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From Briefing.com: 4:18PM IBM beats by $0.13, ex items (IBM) :Reports Q3 (Sep) earnings of $1.26 per share, excluding non-recurring items, $0.13 better than the Reuters Estimates consensus of $1.13; revenues fell 7.8% year/year to $21.53 bln vs the $21.71 bln consensus.

4:16PM Infineon change of venue request denied in Mosaid Technologies suit (IFX) 9.82 -0.01:

4:14PM Novellus reports in-line (NVLS) 24.89 :Reports Q3 (Sep) earnings of $0.21 per share, excluding non-recurring items, in-line with the Reuters Estimates consensus of $0.21; revenues fell 18.5% year/year to $338.9 mln vs the $320.9 mln consensus. NVLS reports gross margin 45% vs 47% street expectations Co stated: "While we have made our earnings per share targets for the company, it was not achieved while hitting our gross margin targets. Our gross margin suffered because of higher warranty costs, lower absorption of operations overheads and other timing effects."

Close Dow +60.76 at 10348.10, S&P +3.53 at 1190.10, Nasdaq +5.47 at 2070.30: After opening higher but spending most of the session within a tight trading range that kept the indices encircling the flat line, the market found some modest late-day support in the Financial sector's (+0.2%) emergence from the red. During the final hour of trading, the indices rose to their second straight session of gains that came on the heels of a two week slump. While Financials' turnaround injected some fresh momentum into the market, it was the General Motors (GM 30.03 +2.05) and Altria (MO 74.96 +4.30) team that supported the Dow and can be credited for upholding the overall market. Despite the much wider than expected Q3 loss GM announced this morning - the company missed analysts' estimates by $1.11 - a pair of news items traders simultaneously digested eclipsed the report and sent shares soaring over 7.0%. Specifically, the company announced that it has reached a definitive agreement with the United Auto Workers (UAW) to cut healthcare costs by $1 bln annually, and is also reportedly considering selling a stake in GMAC. Altria, meanwhile, reported that the U.S. Supreme Court rejected the Justice Department's appeal aimed at reinstating a potential $280 bln penalty in its landmark case against cigarette makers. As a result, Phillip Morris' parent's shares surged over 6.0%. Mounting concerns over Tropical Storm Wilma, which could potentially approach the oil-rich Gulf of Mexico by the end of the week, helped cap overall momentum today, though. Renewed infrastructure and supply worries drove the price of crude higher and to a $63.60/bbl close while the prices of gasoline and natural gas similarly headed north. As such, energy price action exacerbated investors' sense of nervousness as the third quarter earnings season kicks off. Speaking of earnings reports, today's session included several upside surprises. Citigroup (C 44.81 -0.23), Wachovia (WB 48.10 +0.25), and Charles Schwab (SCH 13.42 +0.39) surpassed analysts' expectations, and brokers' outperformance that a 2.2% jump in SCH shares fostered help support the Financials (+0.2%) sector. Posting the biggest gain was the Utilities sector, up 1.3% on account of wide-spread buying interest and a 4.1% upgrade-induced gain extended by Exelon (EXC 50.62 +1.97). Due to the gain Altria lent, Consumer Staples posted a 1.1% gain while, alongside the aforementioned rises in energy prices, the Energy sector climbed 0.9%. After several session's of profit-locking within the S&P's best performer, crude's action gave traders a cue to reinitiate buying activity today. As for the three sectors that finished in the red, Telecom's 0.8% decline left it in last place. Healthcare (-0.1%), while paring much of its session-long loss, was unable to fully recover from weakness in its bellwethers and particular weakness in pharmaceuticals. While the session's calendar was a light one - featuring just a handful of earnings reporters and the latest report on manufacturing in the New York region - traders may have had their eyes on tomorrow's docket. Sept. PPI data (consensus 1.2% total, 0.2% core) will be released at 8:30 ET. In addition, Johnson & Johnson (JNJ 62.90 -0.80), 3M (MMM 72.46 +1.74), and United Technologies (UTX 51.11 -0.52) are amongst the earnings reporters slated to release Q3 results.DJTA +0.15, DJUA +1.64, DOT +0.96, Nasdaq 100 +0.36, Russell 2000 +0.03, SOX +0.46, S&P Midcap 400 +0.47, XOI +1.45, NYSE Adv/Dec 1764/1497, Nasdaq Adv/Dec 1414/1587

