Stocks Slide as J&J Earnings Disappoint
Stocks skidded Tuesday as earnings season took a turn for the worse. After a few companies delivered what analysts want to see this quarter, improvement in revenue, J&J delivered more of the same from last quarter.
This came after the U.S. market's record day on Monday where the Dow Industrial Average reached a new 2009 trading high, within 100 points of the 10,000 mark.
Dow component Johnson and & Johnson beat earnings expectations but missed on revenue. J&J shares were the biggest percentage decliner on the Dow, down nearly 3 percent.
Analysts are over the earnings beat due to cost-cutting, now they want to see signs of sustained growth — that consumers and companies are actually buying things again. It's not enough anymore to show that you can navigate the ship through a downturn.
Tech giant Intel reports after the bell today, as does specialty chipmaker Altera . We'll also see the latest quarterly numbers from Dow Transportation component CSX .
It's also a big week for bank earnings: JPMorgan reports Wednesday, followed by Citigroup and Goldman Sachs on Thursday and Bank of America on Friday.
Shares of Goldman Sachs skidded after independent analyst Meredith Whitney cut her rating on the stock to "neutral" from "buy." Her "buy" rating back in July sparked a rally after she predicted that Goldman would be in for a "hugely profitable quarter."
Big banks should do well in the coming quarters, helped by strong trading activity, banking analyst Dick Bove said on CNBC yesterday. But, he cautioned that regional banks will take a hit from commercial real estate.
Today, FDIC chair Sheila Bair said bank failures will continue at a pretty good clipbut shouldn't involve any more bailouts from taxpayers.
More M&A news this morning:Cisco
hasagreed to buy Starent Networks
, a company that helps wireless-service providers support smart phones, for $2.9 billion. This is the second major acquisition in two weeks for Cisco: Earlier this month, the company agreed to buy videoconferencing-gear maker Tandberg ASA for $3 billion.
Cisco shares were among the biggest percentage gainers on the Dow, but it wasn't enough to offset the drag of J&J and bank stocks, which fell ahead of their earnings.
In other deal news, the Comcast -General Electric deal being discussed by the companies apparently includes two potential dates in which GE could unwind its stakein NBC Universal, the parent of CNBC, according to Reuters. GE shares fell more than 1 percent.
No major economic reports are on the calendar today, though we'll hear from two Fed members: Fed vice chair Kohn at noon ET and New York Fed president Dudley at 1:15pm.
Wall Street will be focused on Washington as well, as the Senate Finance Committee takes up the health-care reform bill. A final vote is not expected until the afternoon or perhaps even the evening, depending on how much debate takes place.
Later this week, we'll get more insight on the economy, with the government's report on retail sales and reports on the consumer price index, initial jobless claims, and consumer confidence.
TUESDAY: NABE annual meeting; Bear Stearns execs on trial; Enron's Skilling resentenced; Fed's Kohn and Dudley speak; Treasury budget; Earnings from Johnson & Johnson, Intel
WEDNESDAY: Allen Stanford court appearance; Weekly mortgage applications; government's report on retail sales; import/export prices; business inventories; Fed minutes; Earnings from Abbott Labs and JPMorgan
THURSDAY: IRS amnesty for offshore accounts ends; CPI; Empire State manufacturing; weekly jobless claims; Philly Fed; weekly crude inventories; Earnings from Citigroup, Goldman Sachs, Nokia, IBM and AMD
FRIDAY: Industrial production; consumer sentiment; Fed's Fisher speaks; Earnings from Bank of America, GE, Halliburton and Mattel
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