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4:12 pm Closing Market Summary: Nasdaq Leads Stocks Higher (:WRAPX) : Equity indices finished the first session of the week near their highs with the Nasdaq Composite (+1.4%) leading the way. The S&P 500 (+0.9%) settled a bit behind the tech-heavy index while the Dow Jones Industrial Average (+0.1%) struggled to turn positive.

The price-weighted Dow spent the bulk of the session in the red as IBM (IBM 169.10, -12.95) weighed. The stock fell 7.1% and surrendered its standing as the second-largest Dow component after reporting disappointing results that featured revenue declines across all key segments and all geographic regions in which the company operates.

Despite IBM's miss, the technology sector kept pace with the broader market, thanks in part to the relative strength of Apple (AAPL 99.76, +2.09). The top-weighted sector component jumped 2.1% ahead of its earnings report. Similarly, chipmakers also contributed to the advance with the PHLX Semiconductor Index climbing 1.5%.

The outperformance of microchip manufacturers gave a boost to the Nasdaq Composite, which also benefited from strength in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 269.57, +4.20) spiked 1.6% while the health care sector (+1.2%) finished among the outperformers. Similarly, two other countercyclical sectors-consumer staples (+1.4%) and utilities (+1.4%)-displayed relative strength, while the telecom services space (+0.8%) ended a bit behind the S&P 500.

Also of note, the energy sector (+0.8%) was able to settle in the green even as crude oil slipped 0.1% to $81.97/bbl. Halliburton (HAL 52.92, +0.32) underpinned the sector, climbing 0.6%, in reaction to better than expected earnings and revenue.

Elsewhere, industrials (+0.3%) registered a slim gain, but the sector was weighed down by defense contractors with the PHLX Defense Index shedding 0.1%. Meanwhile, transport stocks fared well with the Dow Jones Transportation Average rising 1.0%. Airlines led the way with United Continental (UAL 47.29, +2.61) spiking 5.8%.

Treasuries registered modest gains with the 10-yr yield slipping one basis point to 2.18%.

Today's participation was largely in-line with average as 723 million shares changed hands at the NYSE floor.

Investors did not receive any economic news today and tomorrow's data will be limited to the Existing Home Sales report for September (Briefing.com consensus 5.11 million), which will be released at 10:00 ET.

Nasdaq Composite +3.3% YTD
S&P 500 +3.0% YTD
Dow Jones Industrial Average -1.1% YTD
Russell 2000 -5.8% YTD

4:37 pm Ultra Clean Holdings misses by $0.03, reports revs in-line; guides Q4 EPS and revs below consensus; experiences impairments due to GTAT bankruptcy (UCTT) : Reports Q3 (Sep) earnings of $0.12 per share, excluding non-recurring items, $0.03 worse than the Capital IQ Consensus Estimate of $0.15; revenues rose 9.2% year/year to $117.04 mln vs the $117.19 mln consensus.


Co issues downside guidance for Q4, sees EPS of $0.11-0.14, excluding non-recurring items, vs. $0.18 Capital IQ Consensus Estimate; sees Q4 revs of $115-120 mln vs. $125.11 mln Capital IQ Consensus Estimate.

"At the beginning of the Company's fourth quarter, a new customer, GT Advanced Technologies, Inc. (GTAT), filed for bankruptcy. This event had an impact on the Company's earnings for the third quarter of 2014. As of the end of Q3 2014, the Company believes that the outstanding accounts receivable, as well as the value of its on-hand inventory and related non-cancelable in-transit inventory related to the bankruptcy, has been impaired. As a result, in the third quarter of 2014, approximately $2.8 million of revenue was reversed for third quarter 2014 and $1.6 million of account receivables was written off to bad debt expense for shipments made prior to the third quarter of 2014. In addition, approximately $6.6 million of on-hand and non-cancelable in-transit inventory was written off to cost of goods sold in the third quarter of fiscal 2014."