9:47AM Anheuser-Busch (BUD) Legg Mason upgrades Sell to HOLD. Upgrade follows a several month selloff in the shares. They note that the co continues to return margin to consumers, but say a low $40s share price anticipates limited growth off an earnings base that is approximately 10% lower than 2004's profits. Still, they believe trading risk points downward and the industry and co-specific outlook argue against overweighting the shares for months or qtrs to come.
9:42AM Cincinnati Fincl (CINF) Legg Mason upgrades Hold to BUY. Target $47. Firm is saying the co's recently distributed guidance for Q3 suggests that near-term expectations for fundamental underwriting profits (i.e. excluding catastrophes) are probably too low. They see book value growth resulting from steady underwriting outperformance as the primary catalyst for the shares.

9:42AM Hershey Foods (HSY) Harris Nesbitt upgrades Neutral to OUTPERFORM. Target $72. Upgrade is based on valuation. Notably, firm expects HSY's recent momentum in its non-chocolate confectionery division (an estimated 20% of total sales) to contribute to ongoing earnings growth. Firm says their upgrade is not contingent on the upcoming qtr.

9:41AM Corinthian Colleges (COCO) Morgan Stanley initiates EQUAL-WEIGHT. Target $14. Firm finds the stock's valuation to be attractive relative to a possible upside scenario, likes the changes in management and strategy, and sees a long-term secular opportunity to meet vocational education needs. However, they think that operating performance will be very slow to improve, given the mixed asset quality, insufficient infrastructure, heightened competition, and ongoing regulatory challenges.

9:40AM Aeropostale (ARO) Brean Murray upgrades Hold to ACCUMULATE. Target $23. Although firm believes that the co's turnaround will not become fully apparent until 2006, they believe that in many respects the worst is behind the co and mgmt is once again fully focused on driving profitable growth. Also, with ARO now trading near its 52-week low and a valuation of 11.2x their below-consensus 2006 EPS est (which does not include the co's net cash of over $2.50/share), firm believes the risk/reward is compelling.

9:40AM Photon Dynamics (PHTN) First Albany upgrades Neutral to BUY. Target $22. Upgrade is based on valuation and near-term demand. Firm believes that the recent lack of execution is priced into the stock, and that the value of the co's dominant market position in LCD inspection is not.

9:28AM Delta Petroleum (DPTR) KeyBanc Capital Mkts / McDonald initiates BUY. Target $23. Firm believes he DPTR's growing asset base, especially the growth potential from the Rocky Mountain region, will provide a catalyst for share price appreciation going forward. As DPTR focuses more of its drilling activities on unconventional natural gas resource plays in the Rocky Mountain region, they believe the co will create more of a longer life stable production base with strong organic growth potential.

9:26AM Seattle Genetics (SGEN) Needham & Co initiates BUY. Target $7. The co has a promising pipeline focused on antibody therapeutics for hematological cancers, featuring two Phase 2 and Phase 1 clinical products (with a third expected in Q4), with encouraging data to date; impressive collaborations with top-shelf PHRMA and biotech companies, thereby validating SGEN's approach. Firm believes that SGEN-40 represents a hidden jewel in the product pipeline: firm is impressed by data to date in multiple myeloma and Non-Hodgkin's Lymphoma as well as the potential for this antibody in a variety of B cell diseases. Although firm does not expect SGEN products to be marketed until late 2008/early 2009, the upcoming newsflow from these clinical products combined with the current modest valuation should elicit investor interest.

