- It’s debatable whether technicals or valuation are driving stocks higher, but “excessively bullish sentiment is the biggest risk right now,” Barry Ritholtz writes at The Big Picture.
- The ratings agencies’ flaws need to be addressed. “Perhaps the recent attention to the role the ratings agencies played in the crisis will change that, but I’m certainly not counting on it,” Mark Thoma says on his blog.
- It’s hard to see how Palm considering licensing its WebOS platform to other hardware makers could ultimately be successful, especially as Google’s (GOOG) Android popularity rises, Dan Frommer writes at Silicon Alley Insider. “While licensing WebOS might make a sexy story to tell potential acquirers or Wall Street, it’s not going to save Palm.”
- Can’t be too defensive, right? “I do recognize that my credibility in sounding a cautious note would presently be stronger if I had ignored further credit risks and captured some of the past year’s gains,” John Hussman says. “But the awful outcome of this same set of conditions, which we also observed in 2007, should provide enough credibility.”
- Newspaper circulations keep declining, as average weekday sales have dropped almost 9% since last year, NYT’s Media Decoder writes, citing data from the Audit Bureau of Circulations. “The reality facing American newspaper publishers continues to look stark.”
- “It’s ironic how the ‘Goldman was so smart to have shorted subprime’ meme is now being turned on its head…as Goldman’s conduct in the run-up to the crisis is being re-examined in a new light, Yves Smith writes at naked capitalism.
- Felix Salmon details the continuing Goldman wars.
- Whirpool (WHR) shares soared after its blowout 1Q report. “I continue to think that the panic a year ago was greatly overdone, as individuals and companies cut costs wherever they could, while waiting to find out if forecasts of Great Depression II were going to be borne out,” NYT’s Floyd Norris says. “But now the spending — and the hiring — is coming from people and companies that overreacted in the panic.”
So today we’re talking about the Dow’s savior, Caterpillar, as well as the usual suspects, financial reform and Greece. Funny how those Greeks keep hogging all the headlines, isn’t it?
US stocks close mixed as strong earnings from Caterpillar (CAT) were offset about worries in the financial sector.
With the debate in DC heating up over regulatory reform, financials were the S&P 500′s biggest declining sector. JPMorgan (JPM), Goldman (GS) and Citi (C) all fall, the last even as Treasury moves step closer to selling its 27% stake.
On the bright side, CAT jumps 4.2% on better-than-expected 1Q profit as well as its boosted 2010 outlook.
DJIA narrowly keeps its five-day winning streak intact – barely – closing up 0.83 to 11205. Index has now risen in 12 of the last 13 sessions. Nasdaq Comp falls 7 to 2523 and S&P 500 ends down 5 at 1212.
So, Caterpillar’s earnings today really illustrate, and not in a particularly good way, this idea that the third world, oh, sorry, I mean, the developing world, is going to solve all of corporate America’s problems.
You can’t just discount the two largest economies in the world, the U.S. and Europe, when you’re talking about business prospects. But that’s what the popular conception is these days, a variant on the “decoupling” theory that was so popular before the U.S. housing market poked a hole or two in it.
So let’s look at Cat’s numbers and see how it’s working out.
Caterpillar swung to a first-quarter profit, raking in $233 million compared to the $112 million it lost last year (on a big restructuring charge.) Sounds good, right? And, the company offered a rosy outlook. “Economic conditions are definitely improving,” CEO Jim Owens said, “particularly in the world’s developing economies.” Machinery sales in the Asia-Pacific region, mainly China, were up 40%.
That prompted the company to boost its 2010 outlook, now pegging earnings per share at $2.50-$3.25 — up from a $2.50 projection in January — on revenue of $38-$42 billion. That was all good enough to drive CAT shares up 5%, which is, incidentally, the only thing keeping the DJIA out of the red today.
But, and this is important, Caterpillar’s sales were down11%, on weakness in the first world, or what they call the developed world today. That’s, like, here. Machinery sales were down 15% in North America “as Caterpillar dealers continued to shed inventory and residential and commercial construction remained weak,” and 22% in Europe, the Middle East and Africa.
So, with earnings season about halfway over, we can start to sketch out some broad themes. Earnings are up. As in, really up. This is partly, even mainly, due to the easy comparison to last year’s first quarter, which was only outdone in its stupor by the fourth quarter of 2009.
Still, earnings are up roughly 75% on an “as reported” basis, meaning not stripping out any of the “one-time” charges and such that usually make the picture look a little sweeter.
But sales are up also, for the second consecutive quarter, and after four quarters of double-digit slides on a percentage basis, that’s a welcome trend, as we write about in today’s Upshot:
Consumers are spending again, delivering a strong boost to first-quarter corporate sales and profits, and prodding some companies to rehire laid-off workers and others to start raising prices again.
From restaurants including Cheesecake Factory Inc., which posted its first increase in sales at stores open at least a year in two years, to high-tech bellwethers such as Intel Corp., which reported its best-ever first-quarter sales and operating income on strong consumer PC sales, buyers returning to their old ways are powering results.
Encouraged by strengthening order rates, firms are recalling laid-off workers, and a few are raising prices and advising of price hikes to come.
Markets head into a swirl of cross-currents this week, with loads of economic data, torrent of 1Q earnings news, two-day FOMC meeting and the various investigative sideshows in DC. Stocks up in Asia overnight and higher in Europe.
Path of least resistance looks like it remains higher for US equities as well. DJIA up eight weeks in a row, and ten of the last 11. The S&P 500 is up 80% from low last March, and more than 9% this year.
CAT reports 1Q before the open; Texas Instruments, RadioShack among those reporting after the close. Dallas Fed’s April manufacturing outlook set for 10:30 a.m. ET. Dollar index at higher, recently at 81.59. S&P futures up 2, DJ futures up 27. Ten-year a touch higher, yield at 3.80%.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
You can’t lie to the Internal Revenue Service. But can the IRS lie to you? Congress spent much of the day grilling IRS officials for the revelations that came out last week that the IRS was targeting conservative groups. And some lawmakers didn’t like the answers they were getting and accused IRS officials of lying. […]