4:35 pm Apple beats by $0.11, beats on revs; guides Q1 revs above consensus (AAPL) : Reports Q4 (Sep) earnings of $1.42 per share, $0.11 better than the Capital IQ Consensus of $1.31; revenues rose 12.4% year/year to $42.12 bln vs the $39.84 bln consensus.

Gross margins of 38% vs ests ~38% (guidance 37-38%)iPhone sales of 39.27 mln vs 38 mln ests and 33.8 mln last year.Q4 iPad sales of 12.32 mln vs 13 mln ests and 14.1 mln last year.Q4 Mac sales of 5.52 mln vs 4.75 mln ests and 4.6 mln last year

Co issues upside guidance for Q1, sees Q1 revs of $63.5-66.5 bln vs. $63.44 bln Capital IQ Consensus; sees Q1 gross margins of 37.5-38.5% versus ~38% ests vs 37.9% last year.
"We continued to execute aggressively against our capital return program, spending over $20 billion in the quarter and bringing cumulative returns to $94 billion."

4:34 pm Texas Instruments beats by $0.05, beats on revs; guides Q4 EPS above consensus, revs in-line (TXN) : Reports Q3 (Sep) GAAP earnings of $0.76 per share, $0.05 better than the Capital IQ Consensus Estimate of $0.71; revenues rose 7.9% year/year to $3.50 bln vs the $3.45 bln consensus.

"Gross margin of 58.4 percent, a new record, reflects the quality of our portfolio of Analog and Embedded Processing products as well as the efficiency of our manufacturing strategy. Co issues mixed guidance for Q4, sees GAAP EPS of $0.64-0.74 vs. $0.63 Capital IQ Consensus Estimate; sees Q4 revs of $3.13-3.39 bln vs. $3.25 bln Capital IQ Consensus Estimate. The annual effective tax rate for 2014 is expected to be about 28 percent, unchanged from our previous guidance.

4:11 pm Cadence Design beats by $0.02, reports revs in-line; guides Q4 EPS below consensus, revs in-line (CDNS) : Reports Q3 (Sep) earnings of $0.26 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.24; revenues rose 9.0% year/year to $400 mln vs the $396.24 mln consensus.

"Cadence continued to drive growth in the 3Q, with wins in core EDA and our expanding systems business," said Lip-Bu Tan, president and chief executive officer.

Co issues mixed guidance for Q4, sees EPS of $0.26-0.28, excluding non-recurring items, vs. $0.29 Capital IQ Consensus Estimate; sees Q4 revs of $417-427 mln vs. $427.44 mln Capital IQ Consensus Estimate.

4:11 pm Rambus misses by $0.01 (:GAAP), misses on revs; guides Q4 revs ~in-line (RMBS) : Reports Q3 (Sep) GAAP earnings of $0.05 per share, $0.01 worse than the Capital IQ Consensus of $0.06; revenues fell 4.9% year/year to $69.7 mln vs the $71.16 mln consensus, down 9% on a sequential basis from the second quarter of 2014 primarily due to a one-time catch-up payment from the new license agreement signed with Qualcomm during the second quarter of 2014 and lower royalty revenue from NVIDIA. As compared to the third quarter of 2013, revenue was down 5% primarily due to lower royalty revenue from Samsung and NVIDIA, offset by the license agreements signed with Qualcomm and Micron Technology. Revenue is not without risk and includes expectations that the Company will sign new customers for patent as well as solutions licensing.

Co issues in-line guidance for Q4, sees Q4 revs of $70-75 mln vs. $74.07 mln Capital IQ Consensus.

4:06 pm Silicon Image appoints Khurram Sheikh as new Chief Strategy and Technology Officer (SIMG) : In the new role, Mr. Sheikh will be responsible for driving the company's strategic initiatives and technology innovation as well as overseeing corporate development, business development and industry standards activities. Prior to joining Silicon Image, Mr. Sheikh was founder and CEO of JKSFS, a communications technology company based in Silicon Valley.