9:24AM St. Jude Medical (STJ) FTN Midwest upgrades Neutral to BUY. Target $33. Firm views the proposed acquisition of ANSI quite favorably, as the acquisition not only stands to enhance STJ's sustainable long-term revenue and earnings growth rates, but also successfully diversifies STJ's existing product offering into the high-growth, $1.0 billion neuromodulation market nearer term. Furthermore, firm says the potential R&D synergies between the two co's may serve to not only bolster but also accelerate commercialization of the respective companies' pipelines.

9:23AM Apple Computer (AAPL) Am Tech/JSA Research upgrades Hold to BUY. Target $63. Firm's concerns with high investor expectations, competition, the INTC transition, and even valuation have lessened. Firm believes AAPL is experiencing strong product momentum and that the co's already strong competitive advantage with its integrated stack of hardware/software/service has strengthened. Firm sees many potential catalysts for the balance of 2005 and more importantly in 2006.

9:21AM Lamar Advertising (LAMR) Janco Partners initiates BUY. Target $55. Firm believes several near-term catalysts make for an attractive entry point in the stock given their expectations for market share gains for the Outdoor industry in the coming years.

3:54PM Altria Group (MO)
75.00 +4.34: Tobacco stocks climbed sharply higher on Monday after the U.S. Supreme Court rejected an appeal by the Department of Justice to reinstitute a financial disgorgement penalty in its ongoing civil racketeering case against the tobacco industry. The Dow Jones tobacco index gained more than 6% during the regular trading session, with shares of Altria Group, parent of Philip Morris, leading the rally. The stock - a component of the Dow Jones Industrial Average - traded up nearly 7% on Monday, reaching an all-time high of $75.60.

Other companies targeted in the lawsuit include Reynolds American (RAI), Vector Group Ltd.'s (VGR) Liggett Group Inc., Loews Corp.'s (LTR) Lorillard Inc., and British American Tobacco Plc (BTI), all of which moved to the upside in intraday trading.

The decision by the high court upholds an earlier ruling by a Washington D.C.-based U.S. District court, where a panel of judges voted 2-1 against the government and its attempt to collect nearly $280 billion from the industry for allegedly misleading the American pubic about the dangers of smoking over the past five decades. The U.S. Court of Appeals stated that "disgorgement" financial penalties could be forced in a criminal racketeering cases, but not it civil lawsuits, according to the 1964 Racketeer Influenced and Corrupt Organizations Act. With the Supreme Court's rejection of the appeal, the government is prohibited from seeking past profits from cigarette makers to compensate for years of alleged fraud.

As a result of the favorable decision, Altria and the tobacco industry are largely clear of the government's landmark racketeering suit. While the potential threat from the lawsuit has not completely dissipated, the recent decision provides great clarity for Altria into any potential financial obligations and seemingly brings the company closer to its planned break-up.

--Richard Jahnke, Briefing.com

12:26PM Supervalu (SVU)

31.70 +1.85: Shares of Supervalu climbed more than 6% early Monday after the Minneapolis-based grocery retailer and food wholesaler posted second quarter earnings ahead of analyst expectations. For the most recent period, the company said it earned $33.8 million, or $0.24 per share, compared with $78.5 million, or $0.55 per share, for the same quarter last year. However, excluding charges of about $45 million, or $0.31 per share, related to the plan to sell 20 Pittsburgh stores, start-up costs related to growth initiatives, and the losses incurred from Hurricane Katrina, quarterly profits were flat with last year's quarter and seven cents better than the consensus estimate.

Net sales for the quarter rose slightly to $4.6 billion from $4.5 billion, with supply chain services up 2.8% and retail sales flat on a year/year basis. Sales for supply chain services increased to $2.1 billion, while operating income for the segment advanced 10 basis points, ex-items, reflecting the higher-margin third-party logistics service business, the company said. Second quarter retail sales were $2.5 billion with operating income about 10 basis points higher, excluding charges related to the planned store closings in Pittsburgh and Hurricane Katrina. The performance in the retail division reflects new store openings, substantially offset by the impact of higher store closings, primarily at Sav-A-Lot, as well as a more competitive retail environment. Same-store sales declined 1.6%, including flat comparable sales at company-operated Save-A-Lot stores.

