After Dow's loss, Apple earnings delight
Apple profits crush estimates; Yahoo will cut 10% of its work force. But the Dow falls 232 points on weak earnings overall and profit-taking. Caterpillar and DuPont miss Street forecasts. Kirk Kerkorian sells a big chunk of his Ford stake.
By Charley Blaine and Elizabeth Strott
Stocks tumbled today because investors didn't care for most of the corporate earnings they saw.
But they liked Apple's (AAPL, news, msgs) quarterly report and sent the shares nearly 15% higher in after-hours trading.
Apple's numbers were so good that the futures trading suggests the U.S. stock market will open higher on Wednesday, with the Dow starting with a gain of some 70 points.
In addition, Yahoo shares were higher after it reported better-than-expected quarterly profits and said it would cut 10% of its work force by year-end.
Apple's and Yahoo's earnings came out after a day that saw the Dow Jones industrials fall 232 points, or 2.5%, to 9,034. The Standard & Poor's 500 Index was was down 30 points, or 3.1%, to 955, and the Nasdaq Composite Index was off 73 points, or 4.1%, to 1,697.
Much of the Nasdaq's loss was due to weak tech shares, which were driven lower by a weak earnings report from Texas Instruments (TXN, news, msgs) on Monday and worry about, yes, Apple. Apple was down 7.1% to $91.89 in regular trading -- and soared 13% to $103.32 by 6 p.m. in after-hours trading.
There were continuing indications that the credit markets was starting to thaw a bit. The Federal Reserve said today it would provide financing to shore up money market mutual funds, which were roiled when Lehman Bros. failed.
Despite that good news, the market was weighed down by energy stocks, which fell back after leading the Dow to a 413-point gain on Monday. Crude was the problem, falling 4.5% to $70.89 from Monday.
Result: ExxonMobil (XOM, news, msgs) fell 4.7% to 471.50; Chevron (CVX, news, msgs) was off 4%. Together, they subtracted 57 points from the Dow. Anadarko Petroleum (APC, news, msgs) dropped 6.9% to $34.84.
Yahoo, Apple beat estimates
Apple, down 7.1% to $91.49, clobbered Wall Street estimates in its fiscal-fourth quarter.
Despite a cautious first-quarter estimate -- even for Apple, which has always been very conservative on guidance -- shares were rising after hours. At 7:45 p.m. ET, the stock was at $104.96, up $13.47, or 14.7%, from the regular close. That's still down 47.5% from its record high of $199.83 on Dec. 28.The company earned $1.26 a share, up from $1.01 a year ago and ahead of the Wall Street forecast of $1.11 a share. Revenue was $11.7 billion, up 29% from a year ago. Wall Street was expecting $8.04 billion.
The company sold 2.6 million Macintosh computers in the quarter, up 21% from a year ago. Mac revenue was up 38% from a year ago.
IPod music player sales were 11.1 million units, up 8% from a year, with revenue up only 3% to $1.66 billion.
Yahoo shares, down 6.1% to $12.07 in regular trading, jumped 7% to $12.91 after hours after announcing it would cut 10% of its work force. The company also reported 9 cents a share in third-quarter earnings, down from 11 cents a year ago but a penny ahead of estimates.
Net income was $151.3 million, down 64% from a year ago. Revenue was $1.3 billion after payments to partners were deducted, up 3% from a year ago. Wall Street had expected $1.37 billion.
Analyst Martin Pyykkonen of Wunderlich Securities said fourth-quarter guidance of $1.77 billion to $1.97 billion was disappointing because it showed little if any growth.
A disappointing market close
The Dow's weak close was a bit of a downer. The blue chips had been down as much as 261 points at 12:45 p.m. ET and then started a big rebound when crude oil bounced higher from its lows, giving energy stocks a boost.
Profit-taking was partly at work after the market's big rally on Monday, when the Dow gained 413 points. Many traders aren't confident to stay with a stock for more than a few days -- if that long -- and sell on any significant upticks.
Energy stocks had led the Dow to a 413-point gain on Monday. But after crossing into the black at 3 p.m. ET, late-day selling set in and the market tumbled again.
Crude oil, which had dropped under $70 a barrel early in the day, closed at $70.89, down 4.5% on the day. Energy shares trimmed early losses, then faded again.
The Select Sector SPDR-Energy (XLE, news, msgs) exchange-traded fund had been down as much as 6.6% early in the day, recovered substantially by 3:30 p.m. ET and then dropped back to $48.96, down 4.5% from Monday.
Copper flirted with $2 a pound, its lowest price since November 2005. Freeport-McMoRan Copper & Gold (FCX, news, msgs) was down 10.8% to $32.74 after reporting that third-quarter earnings fell a third from a year ago.
* Get free, real-time stock quotes on MSN Money
Twenty-five of the 30 Dow stocks were lower today, along with 428 S&P 500 stocks and 95 stocks in the Nasdaq-100 ($NDX.X) Index. The index, which tracks the largest Nasdaq stocks, was down 69 points, or 5.1%, to 1,283.
For those wondering if the market has stabilized, the answer remains maybe.
The S&P 500 has been trading 50 points above and below 950 for seven sessions, and it has not come close to falling below 840.42, its intraday low on Oct. 10.
Energy prices -- New York close Tues. Mon. Chg. Month chg. YTD chg.
Crude oil (NYMEX) (per barrel) $70.89 $74.25 -$3.36 -29.56% -26.14%
Heating oil (per gallon) $2.1771 $2.2099 -$0.0328 -23.94% -17.83%
Natural gas (per million BTU) $6.8440 $6.7410 $0.1030 -7.99% -8.54%
Unleaded gasoline (per gallon) $1.6919 $1.7201 -$0.0282 -31.91% -32.07%
Dow stocks post mixed results
Earnings season is now in high gear, and investors can use reports from four Dow companies to gauge how well they are faring through the economic slowdown.
