PortfolioCrafter – Market Commentary 10/23/07
Tuesday, October 23rd, 2007
Stocks rallied to close higher with enthusiasm for tech stocks carrying the day, after results from Apple Inc., DuPont and AmEx managed to overshadow fresh concerns about credit related write-offs in the financial sector. Investors continued to move back into stocks after last week’s mass exodus.
The Dow Jones industrial average closed up 109.26 or 0.81% to 13,676. 23, the broader S&P 500 closed up 13.26 or 0.88% to 1,519.59, and the tech-fueled Nasdaq composite closed up 45.33 or 1.65% to 2,799.26.
Market breadth was positive. On the New York Stock Exchange, winners beat losers 11 to 5 on volume of 1.3 billion shares. On the Nasdaq, advancers edged decliners 17 to 11 on volume of 2.4 billion shares.
Upbeat earnings from Apple and American Express and a drop in oil prices were among the factors lifting stocks today. However, lower- than-expected forecasts from Texas Instruments and Coach weighed on those stocks, reminding investors of how much profit growth is expected to slow this quarter. It appears that stocks can drift higher this week as investors show caution ahead of the Federal Reserve policy meeting next week.
It is apparent that bulls are hanging their hats on a cut by the Feds. Should this not happen, stocks could start that bigger pullback off the recent highs. With 31% of the S&P 500 having reported results, earnings are on track to have fallen 0.1% from the same 2006 period. Even if the rest of the earnings period brings lots of upside surprises, earnings growth is still on track to be the slowest in at least 5 years.
Shares of American Express closed up $1.79 or 3.15% to $58.66, on reporting sales and earnings that topped estimates. Higher spending by cardholders pushed third-quarter profit up to $1.07 billion, from $967 million. Revenue rose 11% to $6.95 billion from $6.27 billion.
Stock of Wal-Mart closed down $1.32 or 2.92% to $43.93, on stating that it expects growth to slow this year and for the next two years.
Shares of Texas Instruments closed down $2.84 or 8.29% to $31.43, on warning that fourth-quarter revenue won’t meet forecasts. Its third- quarter earnings rose 11% as demand for analog chips and lower manufacturing costs overcame a drop in revenue. Its net income rose to $776 million, from $702 million in the year-earlier period. Revenue fell 3% to $3.66 billion from $3.76 billion a year ago.
Stock of Level 3 Communications closed down $1.04 or 24.07% to $3.28, after reporting a wider third-quarter loss versus a year earlier, that nonetheless was narrower than analysts were expecting on an earnings-per-share basis.
Shares of Coach closed down $4.87 or 11.74% to $36.60, after issuing 2008 profit guidance that is short of estimates, overshadowing the company’s stronger third-quarter results.
U.S. light crude oil for December delivery fell for a second session in a row, losing 75 cents to $85.27 a barrel, not far from an all- time high of $90.07 hit last week in electronic trading.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
