Market Insider: RIM Could Trip Up Stocks Friday 

Research In Motion's earnings could cast a cloud over Wall Street, Friday.

RIM stock fell sharply after hours on a disappointing third quarter revenue forecast. Second quarter revenues and unit shipments were also below expectations. Traders say as RIM earnings came out just after 4 p.m., S&P 500 futures moved lower.


RIM earned $475.6 million, or $0.83 per share, in the second quarter on revenues of $3.53 billion, below an estimated $3.63 billion.

"We were up five bucks in the S&Ps, but then after the stocks closed we (futures) went right back down to 1044," said Patrick Kernan, who trades S&P 500 options. "It could be parallel to RIM. I think it's a bad sign for the next couple of days...just because we had two days in a row where we just closed on an ugly note, and of the last couple of weeks, we had been pushing them (futures) higher."

Apple , a RIM rival, also moved lower after the bell, in sympathy with RIM. RIM has been a high flier, doubling its share price since March on expectations for its blackberry products. Hewlett-Packard shares slipped also, after the company forecast 2010 revenue will be up just 3 percent, below Wall Street estimates.

Stocks Thursday finished lower after trading down on a surprise drop in existing home sales, released at 10 a.m. The market had initially been higher on reports that jobless claims were 530,000, about 20,000 better then expected. The Dow finished off 41 points at 9707, and the S&P 500 slid 10 to 1050. Nasdaq was off more than a percent at 2107.

The dollar was higher against a basket of currencies and up 0.7 percent against the euro, at $1.4656. Oil was the big loser, down another 4.4 percent to $65.89 per barrel, on news of rising supply.

As stocks sold off, buyers loaded up on Treasuries, bought dollars and sold commodities.

"I think this is just corrective, and the Fed made it clear yesterday, it's not taking the punch bowl away yet," said Marc Chandler, chief currency strategist at Brown Brothers Harriman.

The Fed did, however, announce it was scaling back two of the emergency lending programs it established during the worst of the financial crisis. The Fed is cutting back the amount of money available to banks in short term loans under the Term Auction Facility. It is also planning to cut back on a program that allows investment firms to temporarily swap risky assets for Treasuries.

"The Fed is slowly unwinding some if its liquidity provisions, but if the market was judging the pullback of liquidity was too fast and too much, we'd see a big pull back in equities and we wouldn't see buying in bonds,” he said.

Treasuries saw buyers on pretty decent volume Thursday, as well as a robust auction of $29 billion in 7-year notes. "There's a rising tide of demand. It's absolutely impressive. What's really interesting about the auction process is supply really does beget demand," said Bill O'Donnell, head of Treasury strategy at RBS.

Now that the auctions are over, he said the market is turning its focus to next Friday's September employment report.

"We could also start to see a little bit more liquidity as we get to quarter end," he said. O'Donnell said there could be pressure on bonds because of the quarter end but also because September 30 is the end of the second half in Japan. "There could be some repatriation out of Japan," he said.

What to Watch

  • Leaders of G-20 countries continue to meet in Pittsburgh. President Obama holds a press briefing there in the late afternoon.
  • Economic reports for Friday include durable goods for August, at 8:30 a.m. Consumer sentiment is at 9:55 a.m., and new home sales are at 10 a.m.
  • Fed Chairman Ben Bernanke speaks and takes questions before the Congressional Black Caucus Foundation at 9 a.m. Fed Gov. Kevin Warsh speaks at 1:15 p.m. in Chicago before the Chicago Fed's international banking conference.
  • In earnings news, KB Homes reports ahead of the open.

Questions? Comments?