Dow: 12,943 (+0.27%) S&P 500: 1,377 (+0.27%)
Technology stocks stole the show and rallied high today, pushing the tech-heavy NASDAQ stock index up 0.8%. At first we assumed it was excitement over the gadget wizardry of the new flying Batmobile debuting in The Dark Knight Rises tomorrow – turns out it was thanks to a solid earnings report from tech big-boy IBM. Second quarter corporate earnings continue to beat analysts’ expectations (even if those are low expectations), pushing the Dow up 35 points today. But a smorgasbord of uninspiring economic reports, including housing, job and manufacturing data, held stocks from venturing any higher.
IBM, Microsoft jump on stronger profits, Morgan Stanley misses expectations
The fundamental value of a stock is a shareholder’s claim (as owner of the company) to dividends from the company’s profits. IBM (IBM) makes $400M dollars/day in sales, equaling a monster $3.9 billion in profits last quarter, or $3.51/share. With that kind of cash rolling in investors bought up the stock 3.8% higher on expectations that “Big Blue” will have plenty more to send home to the owners of the company (i.e. dividends). IBM’s strategy of shifting to software has been killing it and the value of the company is close to the record high set in April ($225B). They still manufacture servers pretty well, but those old, poorly built, black IBM laptops that look like a crudely put-together jigsaw puzzle are things of the past. As some analysts noted, a big driver of profit was cost cutting, which can only go on so long before you need to create new business. Microsoft (MSFT) also had strong earnings as companies are upgrading to Windows 7 and Microsoft Office (Word, PowerPoint, and the mind-numbing…Excel) software. Only investment bank Morgan Stanley (MS) disappointed, falling over 5% on its weakening trading business.
Weekly Jobless Claims spike back up, Existing Home Sales and Mid-Atlantic Manufacturing dip
After dropping the most in 4 years last Thursday, the number of Americans filing for unemployment jumped right back up by 34,000. Weekly jobless claims usually move in smaller increments, but seasonal factors (like temporary summer auto factory closures) accounted for the big jumps you’ve seen the last two weeks in your MarketSnacks. Economists focus on the total amount of jobless claims, now at 386,000, hoping it won’t move above 400,000 – a psychological threshold between an economy that’s adding jobs and one that ain’t. July manufacturing activity in the Mid-Atlantic region has so far contracted for the 3rd month in a row, though at a slowing rate. And despite improving housing data this month, sales of existing homes surprisingly fell in June to the lowest level in 8 months. Overall, investors are looking at the recent combination of both positive and negative economic news as a sign of the slowing pace the economy’s recovery has hit.
- Google (GOOG) smashed earnings expectations after the market closed with a 35% increase in revenues from last year – we’ll be following the stock tomorrow…
- More earnings reports, baby: Xerox, General Electric, Schlumberger…
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