Wednesday Look Ahead: Will Intel, JP Morgan Take Dow to 10,000?
Intel's earnings beat should help stocks Wednesday but focus will quickly shift to J.P. Morgan's report, ahead of the opening bell.
"One down, a bunch more to go," said Tim Smalls of Execution LLC. Intel's strong after the bell earnings, and an upgraded fourth quarter revenue forecast, propelled it and other tech stocks higher in after hours trading.
J.P. Morgan is the first big financial to report and is seen as a bellwether for the recovering banking industry. It is viewed as the strongest of the banks and is a read on both the health of the broader financial industry and economy. J.P. Morgan is expected to earn $0.52 per share. Rivals Citigroup and Goldman Sachs report earnings Thursday.
If stocks find a reason to rally, the Dow is within easy reach of the psychologically important 10,000 level.
Financial stocks were under pressure Tuesday, losing 1.1 percent after influential analyst Meredith Whitney downgraded Goldman Sachs to neutral and said take profits in the banking group ahead of earnings. For most of the day, the stock market traded sideways as the dollar weakened, and gold hit a new high.
The Dow finished at 9871, off 14, and the S&P 500 was off 3 at 1073. Gold rose $7.50 per troy ounce, to a Comex closing high of $1064.20. The dollar continued to slip, losing 0.3 percent against the euro to $1.4829. Treasurys, meanwhile, found buyers along the curve, pushing the 10-year's yield lower to 3.314 percent.
Intel reported profits of $1.9 billion or $0.33 per share, well above the $0.28 per share expected by analysts. Intel also raised its fourth quarter revenue forecast to $10.1 billion, above the $9.5 billion expected by analysts.
Ahead of its report, Intel earnings were the talk of the market, including whispers about how much improved its closely watched margins might be. The company reported gross margins of nearly 58 percent, above analysts expectations in the low 50s but just slightly shy of the 60 percent whisper number.
Intel said it saw a strengthening pc market during the third quarter. Its comments on the economy were cautious but positive. Intel CEO Paul Otellini said in a release that the company's strong results "underscore that computing is essential to people's lives, proving the importance of technology innovation in leading an economic recovery."
Whether it leads a recovery or not, Intel's news was leading a tech rally in the after hours trading.
Rail company CSX, meanwhile, also reported after hours. Its profit of $293 million, on revenues of $2.3 billion, was better than expected. The company noted in its comment that "the worst of recession is behind us." CSX shares jumped 3 percent.
Other companies reporting Wednesday are Abbott Labs, WW Graingerand Host Hotels, before the bell. Crown Holdingsand Xilinxreport after the bell.
September retail sales are reported at 8:30 a.m. and are expected to be down 2 percent. The numbers are expected to look weaker than August because of the boost to auto sales earlier in the summer from the "cash for clunkers" program. Without autos, the number is expected to be 0.3 percent higher.
"I don't think anybody's expecting anything really good," said Smalls. "I'm of the mindset that as long as it's not a disaster, it's ok."
Import prices are also reported at 8:30 a.m. and business inventories are expected at 10 a.m. The minutes from the Fed's last meeting are released at 2 p.m.
At 2:30 p.m., Fed Gov. Daniel Tarullo testifies on the state of banking before a Senate Banking subcommittee.
Jefferies Treasury Strategist John Spinello said comments on the state of the economy from Fed Vice Chairman Donald Kohn sent buyers into bonds Monday. While Kohn didn't appear to say anthing new, his tone seemed to rattle traders who saw less chance the Fed would raise rates soon.
Kohn said the jobs situation remains weak, and that is likely to weigh on the consumer. That comment followed on comments from St. Louis Fed President James Bullard that were also viewed as dovish.
Spinello said Treasurys were also rebounding after last week's sell off. "I think earnings will probably be pretty important, but there's not a real connect. I think if the stock market went down a lot it would probably favor bonds," he said, adding though its more likely stocks continue higher. "If it goes up, it wouldn't shock many people."
Traders will also be gaming the Senate health care bill, which was passed on by the Senate Finance Committee Tuesday afternoon. Insurance stocks, like United Health Care and Aetna, were lower on the news.
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