Trader Talk

IBM, Dollar Reversal Help Stocks Recoup Yesterday's Losses

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

The lower dollar and strong earnings from IBM are helping stocks recover all of yesterday’s losses – and then some this morning. Techs are leading the markets after IBM beat and raised its guidance, while the weaker dollar is giving a boost to commodity stocks in early trade.

Also helping, better-than-expected housing data. June Housing Starts rose 14.6 percent, much higher than the 2.0 percent rise the Street expected. That data point hit a 6-month high, while building permits also saw a surprising rise last month.

A big day for earnings this morning. While there were a number of beats especially outside the financial industry, but some companies weren’t ready to show full optimism on the state of the U.S. economy.

Global companies like Coca-Cola and Stanley Black & Decker showed little growth in their U.S. markets. Label maker Avery Dennison warned on its Q2 outlook, citing its customers “became more cautious about consumer sentiment and the impact of rising retail prices to offset inflation.” And Wells Fargo’s CEO John Stumpf noted that the economic recovery “continues to be slower than expected.”

Big Earnings Day for Financials

For just the 5th time since its IPO in 1999, Goldman Sachs missed estimates ($1.85 vs. $2.27 consensus), and the stock continues to hit a 2-year low. CEO Lloyd Blankfein noted that “certain of our businesses had disappointing results.” Revenues fell 18 percent (more than expected) on a 53 plunge in fixed income, currency and commodities trading revenues. Although equities revenues grew 19 percent, the firm noted the “challenging environment” resulting from lower trading activity and volatility that reduced its commissions and fees.

Additionally, expenses dropped 23 percent after “implementing expense reduction initiatives.” Following the disappointing results, Goldman’s stock is trading at its lowest level since April 2009.

Bank of America also continues to hit new 2-year lows after reporting a record quarterly loss due to its previously-announced settlement related to its mortgage business. However, results were inline with Street expectations, with the improvement of credit quality enabling the bank to release $2.4 billion of its previously-set aside loan loss reserves. Loan growth continued to be absent, with loans falling 2 percent in the quarter.

Wells Fargobeats estimates ($0.70 vs. $0.68 consensus) as credit quality improved. On the positive side, loan charge-offs fell 12 percent from the prior quarter. The bank also reduced their loan loss provision by $1 billion, which also helped its results. However, the bank’s net interest margin moved lower, as interest rates remained low. Additionally, lending was still down, as loans fell almost 3 percent from a year ago.

Pricing Power Gives a Boost:

Coca-Cola trades at a 12-year high after beating estimates by a penny. Stronger-than-expected sales were led by a 6 percent rise in worldwide volumes, with all the growth coming from outside North America. Particularly strong were the 24 percent volume growth in China and 17 percent growth in Russia. Although North America volumes were flat, the beverage maker was able to realize higher prices to offset its higher commodity costs.

Mosaic handily beats Q4 estimates ($1.52 vs. $1.38 consensus). Revenues surged 54 percent on solid fertilizer demand and strong pricing.


No blues for Big Blue. On the heels of its report, IBM jumps to a new historic high and is accounting for 40% of the Dow’s gain this morning. The tech giant beat estimates ($3.09 vs. $3.03 consensus) as revenues jumped 12 percent amid double-digit growth across all its major regions. More important, IBM provided a better-than-expected 16 percent growth in all-important signings and raised its full-year outlook to “at least $13.25” — higher than the Street’s current expectation of $13.21.

Stanley Black & Decker Q2 earnings topped estimates ($1.46 vs. $1.26 consensus). Revenues were inline with estimates, growing 11 percent. Strong Asia and Latin America sales offset weakness in the U.S. and Europe. The tool maker also raises its full-year outlook to $5.15-$5.40, mostly above $5.15 consensus. However, the firm cut its organic sales growth forecast by 1 percentage point to up 4-5 percent due to poor weather conditions in the U.S. last quarter and continued weakness in Europe.

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