Market Talk

It’s the simple things in life that matter, really; a child’s joy, a warm summer’s day, a meal out with the family, a 270% return in your massively-short-the-housing-market strategy. Okay, that last isn’t so simple. But you get the point.

What we’ve seen with some of the restaurant companies that have reported first-quarter earnings is that Americans are indulging once again in one of those simple pleasures, as we write about in today’s Upshot column:

From Brinker International Inc. to McDonald’s Corp. to Starbucks Corp., restaurant chains are serving more customers. That’s boosting bottom lines and increasing confidence that the worst is firmly in the rear-view mirror.

“Consumers are more confident today, dramatically more confident today then they were especially one year ago,” Chipotle Mexican Grill Inc. co-Chief Executive Montgomery Moran said on a conference call Wednesday. “It looks like the consumer is out spending again.”

Nobody knows where things will go, what the economy will do in the second half, but this is a small, good sign of demand returning to the marketplace.

US stocks close mixed, with weakness in health-care and financial sectors weighing on the market. DJIA gains 8 to 11125, marking its third straight day of gains. Index has risen in nine of the last 10 sessions. S&P 500 falls 1 to 1206 and Nasdaq Comp rises 4.3 to 2505.

Losses were muted as United Technologies (UTX) jumped 3.7% on better-than-expected earnings and Boeing (BA) rose 3.9% as it anticipates additional aircraft orders this year. Apple (AAPL) jumps 6% on, you guessed it, blowout earnings.

With earnings in full swing there’s lots to digest after hours.

Both Chipotle Mexican Grill (CMG) and Starbucks (SBUX) issue quarterly reports ahead of estimates, helped by stronger sales, offering more evidence of a consumer recovery. Customer traffic was up at both companies. In after-hours trading, CMG up 4.9% to $133; SBUX up a fraction at $25.42.

But Qualcomm (QCOM) couldn’t match heightened Wall Street expectations. Despite raising its fiscal full-year forecast, the estimates still fell below what analysts were looking for. FY3Q estimate, meanwhile, looks soft, with earnings flat to slightly below expectations. QCOM shares off 7.6% at $39.37 after hours.

And eBay shares were off more than 7% in late trading after providing disappointing 2Q earnings and revenue guidance.

(Paul Ziobro and Roger Cheng contributed to this post.)

- Palm’s headed toward a fork in the road as there’s a growing belief that its future contains only two paths: acquisition or insolvency, Jon Stokes writes at ars technica.

- Bronte Capital blogger John Hempton says BofA engaged in some shady accounting engineering during the boom, similar to Repo 105. But BofA defends its accounting procedures. “Efforts to manage the size of our balance sheet are routine and appropriate, and we believe our actions are consistent with all applicable accounting and legal requirements,” BofA tells ProPublica. It all sounds strikingly similar to what Ernst & Young recently said about Lehman, DealBook notes.

- “With all eyes on financial institutions, sovereign defaults, state bankruptcies and pension shortfalls, I’ll humbly submit reason #11 to be wary of this scary bull – unforeseen systemic risk emanating from quant models gone awry,” Todd Harrison says. “This is the first time in history 10-year interest rate swap spreads turned negative…I would venture to guess it wasn’t ‘modeled’ that way by the quant geeks.”

- GE shares up 24% this year and 80% over last 12 months. That’s noteworthy, especially since GE underperformed the broader market during much of the 2000s, Bespoke notes. “Is GE finally ready to lose the ‘dead money’ label?”

- New home sales hit a record low last month and months of supply rose to 9.2 months. “Obviously this is another extremely weak report,” Calculated Risk says.

- Blogosphere loves Sprint Nextel’s (S) new 4G phone – Evo. Engadget says it’s a “breathtaking” device. “Evo 4G is the best Android phone out there. It may even be the best phone, period,” Gizmodo adds.

- “The administration may be distancing itself from the Volcker Rules, but the same is not true of all Senators,” Simon Johnson says.

- Will Apple’s (AAPL) iPad live up to the hype? Kara Swisher discusses on WSJ’s Digits show.

- Bank of America (BAC) says it will make principal forgiveness a priority for certain subprime mortgages.

- Starbucks (SBUX) to offer its first-ever cash dividend and announced it will boost its stock-buyback plans.

- Is the economy ready to walk without the Fed’s MBS crutch? It’s possible, but keep in mind the Fed’s made it clear it’ll resume the purchase program if trouble ensues, John Curran says. “I doubt that a declining stock market alone would be trouble enough to trigger a restart of the program but a sinking economy certainly would.”

- The most important thing FCC’s National Broadband Plan should accomplish is increasing amount of wireless spectrum available for broadband Internet, writes Fred Wilson. “The fact is that wires, fiber, and cable aren’t going to get us where we need to go.”

- It seems homeowners are increasingly opting for strategic
defaults. At least that’s the sense from recent NY Times and LA Times stories, Calculated Risk says. “I’m not sure if walking away is becoming more common or if there is a bubble in walking away articles.”

- Palm’s situation is turning from bad to worse, as its 4Q may not be any better than its ugly 3Q, John Paczkowski notes.

- Number of single-family homes under construction has fallen off a cliff since the housing bubble burst. About 1 million were under construction in February 2006; today there are just 300,000. “The precipitous decline ended last summer, and housing construction has been essentially flat for several months,” Donald Marron says. “Perhaps housing construction has finally found bottom?”

- Our DJ colleague Brendan Conway wonders whether the party’s over for financial stocks.

- Sen. Dodd’s financial regulation bill is “tougher and better than I had expected,” Edmund Andrews writes on the Capital Gains and Games blog. “The big banks and Wall Street firms are already howling in protest. Front groups like the US Chamber of Commerce, which claim to be looking out for mom-and-pop businesses, are throwing everything they have at it.”

- PPI falls 0.6% in February, marking biggest drop in seven months and curbing inflation expectations, for now. Gasoline costs declined sharply.

- Fed’s faced its fair share of scrutiny for underestimating the financial crisis, but simply calling for change doesn’t mean much. “Let’s be practical. What other institution did a better job?” James Hamilton ponders. “Where in Washington today do you see an agency with the intellectual resources to get this right? Simply squawking that we need a change is not constructive leadership; it’s political finger-pointing.”

- Starbucks (SBUX) appears to be testing blueberry waffles in some markets, Starbucks Gossip blog reports, with Denver, Oregon and an area north of Seattle trying out the toasted items. Waffles could help increase those morning sales, too, especially at a price noted by several blog commenters: $2.50 per waffle.