2:01 pm General Electric's GE Aviation wins avionics and power systems for General Dynamics's (GD) Gulfstream's G500/G600 (GE) : GE Aviation is supplying the data concentration and network, the advanced power management system and the advanced health management system to General Dynamics's (GD) Gulfstream Aerospace Corporation for the G500/G600 business jet aircraft.
The data concentration and network for the G500/G600 builds on GE's core computing system from the Boeing (BA) 787 and is a new offering for business jets. The system provides a highly configurable integrated data network (analog, digital via multiple communication protocols) for the aircraft and offers a way to seamlessly connect avionics and utility functions. Using GE's sophisticated tool suite, the data concentration and network system can be rapidly re-configured, enabling efficient integration and significantly reducing cost of change over the life of the airplane. The G500 entry-into-service is anticipated for 2018. The G600 is slated to enter service in 2019.12:33 pm Notable movers of interest (:SCANX) : The following are some of today's most notable movers of interest, categorized by market capitalization (large cap over $10 billion and mid cap between $2-10 billion) and ranked by % change (all stocks over 100K average daily volume).

Large Cap Gainers

LUV (32.59 +4.96%): Positive view mentioned over the weekend in Barron's; strong commentary from Cowen on the airline industry ahead of earnings.
RCI (38.8 +3.49%): Upgraded to Buy from Hold at Canaccord Genuity.
TWTR (50.38 +3.29%): Bullish commentary from Topeka Capital Mkts, notes numerous near-term catalysts, raised PT to $63 from $62.

Large Cap Losers

IBM (169.72 -6.77%): Missed Q3 estimates by $0.64, missed on revs; removed 2015 EPS guidance.
SAP (65.36 -5.26%): Beat by EUR0.02, reported revs in-line; issued mixed guidance, trimming full-year profit outlook.
MJN (96.13 -4.09%): Reports are out that Danone (DANOY) did not discuss a transaction with MJN at its latest board meeting; also was downgraded to Hold from Buy at Deutsche Bank.

Mid Cap Gainers

CNL (53.08 +9.98%): To be acquired by a North American investor group led by Macquarie Infrastructure for $55.37, or ~$4.7 bln.
TERP (27.36 +9.66%): Mentioned positively by Greenlight's Einhorn at Robin Hood conference; also upgraded to Overweight from Neutral at JP Morgan.
LII (83.16 +8.92%): Beat by $0.03, missed on revs; reaffirmed FY14 EPS in-line, reaffirmed revs in-line; announced new $450 mln accelerated share repurchase program.

Mid Cap Losers

NCR (23.46 -21.46%): Issued downside Q3 guidance and lowered 2014 guidance.
TLLP (61.2 -8.77%): Purchased the Midstream Business from QEP Resources (QEP) for $2.5 bln, announced the commencement of a registered underwritten public offering of 19.35 mln common units and an intention to offer $1.3 bln of senior notes.
SHOO (29.16 -8.72%): Issued downside Q3 guidance; updated FY14 guidance to reflect Dolce Vita acquisition.

11:50 am Heading towards midday trading, SPX large-cap sector leadership & out-performance is seen in utilities- XLU +1.3%, consumer staples- XLP +1.0%, materials- XLB +0.90%, and consumer discretionary- XLY +0.85% (SPY) :

SPX currently trades @ 1894.17 +7.41 (+0.39%)11:41 am Stocks/ETFs that traded to new 52 week highs/lows this session - New lows (57) outpacing new highs (22) (:SCANX) : Stocks that traded to 52 week highs: AMRE, ANAC, BSET, CCBG, CNSL, DPZ, EIX, ELLI, ERIE, FIZZ, FNHC, JXSB, NAVI, ORC, RDNT, ROX, SONC, STRA, TE, USPH, UUU, VAC

