Market Talk

- If Google (GOOG) can grow revenue, why can’t Yahoo (YHOO)? That’s the question Eric Savitz poses at Barron’s Tech Trader Daily blog. “[Yahoo CEO Carol] Bartz inspires confidence, she’s big on taking decisive action, but for all her efforts, the company still isn’t growing,” he says. “At some point, Yahoo is going to need a more clearly defined growth strategy — and it will have to execute on it.” Yahoo shares drop 8.5%.

- Google issues a 20-page response to FTC’s staff discussion draft about the future of journalism in the digital age. Main takeaway: Don’t blame Google for the newspaper industry’s troubles. “The large profit margins newspapers enjoyed in the past were built on an artificial scarcity: Limited choice for advertisers as well as readers,” Google says. (Hat tip, Jeff Jarvis.)

- Any worries that the iPad would hurt Mac sales were put to bed in Apple’s (AAPL) 3Q results. Apple set a quarterly record by selling 3.47M Macs in 3Q, a 33% increase from a year ago. “If the iPad is having any effect on Mac sales, it’s an additive one,” Digital Daily blogger John Paczkowski says. “Like the iPod once did, the new slate from Apple seems to be having a halo effect on Mac sales thanks to the publicity and Apple Store floor traffic it has generated.”

- Just how impressive were Apple’s quarterly results? Look no further than the 3.27M iPads sold during 3Q, TechCrunch says. Put into context, that’s only 200,000 fewer units than all the Macs sold. And 3Q was the best Mac sales quarter ever. “In other words, in just about any other quarter, the iPad would have outsold the Mac,” TechCrunch says, while expecting the iPad to blow past Mac sales next quarter.

- Bulls once again get rejected trying to rally S&P 500 significantly above its 50-day moving average. Bespoke Investment Group reports this is the fourth separate time since the “flash crash” in early May that the index has turned back at its 50-day moving average. “Bulls had been hoping that strong earnings would be the catalyst to take the S&P 500 to the other side of its 50-day, but so far the bears (and Bernanke) are having none of it.”

- Yesterday’s trading showed “the high-frequency-trading nerds were in full swing, but to the upside this time,” Doug Kass writes. “I have written that few complain when the algorithms take the market up (like yesterday). But I would prefer to be intellectually honest, even when the programs take the market up, and I will not stop writing about this subject until the SEC acts responsibly and curbs certain high-frequency-trading strategies.”

- The housing market is stumbling, once again. “In major markets across the country, home sales are deteriorating, inventories of unsold homes are piling up and builders are scaling back construction plans,” WSJ says.

- “Returning to a sensible, fundamentals-based housing market is painful, but ultimately, it’s something we’re going to have to do, one way or another,” Barbara Kiviat writes at Time’s Curious Capitalist blog.

- A stumbling housing market offers clear evidence that the housing tax credit was a “clear and unequivocal failure,” Bill McBride writes at Calculated Risk. “Not only did most of the benefit go to people who were going to buy anyway, but the credit didn’t reduce the overall supply,” he says. Ultimately, the tax credit merely pulled demand forward. “This is a textbook example of bad policy.”

- “At just 12 times prospective earnings and with prodigious cash flow enabling it simultaneously to keep up its pace of small acquisitions while still repurchasing shares, the market may soon realize that its diagnosis of J&J was overly dire,” Lex says.

- Are Goldman shares worth a flier at current levels? James Stewart weighs in.

US stocks jump across the board as energy leads the way following a 2.5% rise in crude oil futures. DJIA gains 25 to 11117, S&P 500 increases 10 to 1207, Nasdaq Comp rises 20 to 2500.

All ten of the S&P 500′s sectors post gains amid light volume.

Oil snaps back after a three-day losing streak. Earnings, however, disappointed investors, with IBM dropping 1.9%, Coke falling 1.5% and Johnson & Johnson declining a fraction.

Keep in mind the Dow has gained 98 points this week, coming close to regaining the 126 points it lost last Friday when the SEC dropped its bombshell civil-fraud suit against Goldman.