Looking ahead, Jeff Noodle, Supervalu Chairman and CEO noted, "as the impact of higher fuel prices continues to unfold across the consumer spending landscape, we are refining our merchandising programs across our network to improve sales performance. In addition, our supply chain services operation continues its progress with next generation strategies including supply chain technology investments, W. Newell & Co. produce, and third party logistics. We are confident that these programs lay the groundwork for sales improvement."

For the full-year, Supervalu projected earnings to be in the range of $2.29 to $2.39 per share, excluding one-time charges, compared to its previous guidance of $2.20 to $2.30 per share. In addition, comparable store sales are expected to be flat for the remainder of the year, as consumer spending will continue to be pressured by higher fuel prices and modest food inflation, the company said. Analysts had forecast EPS of $2.23, according to Reuters Estimates.

--Richard Jahnke, Briefing.co

11:18AM General Motors (GM)

29.97 +1.99: Despite reporting a $1.6 bln third quarter loss, shares in General Motors surged in response to the auto maker's announcement that it had reached a tentative agreement with the UAW. The deal comes at a critical time for GM as health care costs have swelled to $5.6 bln for this year alone - 1.5x profits. The market is still digesting this news windfall this morning, along with the possibility that GM may sell-off GMAC.

After weeks of negotiations, a deal was reached between the world's largest automaker and the United Auto Workers Union to reduce health-care costs for retirees by 25%, or $15 bln. The amount was slightly less than the $20 bln that GM had targeted. The deal reduces expenses by $3 bln on a pre-tax basis and will equate to cash savings of $1 bln per year. GM's feet were put to the fire, so to speak, after Delphi, the largest parts manufacturer, filed Chapter 11 last week. Under the agreement, which still needs to be ratified, GM will help mitigate the impact of the reduction in health-care coverage by establishing a Defined Contribution Voluntary Employee Benefit Association fund to which GM will contribute a billion dollars to in the years 2006, 2007, and 2011.

GM's future rests on its ability to drastically reduce its considerable structural costs and increase vehicle sales. GM plans to close more component and assembly plants, cutting 25k jobs by 2008 to reduce costs by $5 bln by the end of 2006. It's also exploring the sale of GMAC to an unnamed "strategic partner" - a deal which comes with mixed implications. GMAC is the company's cash cow, but the move would improve liquidity and protect the unit's credit rating against GM's woes.

The bloodshed that was GM's third quarter result was largely overlooked by the market, which hopes the UAW deal marks a signpost in the road towards GM's recovery. GM reported a net loss of $1.6 bln, or $2.89 per share. Stripping out a charge for assets in North America and Europe, the loss was cut to $1.1 bln, or $1.92 per share - two and a half times the loss the market was expecting. Profit gains of $25 mln and $176 mln in Latin America and Asia, respectively, were minuscule in comparison to the losses in North America of $1.6 bln. Europe also posted a loss of $150 mln due to a tough pricing and weak economic environment. GM's global market share slid 80 basis points to 14.6%, including a 2.9% point decline in North America to 25.6%. The only bright spot was a 3 point rise in share in China to 11.7%.

The striking profit loss speaks volumes considering GM generated $38.36 bln in revenue, up 3.5% y/y - three billion dollars above the consensus estimate. The desperate move to lure customers into showrooms with employee-level price discounts severely weighted on the bottom line. GM continues to get hurt by its product mix, which is heavily-weighted towards higher priced vehicles like trucks and SUVs. Average selling prices continue to fall as consumers are buying smaller, lower priced cars, which carry a lower profit margin.

