Earnings misses by tech darling Google and Caterpillar, one of the Dow's power drivers, are adding to a wobbly opening on Wall Street. Citigroup though is a bright spot with a better than expected 18 percent profit gain and record revenues from investment banking and overseas business.
It took just two days for the Dow to lock in a 14,000 close after cracking that magic number Tuesday. Yesterday, the Dow closed 82 points higher at 14,000.41, its 54th record since the beginning of October, 2006.
Gagging on Google
When a company is perceived as being unable to do any wrong, an earnings miss is all the more painful. Google stock paid the price with an after hours whacking and it trades lower today. A number of analysts chopped their targets on the stock this morning. Bear Stearns sliced Google's target to $550 from $600. Citi reiterated its buy rating on Google, but said it is slightly less positive on the stock and says it should trade around $500. Bernstein cut its target to $625 from $635, but kept it rated outperform. Cantor this morning said it was unconcerned by Google's miss.
Google, by the way, reported a 28% increase in second quarter earnings to $925.1 million, its slowest growth rate since becoming a public company in August, 2004. Google blamed higher expenses.
Caterpillar , meanwhile, said its earnings fell more than expected because of lower sales of diesel truck engines, weak North American construction markets and higher production costs. Caterpillar second quarter net fell 21% to $823 million.
Crude oil crossed above $76 this morning. Yesterday, oil closed up 1.16% at $75.92. Gasoline rose 0.2% to $2.1914. CNBC contributor John Kilduff said the market is highly sensitive to supply disruptions despite the fact the U.S. has the highest level of crude supply in nearly a decade.
Yesterday's move came after "Angola had a supply issue. Their output is down by half and that's all we needed to get going again. They're tiny. It highlights just how vulnerable we are to even the slightest supply disruption," said Kilduff, senior vice president of MF Global.
"The last time inventories were at this level in the U.S. we were at $10 a barrel. There's other trouble out there. China's GDP number was very supportive for oil prices and Russian output is down almost 10% year over year. Some of these political issues are starting to show up in lesser output," he said. Kilduff expects oil to hit $83 per barrel before the end of the summer.
CNBC's Maria Bartiromo said oil is at a level where stock traders could start to worry about it. "I think if oil stays above $75 and climbs, that would be a real wrench in the rally. I'm watching crude...along with earnings, GDP, and the financials," she said.
There are a lot of questions out there about the future leadership of Viacom as the Redstone family engages in a highly public boardroom brawl. As CNBC's David Faber reports, Viacom Chairman Sumner Redstone and his daughter, Vice Chairman Shari Redstone are in talks to disengage her from the business, her board seat and her stake in the family-controlled National Amusements.
Red Hot China
China raised interest rates overnight in an effort to rein in its hot growth. The increase came a day after the Chinese government said annual growth rose to 11.9% in the second quarter, the fastest rate in 11 years.
That 14,000 level on the Dow may be but a memory today, but thanks to Bob Pisani's producer, Robert Hum, a markets junkie in his own right, we have lots of data on the latest Dow milestone. It is all attached below.
Since the Dow Industrials' first close above 13,000 on 4/25/07:
- - 59 trading days passed
- - 21 (70%) Dow components up
- - 9 (30%) Dow components down
- - Top 5 impact stocks (IBM, MMM, CAT, XOM, UTX) have added about 519 points to the Dow
- - 9 Dow decliners have only moved the Dow lower by about 120 points
- - IBM, Exxon Mobil , and Alcoa were third, fifth, and sixth top impact stocks from 12,000 to 13,000, respectively (and are also near top of impact list from 13,000 to 14,000)
Dow Components Performance From Dow 13,000 to Dow 14,000
Dow Impact % Change
AA 72.02 24.78%
CAT 111.77 18.78%
MMM 115.43 18.45%
HPQ 53.08 15.60%
XOM 100.55 15.48%
GE 43.08 14.97%
IBM 117.06 14.19%
GM 35.04 13.87%
INTC 24.40 13.49%
UTX 74.30 13.43%
HON 56.82 12.95%
VZ 37.47 12.24%
MSFT 20.48 8.69%
MCD 32.84 8.31%
BA 63.32 8.23%
DD 25.77 6.34%