Blue Chips Power Higher On IBM's Earnings
January 20 2012 - 2:23PM
Dow Jones News
Strong earnings from International Business Machines powered
blue-chip stocks higher even as discouraging quarterly reports from
other bellwethers kept a lid on broader market gains.
The Dow Jones Industrial Average rose 68 points, or 0.6%, to
12693. The Standard & Poor's 500-stock index declined two
points, or 0.1%, to 1313, and the Nasdaq Composite slipped three
points, or 0.1%, to 2785. Each were poised to finish with a
third-straight weekly gain in late Friday's trading.
Blue-chip tech stocks pushed the Dow toward its fourth-straight
gain. IBM rose 4.2% after reporting better-than-expected
fourth-quarter earnings, and indicated that 2012 earnings would
exceed current forecasts.
Microsoft advanced 5.2% after the company reported fiscal
second-quarter earnings that beat expectations, with revenue
essentially in line. The company also lowered its operating expense
outlook for 2012.
Intel gained 2.2% after the chip maker topped fourth-quarter
earnings and revenue forecasts, amid strength in the
personal-computer business, and provided a first-quarter revenue
outlook that was in line with current estimates.
"My sense is that [corporate earnings reports] so far seem to
support that the idea that companies have a greater ability to
sustain profits than had been anticipated," said Jeff Lancaster,
principal at Bingham, Osborn & Scarborough, which manages over
$2 billion in San Francisco.
Other widely followed tech stocks disappointed investors. Google
fell 8.4% and was S&P 500's biggest laggard after reporting
fourth-quarter earnings and revenue that fell short of
expectations. The average cost that advertisers paid Google per
click declined from year-ago levels. Despite Google's decline,
technology stocks on the S&P 500 were one of three sectors in
positive territory on Friday.
Elsewhere, GE recovered from early loses to edge higher. Shares
gained 0.1% after the conglomerate's fourth-quarter earnings topped
estimates but revenue came up short, with discontinued operations
weighing on results.
American Express fell 2% after the company beat earnings
estimates but revenue fell short of expectations.
Weakness in the credit service industry spilled into Capital One
Financial. Shares slumped 6.7% after the credit card-issuer-turned
bank reported disappointing fourth-quarter earnings as loan-loss
provisions increased.
SunTrust bolstered the financial sector. Shares rose 5.2% after
the regional bank announced fourth-quarter earnings slipped 16%,
but that credit costs continued to decline.
"Finally, we're getting to a point where we push Europe to the
back burner," said Randy Frederick, managing director of trading
and derivatives at Charles Schwab. "I had hoped that earnings
season would take over the front page for investors, and so far it
has."
Data on December's existing home sales did little to influence
the market's direction. December's reading on existing homes showed
a third-straight monthly increase, but sales rose less than
expected. Existing-home sales increased 5% from an annual rate of
4.61 million. Economists surveyed by Dow Jones Newswires had
expected home sales to rise by 5.2% to an annual rate of 4.65
million.
European markets slipped Friday, but managed to string together
a fifth consecutive weekly gain. The Stoxx Europe 600 fell 0.3% and
finished with the first decline in five sessions. Talks between
Greece and its private creditors over a debt restructuring plan
agreed to in October began, with reports suggesting an agreement
with private creditors was close.
Asian bourses were broadly higher, as data showed that
manufacturing activity in China contracted in January but at a
slightly slower pace than in December. China's Shanghai Composite
climbed 1%, and Japan's Nikkei Stock Average rallied 1.5%.
Gold futures rose 0.6% to $1,664.60 an ounce, while crude-oil
futures slipped 1.7% to $98.89 a barrel. The U.S. dollar gained
ground against both the euro and the yen.
Schlumberger climbed 0.8%. Fourth-quarter earnings rose 36% as
the oil-field services company saw revenue jump in North
America.
Skyworks climbed 11% after the semiconductor maker exceeded
forecasts for fiscal first-quarter earnings and revenue, and
indicated that second-quarter revenue would be above current
estimates.
Fifth Third Bancorp slid 4.4% as the regional bank's
fourth-quarter earnings and revenue missed expectations.
Intuitive Surgical reported that fourth-quarter earnings rose
25%, but the surgical-robot maker's shares dropped 6.7% on concerns
about slowing growth in the number of procedures using its surgery
machines.
-Chris Dieterich, Dow Jones Newswires; 212-416-2611;
christopher.dieterich@dowjones.com
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