U.S. stocks and exchange traded funds (ETFs) showed scant signs of life at the opening bell as a slew of mixed earnings reports overshadowed Wall Street.
The following earnings reports affected the markets:
- McDonalds (MCD) outperformed analysts’ expectations reporting a first-quarter profit of $0.87/share as compared to the $0.82/share forecasted by analysts. The company stated increased global demand helped their bottom line.
- AT&T (T) smashed analysts’ expectations by reporting earnings of $0.58/share because of an increase in contract customers and improving profit margins. Analysts expected earnings of $0.48/share.
- Boeing (BA) posted sharply lower earnings of $0.86/share and cut its forecasts. The aircraft manufacturer states that the global economic meltdown has really taken its toll on airline travel and the commercial airline markets. Analysts forecasted earnings of $0.93/share.
- The nation’s biggest cigarette maker, Altria (MO) beat analysts’ expectations, posting earnings of $0.28/share because of higher revenues from cigar sales and its financial services division.
- Morgan Stanley (MS) reported a much bigger-than-expected loss and slashed its dividend to $0.05/share as real estate and debt related write-downs overwhelmed trading gains. The financial giant reported a loss of $0.57/share, a far cry from the loss of $0.08/share expected by analysts.
There is yet more devastating news that further supports the belief that the global economy is still in shambles. The International Monetary Fund projects the world economy to shrink by 1.3%, the first decline in the last six decades. The IMF says that they expect this decline because it will take longer than expected to stabilize the world financial markets and get credit flowing freely, which is vital to lift the world out of this prolonged recession, states Timothy R Homan and Simon Kennedy of Bloomberg.
Despite this bad news from the IMF and weak earnings by Morgan Stanley, the financials fared well. The Financial Select SPDR (XLF) gained 1.6% in intraday trading.
Friday could be do or die for the financial sector. The Federal Reserve announced that it will brief all 19 banks as early as Friday on how they performed in government “stress tests.” Unfortunately, these results will not be made public until May 4. Let’s hope the results further support Treasury Secretary Timothy Geithner’s statement that banks have enough capital to keep lending and overshadow any doubts of the weakness in the sector fostered by huge piles of bad debts.
On a separate note, crude oil prices tumbled as the Energy Information Administration reported that U.S. storage houses are flushed with huge amounts of oil. In fact, crude stocks have risen to their highest levels in the past 19 years. Additionally, gasoline inventories rose by 800,000 barrels to 217.3 million barrels, which is 1% higher than the previous year, states Chris Kahn of the Associated Press. This inventory news sent black gold under $49/barrel in intraday trading.
- United States Oil (USO) slipped 1.6% in morning trading.
Despite opening on a sour note, the markets rebounded quickly. The Dow Jones Industrial Average was up 0.8%, the S&P 500 gained 0.8% and the Nasdaq was up a whopping 1.4% in late morning trading.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.