Market Insider/Friday Look Ahead
CNBC Executive News Editor
Microsoft's strong earnings and bullish forecast is setting up to be a catalyst for more tech buying in today's session.
Earnings news this morning should also add to the positive tone in a market set on moving higher. Honeywell and Caterpillar each reported earnings in line with analysts' estimates, but both had better-than-expected revenues and made positive comments about 2008's profit outlook.
Caterpillar this morning says its quarterly profit rose more than 10 percent due to strong sales outside the United States. Profits rose to $975 million on sales of $12.14 billion.
But the company also said recession is a "definite threat" for the U.S. but that strong growth in the rest of the world will give it 2008 sales growth of 8 to 13 percent outside of North America.
Honeywell said it sees softer "global conditions" but is confident it can outperform in 2008.
There are no economic indicators of note this morning. The World Economic Forum continues to meet in Davos and we should hear more from business leaders there.
Microsoft's net income rose 79 percent to $4.71 billion in its December quarter. Earnings per share of $0.50 per share topped analysts' forecasts of $0.46 per share. Revenues jumped 30 percent to $16.7 billion, lifted in part by sales of its Vista operating system. The software giant also raised its forecast for the fiscal year ending in June based on better than expected sales of its Office software suite and video games.
Microsoft CFO Chris Lidell said the company is taking a conservative view of consumer spending for the rest of the fiscal year, but it still expects to significantly increase sales. We will hear more from Lidell on "Squawk on the Street" Friday morning.
Microsoft stock rose in the after-hours session on top of an already 4 percent gain during Thursday's session. Microsoft and tech in general were standouts on the day. The Standard and Poor's tech sector was up 3 percent, the second best performer Thursday after energy, up 3.2 percent.
Despite the shocker of a story about the rogue trader at French bank Societe Generale, the stock market was fairly steady throughout the day and stock markets worldwide moved higher overnight.
The Dow closed 108 points higher Thursday at 12,378. The agreement between Congressional leaders and the White House on a stimulus package was a factor. The plan was seen as a plus for the crippled housing market and is expected to inject some level of confidence into consumer spending.
Oil also moved up on the news of the agreement, closing at $89.41, up 2.8 percent. This morning, it is rising above $90 per barrel. Gold jumped 2.6 percent Thursday to $905.50 and it's up more than $15 per troy ounce this morning as the shutdown of mines in South Africa pressures prices. The dollar is weaker after falling nearly one percent against the euro and 0.3 percent against the yen in Thursday's trading.
While the SocGen story did not turn into a negative for the stock market Thursday, it did have some bearing on some traders' expectations for the Fed. Paris trader Jerome Kerviel, 31, allegedly bet billions of euros on equity derivatives and created fake hedging positions to hide what he was doing. SocGen questioned the trader over the eye-popping $7.2 billion in losses this past weekend, and traders believe the unwinding of those positions led to the market chaos early in the week.
Some traders now assume the Fed's surprise rate cut Tuesday was an aggressive response to the extreme market moves, resulting from the rogue trader. Therefore, the theory goes the Fed may not be quite as aggressive next week when it holds its regularly scheduled meeting.
CNBC's Steve Liesman reported Thursday that the Fed was unaware of the SocGen issues when it made its rate decision this week.
The financial sector closed up 0.6 percent Thursday. Stocks in the group turned in a mixed performance. Bear Stearns and Citigroup were higher. Goldman Sachs and J.P. Morgan were lower.
Shares of bond insurer Ambac rose sharply in the after hours on two separate newspaper reports that investor Wilbur Ross may be a buyer for Ambac. One of those papers, the Financial Times, also said that Ross and private equity firms, like TPG, are also looking to launch new bond insurers that would compete with Ambac and rival MBIA.
"Wilbur Ross and Microsoft will raise the market tomorrow," said CNBC's Larry Kudlow, before his 7 p.m. program Thursday.
Questions? Comments? firstname.lastname@example.org