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From Briefing.com: Weekly Recap - Week ending 15-Oct-10Third quarter earnings reporting season began in earnest this week. While the strong start played a role in the market's advance, particularly in the tech-heavy Nasdaq indices, investors remained focused on the prospects for further quantitative easing from the Federal Reserve.

U.S. equity markets rallied late Tuesday following the release of the FOMC Minutes from the Sept. 21 meeting, which reassured investors that "QE2" seemed to be the likely default scenario for Fed officials.

Then on Friday, Fed Chairman Ben Bernanke seemed to confirm that view, saying at a conference that "there would appear -- all else being equal -- to be a case for further action."

Most of the move this week occurred Tuesday afternoon and Wednesday morning (with the exception, again, of the tech-heavy Nasdaq indices). Foreign markets rallied overnight following the FOMC Minutes, then gains were extended Wednesday, aided by a strong start to earnings season.

Notably, tech bellwethers Intel (INTC) and Google (GOOG) pleased investors. Intel beat by $0.02 and issued gross margin guidance above consensus while Google crushed bottom-line expectations. Those results, along with M&A activity, helped the NASDAQ Comp. outperform the other major averages this week. The NASDAQ 100 also hit a new 52-week high.

Staying along those lines, eight of the 10 S&P 500 sectors advanced this week, easily led by a 3.9% surge in IT. Financials underperformed after JPMorgan Chase (JPM) and GE Capital reported weak top-line figures.

This week's economic calendar was back-loaded. The interesting point here is the market may have preferred bad news, because bad news increases the likelihood of QE2. That may be the reason the major averages ended mixed on Friday -- tech rallied following Google's results -- despite much better-than-expected Retail Sales data. The advance figure for September came in at 0.6% (Briefing.com consensus 0.4%) while both the headline figure and Sales ex. autos were revised higher in August.

Looking ahead to next week, investors can expect a flood of third quarter results, but the focus may once again be on the economy. The economic calendar is a little thin, though it does include Industrial Production, Housing Starts and Building Permits, and the FOMC's regional Beige Book economic survey.

 
 Index       Started Week    Ended Week  Change % Change  YTD % 
 DJIA          11006.48      11062.78    56.30     0.5    6.1 
 Nasdaq         2401.91       2468.77    66.86     2.8    8.8 
 S&P 500        1165.15       1176.19    11.04     0.9    5.5 
 Russell 2000    693.82        703.16     9.34     1.3   12.4

2:31PM Technology Select Sector back flirting with its opening high at 24.03, its 52-wk close high from April is at 23.08 (XLK) 23.02 +0.33 : Note that its 52-wk intraday peak from April is at 24.16 -- GOOG +10.8%, CSCO +1%, HPQ +1.6%, AAPL +2.7%, ORCL +1.8%, MSFT +0.8%.

9:15AM Motorola and Nokia (NOK) announce 4G licensing agreement (MOT) 7.96 : Co and Nokia jointly announce that the companies have entered into a 4G license agreement. Under the terms of the agreement, Motorola and Nokia have extended the companies' existing intellectual property licensing agreement to include 4G cellular technologies, such as LTE, WiMAX and LTE-Advanced. The terms of the agreement are confidential

8:06AM Chipmos Technology plans 1:4 reverse stock split; also confirmed payment from Spansion (IMOS) 1.47 : Co announced that it will hold a special meeting of shareholders on January 21, 2011 to seek approval for a reverse stock split of ChipMOS's common stock with a ratio of 1-for-every-4 shares.... Co also confirmed that its subsidiary, ChipMOS TECHNOLOGIES, INC., a 91% owned subsidiary of ChipMOS, has received the payment of approximately US$67.8 million for the sale of recognized damage on breach of contract and liquidated damages rights against Spansion LLC as disclosed in the Company's January 14, 26 and October 4, 2010 press releases.

6:35AM General Electric beats by $0.02, misses on revs; sees industrial revs flat YoY, with growth QoQ (GE) 17.16 : Reports Q3 (Sep) earnings of $0.29 per share, excluding non-recurring items, $0.02 better than the Thomson Reuters consensus of $0.27; revenues fell 5.1% year/year to $35.89 bln vs the $37.54 bln consensus. GE Capital Services' revenues fell 2% vs last year to $12.5 bln. Industrial sales were $23.6 bln, down 6% from 3Q09. Revs were impacted by lower equipment sales and reduced GE Capital assets. GE expects Q4 2010 Industrial revs to grow QoQ from Q3 and to be about flat with the year-ago period. "For the first time in eight quarters, we saw growth in both equipment and service orders. Equipment orders increased 9%, including 33% growth in Technology Infrastructure... Third-quarter 2010 results should give investors confidence that a renewed GE should grow earnings and dividends in 2011 and beyond... GE Capital is well positioned with respect to Basel III capital requirements and we expect earnings growth in our financial services business to continue."

Texas Instruments (TXN) announced its first wafer fabrication facility in China. This important milestone puts manufacturing close to the co's growing customer base there.