Stocks that traded to 52 week lows: ACUR, AE, AMZG, AU, BIND, BIOS, BSDM, CANF, CGG, CLRB, COOL, CPA, CPXX, DDE, DIT, DRNA, DXPE, EGAN, ENVI, ESCR, ESSX, FRAN, GBIM, GES, GIG, IBM, ISSC, JOB, KGC, LAS, MFLX, MG, MRVC, NCR, OIBR, OIBR.C, OMI, ONP, OXM, PBCT, PED, PETS, PHG, PME, PSTR, PT, QCCO, QEPM, SAP, SHOO, SID, STRM, TCK, TS, VALE, VRNS, WGA

ETFs that traded to 52 week highs: none

ETFs that traded to 52 week lows: DJP, REMX, USCI

Texas Instruments (TXN) announced that its SimpleLink Wi-Fi CC3100 and CC3200 devices, designed for the Internet of Things, are now Wi-Fi CERTIFIED at the chip level.

OmniVision Technologies Inc. (OVTI) announced the newest additions to its portfolio of OmniHDR automotive high dynamic range sensors: the 1.3-megapixel OV10642 and the WVGA OV10625.


Mellanox Technologies, Ltd. (MLNX) announced that its ConnectX-3 Pro 10Gb/s Ethernet adapters with RoCE are integrated on the motherboard in the new HP ProLiant m400 server cartridge

Semtech Corporation (SMTC) announced it will demonstrate its next generation of high performance, low cost transmitter and quad receiver chip sets for HD surveillance applications at the Security China 2014 Conference.

Altera Corporation (ALTR) announced it is demonstrating new field-programmable gate array solutions enabling systems designers to rapidly add features and functionality to their automotive systems designs at SAE Convergence in Detroit, Michigan from October 21 to 22.

7:12 am IBM misses by $0.64, misses on revs -- Co will guide on the call at 8:00 (IBM) : Reports Q3 (Sep) non-GAAP earnings of $3.68 per share, $0.64 worse than the Capital IQ Consensus Estimate of $4.32; revenues rose -4% year/year to $22.4 bln vs the $23.37 bln consensus.

The company will provide earnings guidance during today's quarterly earnings conference call, and it is included in the presentation charts. "We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and their results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas -- cloud, data and analytics, security, social and mobile - where we continue to shift our business. We will accelerate this transformation." Revenues from the Software segment were $5.7 billion, down 2% (down 2%, adjusting for currency) compared with the third-quarter of 2013. Software pre-tax income decreased 3% and pre-tax margin decreased to 35.5%. The Americas' third-quarter revenues were $10.1 billion, a decrease of 2% (down 1%, adjusting for currency) from the 2013 period. Revenues from Europe/Middle East/Africa were down 2% to $7.2 billion (down 3%, adjusting for currency). Asia-Pacific revenues decreased 9% (down 8%, adjusting for currency) to $5.0 billion. Revenues from the company's growth markets were down 6% (down 5%, adjusting for currency). Revenues in the BRIC countries - Brazil, Russia, India and China - were down 7% (down 7 percent, adjusting for currency). The co has reached an agreement under which GLOBALFOUNDRIES will acquire IBM's Microelectronics OEM semiconductor business and manufacturing operations. The loss from discontinued operations in the third quarter includes a non-recurring pre-tax charge of $4.7 billion, or $3.3 billion, net of tax.
At the end of Sept 2014, IBM had ~$1.4 billion remaining from the current share repurchase authorization. The company expects to request an additional share repurchase authorization at the October 2014 board meeting. It could have been a really bad day for the stock market on Monday, but it wasn't. In fact, the stock market did pretty darn good considering IBM (IBM 169.10, -12.95) checked in with a dismal third quarter earnings report and declined 7%, German software company SAP (SAP 65.68, -3.31) lowered its full-year operating profit target and declined 5%, and Dallas Fed President Fisher (an FOMC voter) said he didn't see a reason not to end QE at next week's FOMC meeting.