Heavy-equipment maker Caterpillar (CAT, news, msgs) earned $1.39 per share in the third quarter, down slightly from the $1.40 per share it earned last year and slightly below the consensus estimate of $1.41 per share.
Revenue rose 13% to $12.98 billion.
* Learn how to invest at our New Investor Center
Caterpillar reiterated its 2008 earnings target of about $6 per share. Shares were down 5.1% to $38.83. The company said higher steel and freight costs offset record global sales. The company noted "recessionary conditions" in North America and forecast flat sales for 2009.
Chemical maker DuPont (DD, news, msgs) said it earned $367 million, or 40 cents per share -- a 30% decline from the $526 million, or 56 cents per share, last year.
Adjusted earnings came in at 56 cents per share, topping Wall Street's estimate of 52 cents. But the company lowered its full-year forecast to between $3.25 and $3.30 per share, down from a previous forecast of $3.45 to $3.55 per share, citing the weak economy and disruptions from hurricanes.
DuPont shares fell 8% to $33.28.
3M (MMM, news, msgs) managed to report an increase in profit, albeit a small one. The company earned $991 million, or $1.41 per share, a 3% increase from the $960 million, or $1.32 per share, it earned a year ago. Excluding items, 3M earned $1.42 per share, a nickel above the consensus estimate.
3M shares rose 4.4% to $60.04.American Express (AXP, news, msgs) late Monday reported better-than-expected quarterly earnings of $815 million, or 70 cents per share -- a 24% decline from the $1.07 billion, or 90 cents per share, a year earlier.
Earnings from continuing operations came in at 74 cents, down 20 cents from a year ago, but much higher than the consensus estimate of 59 cents per share.
"Cardmember spending is likely to remain soft. Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks, and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector," Chief Executive Officer Kenneth Chenault said in a statement.
The company set aside $1.37 billion to cover loan losses, a 51% increase from last year.
Credit card companies have been hit by delinquencies and defaults amid the financial market chaos, a slowdown in consumer spending and a rise in unemployment.
Amex shares rose 8.4% to $26.39; the gain was tops among the 30 Dow stocks.
Kerkorian cuts stake in Ford
Billionaire investor Kirk Kerkorian is getting out of Ford Motor (F, news, msgs). Kerkorian's investment company Tracinda has sold 7.3 million shares of the U.S. automaker, reducing its stake to 6% of the troubled company.
Tracinda said it may sell the rest of its Ford shares if market conditions dictate.
Ford stock was down 6.9% to $2.17.
* Top Stocks blog: He lost $700 million in four months
European stocks end mostly flat
European stocks were mixed after rising earlier on news that the French government would lend to six of the country's biggest banks. France's CAC 40 Index was up 0.8%, London's FTSE 100 Index ($GB:UKX) was down 1.2%, and the broader Dow Jones Stoxx 600 Index was down 0.6%.
The steps taken by governments around the world to tackle the financial crisis are starting to stabilize the banking system, if slowly, Standard & Poor's credit analyst Scott Bugie said in a statement late Monday.
Bugie said the moves "should help restore confidence in the world's banks, allowing investors and counterparties to begin assessing banks again on their business strengths."
Efforts to ease credit mess are working
There is growing evidence that the credit freeze is ending or at least easing.
The London Interbank Offered Rate -- the rate banks charge each other for short-term borrowing -- fell to 1.28%, below the government's target federal funds rate of 1.5% for the first time since Oct. 3, according to the British Bankers' Association. On Monday, it fell to 1.5% from 1.7%. Overnight lending rates are typically around the fed funds rate when markets are calm.
The three-month Libor fell to 3.83% this morning, from 4.06% Monday. It was at 4.42% Friday and 4.82% earlier last week.
The rate rose precipitously, locking up the credit markets, when banks panicked over fears of defaults and bankruptcies at other banks.
"Conditions are far from perfect, but (Monday's) improvement was substantial," Miller Tabak Chief Bond Strategist Tony Crescenzi wrote in a note to clients.
Another expert was a bit more cautious. "It likely will be a slow return to normalcy for credit markets," MKM Partners Chief Economist Michael Darda wrote in a note this morning, because "home prices probably have to get closer to a bottom."
Darda expects two to three more quarters of negative growth and then a weak recovery.
This morning, the Federal Reserve announced a new funding program to help further ease the short-term credit crunch by buying commercial paper from money market mutual funds.
"The short-term debt markets have been under considerable strain in recent weeks as money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests," the Fed said in a statement.
TI and Sun miss expectations
Texas Instruments late Monday reported a 26% drop in third-quarter net income, posting $563 million, or 43 cents per share, a penny shy of the consensus estimate.
The chip maker also said profit for the current quarter would be between $2.83 billion and $3.07 billion, short of Wall Street's estimate of $3.33 billion. "We see customers that are observing slowing demand from their marketplaces, and I think we have a number of customers that fear more reductions as they look at the overall economic environment, and I believe we have a number of people starting to guard against getting caught with inventory," CEO Rich Templeton said on an analyst conference call.
The stock was down 6.3% to $16.85; it had dropped nearly 12% after the open.
Things weren't looking any better at Sun Microsystems, which said late Monday that it would report a loss of between 25 cents and 35 cents per share in its fiscal first quarter, which ended Sept. 28.
Excluding charges, the loss will come out to between 2 cents and 12 cents per share, worse than analysts' expectations of a 1-cent loss. Revenue fell 32% to $2.95 billion.
Sun shares tumbled 17.5% to $4.77.
Andrew Rosenbaum contributed to this report.