08:59 am Apple ests raised at RBC Capital Mkts ahead of Q4 report Monday: . RBC Capital notes, on 5 mln iPads, 13.5 mln iPhones, it expects $20.3 bln rev and $4.48 EPS (prior $19.7/$4.15), above Street ($18.8/$4.06) and guidance; GMs expected at 38.0%, above 35% guidance. On strong holiday iPhone, iPad sales and distribution expansion, Q1 guidance expected at $23.0-23.5 bln rev (50% Y/Y), above Street ($22.1). On conservative GM outlook (est. 35-36%), EPS guidance expected at $4.57-$4.85 (Street $5.01). iPhone/iPad supply chain checks indicate strong 2H/CY10 build; it is raising its F10 ests to $65.2 bln rev, $15.00 EPS (prior $64.6/$14.67; $63.7/$14.56) and F11 to $86.2 bln/$19.27 (prior $84.3/$19.00; $81.0/18.03 consensus).

10:58 am AMD Sees Q4 Revs Flat Sequentially (AMD)

Advanced Micro (AMD 21.04 -0.75) reported third quarter earnings of $0.15 per share, $0.09 better than the Thomson Reuters consensus of $0.06.

Revenues rose 15.7% year-over-year to $1.62 billion versus the $1.61 billion consensus.

Gross margin was 46.0% against 44.0% consensus.

AMD expects revenue to be approximately flat sequentially for the fourth quarter of 2010 (approx $1.62 billion versus the $1.66 bln consensus).

10:16 am GOOG Easily Tops Q3 EPS Expectations (GOOG)

Google (GOOG 593.90 +52.97) reported third quarter earnings of $7.64 per share, excluding non-recurring items, $0.96 better than the Thomson Reuters consensus of $6.68.

Revenues rose 25.0% year-over-year to $5.48 billion versus the $5.27 billion consensus.

Third quarter paid clicks (PPC) rose approx.16% year-over-year versus estimates in the low to mid teens (up 15% year-over-year in the second quarter), rose 4% quarter-over-quarter; cost per click (CPC) rose approx. 3% year-over-year versus estimates in the mid single digits (up 4% year-over-year in the second quarter), up 2% quarter-over-quarter op-ex 30% of revenues versus 29% in the second quarter.

Third quarter non-GAAP operating income was $2.93 billion, or 40% of revenues.

This compares to non-GAAP operating income of $2.39 billion, or 40% of revenues, in 3Q09. Headcount +7.0% quarter-over-quarter. TAC was 26% of revenues versus 27% in the third quarter of 2009.

09:48 am GE Q3 Revs Fall Short of Expectations (GE)

General Electric (GE 16.42 -0.74) reported third quarter earnings of $0.29 per share, excluding non-recurring items, $0.02 better than the Thomson Reuters consensus of $0.27.

Revenues fell 5.1% year-over-year to $35.89 billion, worse than the $37.54 billion consensus.

GE Capital Services' revenues fell 2% versus last year to $12.5 billion. Industrial sales were $23.6 billion, down 6% from the third quarter in 2009.

Revenues were impacted by lower equipment sales and reduced GE Capital assets. GE expects fourth quarter 2010 Industrial revs to grow quarter-over-quarter from the third quarter and to be about flat with the year-ago period.

The company said, "For the first time in eight quarters, we saw growth in both equipment and service orders. Equipment orders increased 9%, including 33% growth in Technology Infrastructure... Third-quarter 2010 results should give investors confidence that a renewed GE should grow earnings and dividends in 2011 and beyond... GE Capital is well positioned with respect to Basel III capital requirements and we expect earnings growth in our financial services business to continue."

09:42 am Inflation Remains Subdued as PPI Growth Fails to Pass Through to CPI

Consumer price growth slowed in September as prices increased only 0.1% after rising 0.3% in August. The Briefing.com consensus expected prices to increase 0.2%.

The lack of price growth was a little surprising considering the September PPI data.

Producer prices rose 0.4% as food prices increased 1.2%. Producer food prices generally pass through into the CPI with minimal depreciation, but that did not occur in September. Food prices were up only 0.3%. That is the highest increase since October 2008, but a far cry from the 1.2% increase in the PPI. It seems that even food manufacturers and grocery stores, which sell the most inelastic products consumers can buy, cannot escape the deflationary pressures brought on by high unemployment and low income growth.

Excluding food and energy, core CPI remained unchanged for the second consecutive month. The consensus expected core prices to increase 0.1%.

Year-over-year core growth fell to 0.8% in September. This is the lowest growth rate since 1961 and well below the 2.0% - 2.5% Fed target level.

09:39 am Consumers Show No Signs of Slowing Down as Retail Sales Remain Strong

Last month we stated that back-to-school spending was not the main motivator for strong retail sales in August. Instead, we pointed toward unexpected income growth as the driver in goods demand in August. These ideas were confirmed with the latest data as retail sales remained strong in September.

Retail sales rose 0.6% in September after an upwardly revised 0.7% increase in August. The Briefing.com consensus called for sales to increase by 0.4%.

If back-to-school spending was the main driver for the growth in August, we would have expected a substantial payback period to develop in September in school-related areas. That did not happen.

Sales growth was widespread with only clothing (-0.2%) and department stores (-0.1%) revealing monthly declines.

Even more impressive, the sales growth came after the employment report revealed a lack of growth in weekly earnings along with some of the worst consumer sentiment/confidence levels seen since the end of the recession. It seems that consumers are not worried that income will fall in the near future.

Core retail sales, which exclude the highly volatile motor vehicle dealers, buildings material and supply stores, and gasoline stations, grew 0.4% in September after increasing 1.0% in August. This level is consistent with expectations of steady spending over the next few months.