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From Briefing.com: Weekly Recap - Week ending 23-Oct-09Following a volatile week of trade, U.S. equity markets closed with modest declines. Small cap stocks notably underperformed, though, as evidenced by a 2.5% decline in the Russell 2000. The S&P 500 lost a more modest 0.7%.

The declines were broad-based as nine of the ten sectors that make up the index ended lower, led by Materials (-1.8%). Only IT finished in positive territory (+1%), benefitting from blowout results from the likes of Apple (AAPL) and Amazon.com (AMZN).

Third quarter earnings results remained in focus, and the list of companies that surprised to the upside this week goes on and on, including names such as Amazon.com, American Express (AXP), Apple, AT&T (T), Capital One (COF), Caterpillar (CAT), McDonald's (MCD), Texas Instruments (TXN), UPS (UPS) and Yahoo! (YHOO).

But as mentioned above, the better-than-expected results did not translate to market gains. Once again corporate America demonstrated a unique ability to wring out operating costs. In the process it also revealed just how chubby operating budgets had gotten in the credit-driven bacchanal of recent years.

Basically, it appears as if we're seeing a tired market. That was never more evident than on Wednesday afternoon when the market plunged in the final 45 minutes of trade, with the move attributed to a late-session downgrade of Wells Fargo (WFC).

The ease with which the market broke, however, suggested to us that investors knew they was operating on borrowed time, trying to climb a wall of worry while staring at $81 a barrel oil, digesting word of government mandated pay cuts for select companies receiving bailout funds and realizing that the 1,100 mark for the S&P 500 proved to be another tough nut to crack earlier that day.

There were also disappointing pieces of economic data this week, particularly Initial Jobless Claims, which after falling the prior two weeks climbed in the week ended Oct. 16 (531,000 vs. 515,000 consensus). Housing data was mixed, as a jump in Existing Home Sales in September (5.57 million vs. 5.35 million consensus) offset weaker-than-expected Housing Starts and Building Permits.

Looking ahead to next week, third quarter earnings results and economic data, particularly the Advance reading for third quarter GDP on Thursday (10/29), will be in focus. There is also another potential catalyst as the calendar is full of Treasury auctions -- 5-year TIPS reopening Monday (10/26), $44 billion in 2-year Notes Tuesday (10/27), $41 billion in 5-year Notes Wednesday (10/28) and $31 billion in 7-year Notes Thursday.

 
 Index      Started Week Ended Week  Change % Change  YTD % 
 DJIA	      9995.91	 9972.18    -23.73   -0.2    13.6 
 Nasdaq	      2156.60	 2154.47     -2.13   -0.1    36.6 
 S&P 500	      1087.68	 1079.60     -8.08   -0.7    19.5 
 Russell 2000   616.18	  600.86    -15.32   -2.5    20.3

8:55AM Juniper Networks: Color on Quarter (JNPR) : Credit Suisse raises their JNPR tgt to $28 from $24 following the co's Q3 results that beat on both the top and bottom line. The firm notes that although JNPR's commentary all point to improvement in near-term demand, they still need to see further evidence of growth or oper margin expansion, in order for them to become more constructive. The firm remains concerned longer term re incremental pricing pressure in SP IPG business... Broadpoint Amtech raises their FY10 EPS est to $1.15 from $1.05 (consensus $1.02) following the co's beat and raise quarter post-close yesterday. Though up less than enterprise, the company suggested it is seeing the early phases of a recovery in service provider. Additionally, the co noted that networks are running hotter and service provider appears to be returning to more normal seasonal patterns for Q4. The firm believes that JNPR's premium multiple may be justified by the upside opportunity in enterprise and a recovery in service providers. However, the firm finds the stock fully valued in the high $20s/ low 30's... RBC Capital Mkts raises their JNPR tgt to $30 from $29 following the co's beat and raise quarter in which the co posted a 5% sequential rebound in revenues of $824 mln and EPS of $0.23 ahead of the consensus of $799 mln and $0.21. The firm notes that guidance healthy as well and a return to spend by carriers and enterprise customers helped Juniper post a book to bill greater than 1.0. Additionally, the firm notes that overall deferred revenues at $643 mln were flat sequentially yet product deferred revenues grew ~6% QoQ. It generally feels like smooth sailing for Juniper until the end of the year, in the firm's opinion.

8:35AM Microsoft beats by $0.08, beats on revs (MSFT) 26.59 : Reports Q1 (Sep) earnings of $0.40 per share, $0.08 better than the First Call consensus of $0.32; revenues fell 14.2% year/year to $12.92 bln vs the $12.32 bln consensus. Microsoft reports gross margin 78.0% vs 78.8% consensus. Microsoft is reducing FY10 operating expense guidance to $26.2-26.5 bln, prior guidance $26.6-26.9 bln. These financial results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability. Adding back the deferred revenue, revenue totaled $14.39 billion, a 4% year-over-year decline, and EPS totaled $0.52 per share, an increase of 8% over the same period of the prior year.

8:03AM Power Integrations beats by $0.03, beats on revs; guides Q4 revs above consensus (POWI) 32.46 : Reports Q3 (Sep) earnings of $0.36 per share, $0.03 better than the First Call consensus of $0.33; revenues rose 21.7% year/year to $60 mln vs the $57 mln consensus. Co issues upside guidance for Q4, sees Q4 revs of $63-66 mln vs. $55.65 mln consensus. Q4 Non-GAAP gross margin is expected to be 50%, plus or minus half a percentage point. GAAP gross margin is expected to be between 49 and 50%. Operating expenses are expected to be between $19.5 million and $20 million including approximately $2.5 million of stock-based compensation expenses.

Amkor Technology (AMKR) and Toshiba announced that they have signed definitive agreements for the formation of a joint venture to provide semiconductor assembly and final testing services in Japan. Amkor is expected to invest ~$17 million in J-Devices and to purchase certain assembly and test equipment from Toshiba for ~$45 million and lease such equipment to J-Devices...

09:35 am Microsoft (MSFT)

Microsoft (MSFT 29.29, +2.70) reported fiscal first quarter earnings and revenue that surpassed Wall Street estimates, but both profits and sales were down from the same period last year.

Microsoft reported first quarter earnings of $0.40 per share, $0.08 better than the First Call consensus of $0.32. Net income of $3.57 billion was down 18% year-over-year.

Revenues fell 14.2% year-over-year to $12.92 billion; the consensus expected $12.32 billion.

Microsoft said it is reducing its fiscal 2010 operating expense expectations to between $26.2 billion and $26.5 billion; the company's previous range was $26.6 billion to $26.9 billion.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," said CFO Chris Liddell. "We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."