Just a few days ago, a lineup of headlines like that might have provoked quite a selloff. On Monday all they did was provoke a lot of talk and little selling action in the broader market.

The Dow finished positive, even with IBM's 13-point decline; the Nasdaq surged 58 points or 1.4%; the S&P 500 gained 17 points or 0.9%; and the Russell 2000 added 13 points or 1.2%. All of the major indices pretty much finished at their best levels of the day.

There was reportedly an element of relief, too, that the Ebola contagion scare was sounding less scary. Whatever the case might have been, one thing was clear: the stock market did not want to trade down after last week's late comeback effort.

The resilient performance was a bullish factor in and of itself as it presumably forced some short sellers to cover their positions and was regarded as a sign that the sell-off from the September 19 highs might have run its course.

With more than 100 S&P 500 companies due to report their quarterly results this week, that perspective could change in short order if more reports go the way IBM's report did. Today, however, we suspect an important offset was the belief that IBM's difficulties on the enterprise side of things were going to be overshadowed by an earnings report from Apple (AAPL 99.76, +2.09) after the close that showed clear-cut strength on the consumer side of things.

To be sure, the S&P 500 information technology sector (+1.0%) didn't show any ill-effects of IBM's struggles, which featured revenue declines across all key segments, and all geographies, and a warning from Big (black and) Blue that it no longer expects to achieve $20.00 in EPS in 2015.

Separately, IBM announced it is going to divest its semiconductor manufacturing business. As part of that plan, it will pay GLOBALFOUNDRIES approximately $1.5 billion in cash over a three-year period to take the business off its hands.

55 of the sector's 66 components closed higher and a large number of them gained more than 1.0%, including Apple, Corning (GLW 18.08, +0.33), eBay (EBAY 49.20, +1.25), Facebook (FB 76.95, +1.00), Google (GOOG 520.84, +9.67), Lam Research (LRCX 71.05, +1.86), Microsoft (MSFT 44.08, +0.45), Qualcomm (QCOM 73.27, +0.84), Seagate Technology (STX 53.85, +0.90), Texas Instruments (TXN 44.47, +0.74), and Yahoo (YHOO 39.28, +0.83).

Hewlett-Packard (HPQ 33.82, -0.34) and Cisco (CSCO 22.93, -0.32) were among the handful of laggards. Their weakness probably had a bit of IBM blue written on it as investors bemoaned the difficulties of being too big to grow in a meaningful way. Oracle (ORCL 37.80, -0.07) also underperformed, getting buffeted as well by SAP's lowered outlook.

In other developments, the Chinese Internet stocks enjoyed some nice gains, albeit on low volume, in front of China's third quarter GDP report on Tuesday. Qihoo 360 Technology (QIHU 67.59, +3.49) paced the way with a 5.4% gain.

Blackberry (BBRY 10.30, +0.81) was a big mover on big volume as speculation swirled that Lenovo might make a bid for the company. Altera (ALTR 33.03, +0.51), meanwhile, advanced on reports the company might be considering a sale.

Altera was one of many gainers in the semiconductor group, which remained hot among the buy-the-dip crowd. Including today's 1.5% gain, the Philadelphia Semiconductor Index is up 6.3% from a week ago.

Postscript: After the close, Apple and Texas Instruments reported their quarterly results. Both companies exceeded analysts' expectations and both companies provided fourth quarter guidance that was also better than expected.

Apple reported a profit of $1.42 per share on revenues of $42.1 billion and iPhone sales of 39.27 million units. The company projects fiscal first quarter revenues to be $63.5 billion to $66.5 billion.

Texas Instruments posted a profit of $0.76 per share on revenues of $3.5 billion. TXN is projecting fourth quarter EPS to be $0.64 to $0.74 and fourth quarter revenues to range from $3.13 billion to $3.39 billion.