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CNBC ON DIGG

Stocks Advance; VIX Falls to Just Above 20

Published: Wednesday, 21 Oct 2009 | 2:51 PM ET

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By: Cindy Perman
CNBC.com

The Dow advanced Wednesday after a quick drop at the open as investors digested a mixed bag of earnings.

The Dow Jones Industrial Average, S&P 500 and Nasdaq were all up more than 0.5 percent.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, dropped to just above 20. The gauge hasn't been below 20 since August 2008. At the height of the crisis in October and November of that year, the VIX topped 80.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

DuPont [DD Loading... () ], American Express [AXP Loading... () ] and Alcoa [AA Loading... () ] were the top three gainers on the Dow.

At the back of the Dow pack was Boeing [BA Loading... () ], which lost more than 1 percent after the aerospace giant missed analysts' earnings target and lowered its guidance.

Eli Lilly [LLY Loading... () ] beat expectations on both earnings and sales of prescription drugs and raised its outlook. But shares fell as they didn't raise the fourth-quarter outlook by as much as they beat in the third.

Elan [ELN Loading... () ] rose after the drug maker raised its earnings guidance for the year.

FOR INVESTORS

In the financial sector, Wells Fargo [LLY Loading... () ] and Morgan Stanley [MS Loading... () ] both beat analyst estimates but investors were split. Wells Fargo shares fell as losses from bad loans reached $5.1 billion. Morgan Stanley shares climbed as the brokerage reported its first profit in a year, helped by investment-banking fees.

The Nasdaq opened higher after Yahoo [YHOO Loading... () ] and SanDisk's [SNDK Loading... () ] beat earnings expectations. Yahoo's beat had a lot to do with cost-cutting but it also gave an upbeat forecast.

"You have to view Yahoo's cup as being half full rather than being half empty," Gartner analyst Allen Weiner told Reuters. "They seem positioned for a turnaround with the deal with Microsoft and with branding. They are pretty well-positioned to make a comeback in Q4. These numbers are not going to hurt them."

Flash-memory maker Sandisk also delivered an encouraging forecast, saying orders are strong for the current quarter.

This followed similar outlooks from Intel [INTC Loading... () ] and Texas Instruments [TXN Loading... () ], citing signs of improvement in business spending.

And Dell [DELL Loading... () ] says PC sales should start to get a boost from Windows 7 starting in mid-2010.

The problem for the market right now is that, while a lot of companies are beating estimates, few are delivering what analysts — and traders — want to see.

"What we really need to see is better profit margins, better sales numbers, which means that the US consumer is coming back," Simon Grose-Hodge, director and investment strategist at LGT Bank in Liechtenstein, said on CNBC today.

The equity rally can continue but "the drivers will definitely change in the next couple of quarters," Franz Wenzel, senior investment strategist at AXA Investment Managers, added. "We think that the junk rally — which has pushed markets higher throughout this year — will peter out and that the quality stocks — individual quality stocks — will basically take over the lead," he predicted.

Sun Microsystems [JAVA Loading... () ] said it's cutting 3,000 jobs ahead of the planned takeover by Oracle [ORCL Loading... () ].

Freeport-McMoRan shares [FCX Loading... () ] rose after the gold and copper miner reported its profit soared in the third quarter, helped by higher metals prices and volume. Though revenue slipped.

The euro traded above $1.50 for the first time since August 2008 today, while gold fell below $1,056 a troy ounce.

Oil fell, trading below $79 a barrel, after a report showed crude inventories rose by 1.3 million barrels.

Earnings season rolls on with a week that will ultimately see 25 percent of the S&P 500 report their quarterly numbers.

On the M&A front, General Electric [GE Loading... () ] and Comcast [CMCSA Loading... () ] said they were continuing discussions about a possible deal but that there was no timetable for completion. GE shares slipped.

US Bancorp [USB Loading... () ] is considering acquiring FBOP, which owns eight banks and could be put up for sale by the Federal Deposit Insurance Corp, according to a report in the Wall Street Journal.