Lots of activity on the earnings front after hours.

Apple (AAPL) tops expectations for FY2Q, which comes as a surprise to anyone who’s never heard of Apple. The company’s FY3Q EPS estimate of $2.28-$2.39, which is well below Wall Street’s estimate for $2.70 a share, is a classic strategy of remaining overly conservative. Take its FY2Q EPS of $3.33, which blows away the estimate of $2.45 a share.

Results were largely driven by iPhone sales, which doubled year-earlier results and eclipsed the holiday period.

Yahoo (YHOO) posts a profit of $310.2 million, or 22¢ a share, as company posts its first quarter of revenue growth in a year and a half and surprises analysts with strong profit growth.

(Roger Cheng contributed to this post.)

Paul Vigna and Madeleine Lim review Goldman’s jump in revenue, Johnson & Johnson’s lack of consumer demand and Greece’s “successful” bond auction. It’s Tomorrow’s News Today.

Bulls aim for some follow-through on yesterday’s rebound, with Friday’s lapse in risk appetite just an irritating memory now. US dollar is weaker, with USD index back below 81.00, and oil and gold both up smartly.

Strong 1Qs from Goldman Sachs this morning and IBM late yesterday, but the results seem to be well-anticipated as IBM moves lower, GS edging higher premarket.

No notable economic data on the calendar.

On the earnings front, Coca-Cola’s (KO) 1Q profit jumped 20% on continuing strength abroad. But North American sales continued its declining trend as consumers continue to shy away from its pricier drinks. KO shares were off 1.2% at $54.65 premarket.

Johnson & Johnson’s (JNJ) 1Q earnings rose 29%, ahead of analysts’ expectations, as sales increased and it booked a $910M litigation gain. But JNJ slightly lowers its 2010 earnings forecast, which seems to have more to do with currency trends than US health-care overhaul. Shares were slightly higher premarket.

Yahoo (YHOO) and Apple (AAPL) report after the close.

S&P futures up 4; 10-yr lower, yield at 3.82%.

- VIX volatility index can be a great contrarian indicator — problem is, it’s a backward-looking gauge, Tom Petruno says.

- Crude oil’s getting sneaky high and no one seems to care. “One explanation is that oil prices haven’t climbed as fast as they did in early 2008, with the slope of the ascent being a primary source of worries,” Paul Kedrosky writes.

- “The key to long term economic health, though, will be a greater contribution from exports and less on borrowing and spending all over again,” Peter Boockvar notes.

- He’s chairman and CEO of the world’s largest health-care conglomerate, Johnson & Johnson (JNJ), but yesterday Bill Weldon took on a new role: blogger.

- Twitter users will not abandon the microblogging service just because it will start running search-based advertising, Forrester analyst Josh Bernoff says.

- Rumor du heure for Palm: Let Intel buy them, Jason Perlow writes.

- Google (GOOG) reportedly developing a new tablet device compatible with Android would be great for Adobe (ADBE), but not so good for Apple (AAPL).

- Tech blogger Om Malik gets his hands on Microsoft’s (MSFT) new Kin smartphones, but doesn’t exactly offer a stellar review.

- “If the US economy was about to reach “escape velocity” as Larry Summers says, small business optimism would not be in the gutter and sinking,” Mish says.

- “We live in an age of unprecedented bailouts,” Simon Johnson writes. “The Greek package of support from the eurozone this weekend marks a high tide for the principle that complete, unconditional, and fundamentally dangerous protection must be extended to creditors whenever something “big” gets into trouble.”

Weakness in Asian stocks overnight and declines currently in Europe, along with a stronger US dollar, contribute to a slightly weaker premarket tone for US stocks, although the futures have been whittling away their overnight losses.

Apple posts another powerful quarter, but again, as we’ve noted with other earnings recently, the strong results seem mostly priced in. AAPL up 1.9% premarket. DuPont’s 4Q better than expected, shares up 1.5% premarket. Yahoo reports after the bell.

