As such, investors await further clarity regarding government-led initiatives to help restore the financial system and, in turn, the broader economy. Some expect the government will create a "bad bank" to purchase distressed assets from banks to help protect against further losses. That would require the government to set a price for distressed assets, which could risk rewarding banks at taxpayers' expense, or drive further capital raises to offset write-downs if prices are too low.
The government may also be considering guarantees or loss sharing agreements, which would limit the toll of write-downs on banks' balance sheets. That could require banks to sell a stake to the government, which could further dilute shareholders. If the government takes a preferred stake, banks may be forced to issue special dividends that also drain their capital.
Investors remain mindful that any such plan will have its share of consequences. So it is doubtful that any plan will immediately drive the financial system to recovery. Still, investors anxiously await further detail, which is expected to be announced early next week.
In the meantime, Treasury released details announcing it invested approximately $1.15 billion in 42 banks as part of the Capital Purchase Program. The plan is aimed at helping banks meet lending needs and keeping credit flowing. Citigroup (C 3.46, -0.19) announced its own plans to increase lending. The financial supermarket will use roughly $36.5 billion of the TARP funds it has received for new loans.
Investors also continue to await another fiscal stimulus plan. Reports surfaced midafternoon indicating Republican Senators are crafting proposals to add to the package. One such feature is a temporary reduction in the corporate tax rate.
Automakers continue to struggle. Ford (F 1.96, +0.08) announced January sales declined approximately 40% year-over-year, while General Motors (GM 2.85, -0.04) reported a near 51% year-over-year drop in January sales. Toyota Motor (TM 65.59, +1.71) reported that January sales decreased more than 34% from the prior year.
Nine of the 10 S&P 500 sectors were able to register a gain as stocks closed a bit off their session highs. Financials (-2.5%) were the only sector to post a loss. The broader market's advance was bolstered by a late lift in trading volume. Trading volume had been light for much of the session, reflecting investors' apathy amid a lack of market-moving headlines. Nearly 1.4 billion shares traded hands on the NYSE this session, but that is still below the 50-day moving average.
Economic data was light this session. The National Association of Realtors reported that pending home sales increased 6.3% in December, exceeding the consensus estimate, which called for a flat reading. The hike in pending sales reflects the helpful impact of lower mortgage rates and prices. Tomorrow's economic calendar features the January Challenger Jobs Report and the January ADP Employment report. The January ISM Service Index is also due tomorrow morning.DJ30 +141.53 NASDAQ +21.87 NQ100 +1.7% R2K +0.7% SP400 +0.8% SP500 +13.07 NASDAQ Dec/Adv/Vol 1146/1524/2.09 bln NYSE Dec/Adv/Vol 1166/1841/1.35 bln
4:03PM Pericom Semi beats by $0.03, beats on revs; guides Q3 revs below consensus (PSEM) : Reports Q2 (Dec) earnings of $0.07 per share, $0.03 better than the First Call consensus of $0.04; revenues fell 24.6% year/year to $30.7 mln vs the $29.9 mln consensus. Gross margin was 34.9%, down from 36.4% last quarter, and down from 36.9% in the comparable period last year Co issues downside guidance for Q3, sees Q3 revs of $23-26 mln vs. $27.70 mln consensus. Gross margins are expected to be in the 33.0% to 34.5% range.
7:09AM Motorola misses by $0.01, reports revs in-line; guides Q1 EPS below consensus; suspends dividend (MOT) 4.54 : Reports Q4 (Dec) loss of $0.01 per share, ex-items, $0.01 worse than the First Call consensus of ($0.00); revenues fell 26.0% year/year to $7.14 bln vs the $7.15 bln consensus. Co issues downside guidance for Q1, sees EPS of ($0.12)-($0.10) vs. ($0.06) consensus. MOT is implementing cost-reduction actions of approximately $1.5 billion for 2009 and is suspending their quarterly dividend. Q4 mobile devices sales were $2.35 bln; shipped 19.2 mln handsets. Co also announces that Edward Fitzpatrick, senior vice president and corporate controller, has been named to the additional role of acting CFO, effective immediately, replacing Paul Liska, former CFO. The company has initiated a search to identify a replacement.
08:10 am SanDisk (SNDK)
Flash memory company SanDisk (SNDK 11.33) reported a steep loss as the company continues to deal with shrinking demand for its products.
For the fourth quarter, SanDisk reported a non-GAAP loss of $1.65 per share, excluding nonrecurring items, $1.05 worse than the First Call consensus that expected a loss of $0.60 per share.
Revenues plummeted 30.6% year-over-year to $864 million compared to the $766.7 million consensus.
Underscoring the rapid drop off in demand, average price per megabyte sold in the fourth quarter declined 70% on a year-over-year basis and 28% from the third quarter.
SanDisk's CEO said, "We are very disappointed with our fourth quarter bottom line results, which included significant asset impairment and inventory related charges. We are focused on managing our business through the difficult global economic climate and limited visibility in 2009. We are taking significant steps to curtail our captive output, conserve cash, and reduce capital and operating expenditures."
On the company's conference call, SanDisk issued downside revenue guidance for Q1, expecting revenue between $475 million and $575 million, well below the current consensus of $631.7 million. SanDisk also said it sees substantial gross margin loss in the quarter and will run output at approximately 70% of capacity. |
