Replies to post #8713 on Sector Investing

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From Briefing.com: Weekly Recap - Week ending 16-Oct-09

All ten of the sectors gained, with the advance led by energy companies (+5.2%) and materials (+2.2%). Telecom (+0.1%) and consumer staples (+0.2%) underperformed on a relative basis.

Earnings were in focus throughout the week, with added attention on how the market would respond to revenue misses. The market in aggregate had a positive reaction to several earnings beats, though it is clear that expectations have been raised as shares of GE (GE) and IBM (IBM) tumbled after their quarterly results.

Earnings got off to a strong start, with JPMorgan Chase (JPM) reporting a hefty earnings beat, with Q3 EPS coming in at $0.82 versus the $0.51 consensus.

Goldman Sachs (GS) and Citigroup (C) reported earnings the next day, both topping estimates. But both shares came under a pressure in a "sell-the-news" trade. Later, Bank of America (BAC) broke the trend of upside earnings surprises from the major banks, posting Q3 EPS of -$0.26 per share versus expectations of -$0.20. Banks continue to be hampered by increasing credit losses.

In a similar fashion, shares of both IBM and GE fell despite EPS beats. IBM's disappointment came due to relatively weak services orders, while GE's revenue was well short of expectations ($37.8 billion versus $39.5 billion).

There were some reports that the market liked, however. Google (GOOG) bested its consensus EPS ($5.89 versus $5.42 consensus), and seemed more upbeat about the economic outlook.

After earnings, a major driver of trade was commodities and the dollar. The dollar tumbled to a fresh 52-week low at 75.21, giving a lift to commodities (+5.2%). As a result, gold hit an all-time nominal high of $1070.20 per ounce, and oil surged to the highest levels in 2009 at $78.75 per barrel. Crude prices also benefited by a smaller-than-expected increase in inventory levels. In turn, energy and commodity companies outperformed, with oil & gas equipment & services surging 7.8%.

Economic data had a modest impact on the market this week. Retail sales surprised to the upside with a softer-than-expected decline of 1.5% versus the -2.1% consensus. Excluding autos, retail sales increased a better-than-expected 0.5% versus the +0.2% consensus.

Initial jobless claims for the week ending Oct. 10 totaled 514,000, which was a bit below the consensus forecast of 520,000 initial claims and down 10,000 from the previous week. Continuing claims slipped below 6.0 million for the first time since March by coming in at 5.99 million. The consensus called for an even 6.00 million continuing claims.

The Empire State Manufacturing Index for October came in at 34.57, which topped the 17.25 consensus, which gave the stock market a boost.

Earnings will remain in focus in the upcoming week, with added attention placed to companies' top lines and commentary regarding the economic outlook.

 
 Index       Started Week  Ended Week    Change % Change YTD % 
 DJIA	      9864.94	   9995.91	130.97	  1.3	13.9 
 Nasdaq	      2139.28	   2156.60	 17.32	  0.8	36.8 
 S&P 500	      1071.49      1087.68	 16.19	  1.5	20.4 
 Russell 2000   614.92       616.18        1.26    0.2   23.4

8:51AM Nokia: Moody's downgrades Nokia's rating to A2, stable outlook (NOK) 13.68 : Moody's Investors Service downgraded to A2 from A1 the ratings for senior debt of Nokia Oyj (Nokia), but affirmed the Prime-1 for short-term debt and changed the outlook for the ratings to stable from negative. The rating change reflects Moody's view that (i) the mobile phone market will become more challenging for Nokia as a result of its more modest long term growth and more formidable competition in the attractive segments of the market and (ii) as a result Nokia is unlikely to return near term to the superior credit metrics that have marked the company's credit profile for many years. Given management's leveraging of the company though 2008, Nokia's financial performance and capital structure should be sustained only at or moderately above the current level, which Moody's considers to be commensurate with an A2 rating. At the same time the rating recognizes the still very resilient business profile of Nokia with market shares that dwarf the closest competitors. The expected stabilization of credit metrics on a lower platform and the strong established global market position of the company support the stable rating outlook.

8:02AM Chipmos Technology reports Q3 revs down 23.3% YoY to $104.5 mln, up 14.1% QoQ (no ests) (IMOS) 0.92 : Co reports 23.3% YoY decline in Q3 revs to $104.5 mln (no ests). Co also reports Sept revs fell 11.6% YoY to $35.9 mln, up 3.3% MoM.
10:32 am Advanced Micro Devices (AMD)

1:09AM Canadian Solar prices 6.0 mln common share offering at $15.75/share (CSIQ) 16.26 :

Advanced Micro Devices (AMD 5.81, -0.38) posted a smaller-than-expected loss for its third quarter while revenues came in higher than analyst estimates, but the positive news hasn't stopped investors from driving shares of AMD more than 6.0% lower in early trade Friday.

AMD reported a loss of $0.18 per share, $0.24 better than the First Call consensus that expected a loss of $0.42.

Revenues fell 22.3% year-over-year to $1.4 billion, but managed to top the $1.26 billion consensus. Revenues improved 18% sequentially though, driven by growth in microprocessor and graphics unit shipments.

Gross margins came in at 42% compared to 37% in the prior quarter. AMD said the improvement was due to improved factory utilization rates, higher microprocessor average selling prices and an increase in 45nm product shipments.

08:53 am Google (GOOG)

Google (GOOG 529.91) reported third quarter earnings and revenue that topped expectations and said that it is ready to invest in the future.

Google reported earnings of $5.89 per share, $0.47 better than the First Call consensus of $5.42.

Revenues, minus traffic acquisition costs, rose 8.4% year-over-year to $4.4 billion, topping the $4.24 billion consensus. Google said 53% of its revenues came from outside the U.S.

Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of its AdSense partners, increased 14% year-over-year. Wall Street expected paid clicks to increase about 15% or better. Paid clicks increased approximately 4% from the second quarter of 2009.

"While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future," said CEO Eric Schmidt. Google said it expects to make "significant capital expenditures" but did not provide a specific estimate.

Shares of GOOG are 72% higher year-to-date.

08:37 am IBM (IBM)

IBM (IBM 127.98) reported third quarter earnings that topped expectations, raised its full year earnings guidance and said that it saw improved revenue trends and share gains in software and hardware, but shares of the company are sinking more than 4.5% ahead of Friday's opening bell.

IBM reported third quarter earnings of $2.40 per share, $0.02 better than the First Call consensus of $2.38. Net income was $3.2 billion compared with $2.8 billion in the same period last year, an increase of 14%.

Revenues fell 6.9% year-over-year to $23.57 billion; the consensus expected $23.4 billion. Revenues were up 1% sequentially.

Big Blue reported gross margins of 45.1% in the quarter; the consensus expected 45.2%.

"Our long-term strategic shift to higher-value businesses again enabled us to deliver outstanding margin, earnings and cash flow growth in the third quarter," said CEO Samuel J. Palmisano. "We also saw improved revenue trends in our business and share gains in software and hardware."

IBM raised its guidance for 2009, saying it sees earnings of $9.85 per share, ahead of the $9.78 consensus and up from the company's previous guidance of $9.70. IBM also said it remains "well ahead of pace" for its 2010 roadmap of $10 to $11 per share.

Shares of IBM are up 52% year-to-date.