The loss marks GM largest unprofitable streak in seven years, according to Bloomberg. GM hopes to halt the bleeding by reducing fixed costs by $5 bln by the end of next year. While the UAW agreement is certainly a major hurdle crossed for GM, there is considerable work to be done. GM needs to reduce its cost structure enough to sell cars at competitive prices. What this summer's successful incentive program did show, however, was that the American consumer is still willing to buy GM's cars, only if they perceive value. With regard to the stock, share performance will be steered by headlines, creating a volatile trading environment. The risks are considerable given the highly competitive and cyclical nature of the automotive industry. Additionally, GM's prospects will be impacted by global economic conditions, consumer spending trends and rising interest rates. ---Kimberly DuBord, Briefing.com

10:23AM Mattel (MAT)

15.14 -0.81: Mattel Inc., the nation's largest toymaker, reported Monday that third quarter profits fell 12% as it continued to face significant pressures from rising costs and concerns over slowing consumer discretionary spending. The company, whose brands include Barbie, Hot Wheels, and Fisher-Price, said earnings for the most recent period were $225.3 million, or $0.55 per share, down from $255.8 million, or $0.61 per share, a year earlier. On average, analysts had expected EPS of $0.61, according to Reuters Estimates.

Sales dropped slightly to $1.67 billion, which includes benefits from currency exchange rates, as declines in the Barbie brand offset increases in much of the rest of Mattel's product portfolio. Barbie sales fell approximately 18% from the year-ago period, while Hot Wheels and Fisher-Price advanced 4% and 6%, respectively. On a regional basis, the company said sales declined 4% in the U.S., but climbed 5% in international markets, including a 3% benefit from changes in currency exchange rates.

Slowing sales growth, particularly for the Barbie brand, along with higher SG&A expenses contributed to declining margins for the quarter. Gross margin decreased 2.1% year/year to 45.1%, while operating margin fell 3.1% as SG&A costs rose 1% from last year. With gas prices remaining at high levels, toymakers have felt the pinch of rising input costs, as well as slowing retail demand. As the holiday season fast approaches, Mattel along with rival Hasbro (HAS) - which also reported disappointing third quarter results early Monday - will undoubtedly have to contend with persistently high gas prices and worries of a more meaningful slowdown in toy spending.

"Overall, we continue to experience the effect of a difficult retail environment as well as cost increases," said Robert Eckert, Mattel's Chairman and CEO. "I am confident, however, that our recent organizational changes have laid a positive foundation as we continue to reinvigorate the Barbie brand and improve our processes across the organization."

Shares of Mattel are down more than 5% in early trading Monday, scraping a new 52-week low of $15.14. Year-to-date, the stock has slid nearly 20%.

--Richard Jahnke, Briefing.com

9:06AM Page One - Earnings Reports Will Help

This week will bring a flood of earnings reports. Stock futures indicate a flat to slightly lower open.

Oil prices are up over $1 to almost $64 a barrel. There is another storm in the Caribbean that is a potential threat to output. This has added to a general sense of caution ahead of earnings reports.

This morning, Citigroup reported earnings 3 cents ahead of expectations and Wachovia beat by 2 cents. WW Grainger beat by 6 cents. General Motors reported earnings below expectations, but there is also word that the company has reached agreement with the UAW to cut health care costs. This has the stock trading higher pre-market.

After the close today, IBM reports. Tomorrow morning, Johnson & Johnson, 3M, and United Technologies are the major reports due. There are plenty more on the calendar for the rest of the week.

The return of the focus to earnings should provide support to the stock market. Maybe not today or tomorrow, but as earnings season progresses, the strong trend in earnings can't helped but be noticed.

There is still an excessive pessimism associated with the undeniable negative of high energy prices. But, September consumer spending remained strong, and the core CPI for September was just 0.1%. There is still no hard data to substantiate the fears that high energy prices will slam consumer spending or lead to broad-based inflationary pressures.

As discussed in this morning's Big Picture column, the outlook for the stock market is not great. It is also not nearly as bad as the constant emphasis on the negatives in the press suggests. Economic and profit growth are still above long-term trends and valuations are now at very reasonable levels. A rational assessment takes into consideration all factors, not just the bearish fashion of the day. Dick Green, Briefing.com