US stocks fall, taking the Dow back a hair under 10000, after disappointing reports out of BofA and GE, and despite another strong report on industrial production.
DJIA loses 67 (0.7%) to 9996; the index climbed back above 10000 in the last hour, but couldn’t hold it. IBM weighed heavily as investors were disappointed with its earnings. Still, the Dow gained about 1.3% on the week, and is up for the second straight week, rising 5.4% over that time. S&P 500 loses 9 (0.8%) to 1088, Nasdaq Comp slides 16 (0.8%) to 2157. Crude climbs over $78.
Earnings reports drove gains early in the week, but fueled losses by the end. Last quarter, stocks had a pretty set pattern: earnings were down from the year before, sales were down, but the bottom line beat Wall Street expectations. That pattern was enough for investors — three months ago. Today, GE’s earnings fit that exact pattern, but the stocks dropped 4.2%. The expectations have been raised, for GE and IBM and everybody else. Whether they’ve been raised too much is the question, and it’s the question implicit in a number like Dow 10000.
Based on mutual-fund flows, retail investors haven’t been giddy participants in the stock markets’ big move off March lows, preferring to divert most of their fresh investments into bond funds.
Unusual, since the average investor is typically a horrible market timer, enthusiastically pouring the most money into equity funds as market rallies peak, and yanking out their investments at moments of maximum pain during market bottoms.
So what gives now? Why hasn’t the S&P 500′s 60% move seduced more retail investors into stock funds?
“Maybe it’s because after a record nine point P/E multiple expansion this quickly from the recession low (normally we see a three point multiple expansion) the typical retail investor realizes that it makes no sense at this juncture to pay a Cadillac price for a Ford Focus,” Gluskin Sheff economist David Rosenberg writes in his daily commentary.
There’s a reason they call companies like Bank of America and General Electric bellwethers: earnings from the two blue chips illustrate the strengths and weaknesses in the economy; also, we discuss the strong industrial production report, and wonder whether it can be maintained.
Wal-Mart’s (WMT) continuing price war against Amazon (AMZN) has potential to revolutionize the publishing industry.
Or it may just turn into one huge publicity stunt.
Wal-Mart slashed prices of some highly anticipated new hardcovers to $10, which prompted Amazon to follow suit with the same price cut. Wal-Mart fired back with another cut down to $9, which Amazon matched again this morning.
Wal-Mart, by far the country’s biggest retailer, is aiming to increase its Web presence. The company doesn’t release stats pertaining to online sales, but this latest price war is obviously geared at drumming up publicity about its online offering as well as stealing market share from Amazon.
Wal-Mart CEO Raul Vazquez offered up some fighting words about the retail giant’s strategy. “If there is going to be a ‘Wal-Mart of the Web,’ it is going to be Walmart.com,” Vazquez tells WSJ. “Our goal is to be the biggest and most visited retail Web site.”
Several 3Q reports from bellwethers — IBM and Google late yesterday, along with GE and Bank of America this morning — shake out to leave a slightly negative tone ahead of regular trading.
So far, GOOG’s the only one trading higher premarket, up 3.2%. IBM’s down 4%, GE off 1.4% and BAC down 2.8% so far.
Interesting comment out of JPMorgan regarding IBM. Firm says 3Q results were “good enough,” and suggests buying on any dips, but notes there were some mixed signals that could disappoint elevated investor expectations.
“Hardware exhibited nice improvements, but lighter services signings stand to be an offset,” JPM says. “Results and outlook are solid, but expectations had been running hot,” firm adds. Seems to us expectations are running a little hot for everybody.
US dollar’s slightly higher, oil easing a little but still above $77/barrel. Two pieces of economic data could have some influence on market direction — September industrial production & capacity utilization due at 9:15am, and Reuters/Univ of Michigan Oct consumer sentiment set for 9:55am.
S&P futures down 5.40; DJ futures down 44. Ten-year a little higher, yield at 3.46%.
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