Dow components Johnson & Johnson and Verizon both reported earnings this morning, with J&J topping Street views and Verizon matching them; of course, “Street views” exclude a $3B charge Verizon took to cover layoffs, but nonetheless, the two reports are helping put a little steam back in the Street’s stride.

But both are down a bit premarket, so it’s hard to say they’re driving futures higher.

(Addendum: Verizon is now higher, J&J isn’t. And we forget to mention DuPont, which swung to a stronger than expected 4Q profit; shares are up about 0.5%.)

China cast another pall over the markets, with reports coming out of the country that some of the nation’s banks have ordered some branches to stop making loans for the rest of the month. It would appear to be another step in China’s attempts to halt the frenetic bank-lending that’s been going on over there, and which people worry could fuel a bubble (or has fueled a bubble,) although officials say it won’t have any effect.

November Case-Shiller home price index due at 9:00 a.m.; Conference Board’s January consumer confidence reading, Richmond Fed’s Jan manufacturing index both set for 10:00 a.m. Two-day FOMC meeting also gets underway this morning.

US dollar index up 0.4%; S&P futures, down 5.50 earlier, now down just 1.40; DJ futures up 3. Ten-year higher, yield at 3.57%.

Interesting day for the stock market following last week’s beat-down. Stocks have recovered a sliver of their losses, but a cautious tone lingers ahead of some key events later this week.

Stocks are looking to overcome a streak of triple-digit losses as the major indexes recorded their worst three-day stretch since early March when the market bottomed out. Dow industrials hit a 15-month high on Tuesday, but promptly dropped 5.2% over the next three days. S&P 500 also fell 5.1% in same time span.

The bearish case also seems to be gaining steam amid concerns surrounding China, Greece, Ben Bernanke and President Obama’s bank plan. Check out Josh Brown’s post detailing the growing amount of double-dip believers making their voices heard. Not a good sign, especially with stock prices still up more than 60% from the March lows.

“Investors who’ve been riding the 10-month-old rally, and who haven’t sold anything along the way now have plenty of excuses to take money off the table,” Tom Petruno writes at LA Times’ Money & Co. blog.

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So Johnson & Johnson managed to scratch out a little bit of earnings growth, although its sales still fell, CIT’s CEO Jeffrey Peek decides it’s not worth sticking around to see how things turn out after all, and Meredith Whitney, who liked the banks a quarter ago, decides she’s not so hot on them at these levels

It’s Tomorrow’s News Today.

Reflection of weakness in the US dollar is apparent again this morning as crude oil and gold futures show solid gains. Oil above $74/barrel now, gold’s near $1,067.00/oz. Meanwhile, stock futures point to a flattish to slightly higher open when regular trading begins.

Markets generally higher in Asia overnight, while European equity markets are a little softer.

J&J’s 3Q results aren’t going to set any fires; earnings were up 1.1%, above Street views, although revenue was down 5.3%. Still, the results led the company to nudge its 2009 EPS view to $4.54-$4.59/share from $4.45-$4.55. Shares are down in premarket trading.

Intel reports after the close. No notable data on the menu, Fedspeak this afternoon from NY Fed’s Dudley and vice chair Kohn.

S&P futures down about 0.50; DJ futures down 2. Ten-year higher, yield at 3.35%.

The market just got plum tuckered out.

Goldman Sachs laid it out for the market, gave them the biggest, fattest target you could want. Monster quarter, earnings way ahead of even the most optimistic estimates. Problem is, the market used all its firepower yesterday chasing Meredith Whitney and the shorts.

Stocks rise only modestly today after yesterday’s big rally, despite Goldman’s earnings. The financials cede ground, as there are questions about how well Goldman’s earnings will translate to other banks, as well as how sustainable Goldman’s own result will prove to be.

J&J earnings also beat estimates, driving a modest gain for the stock. Video recap here.

DJIA adds 28 (0.3%) to 8359, S&P 500 rises 5 (0.5%) to 906, Nasdaq Comp gains 7 (0.4%) to 1800 (really, 1799.73, but we’re rounding). Big Board volume’s low. Crude’s falls 17c remaining under $60/bbl, and Treasurys fall as well.

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