As the world watched a saucer-type contraption shoot through the Colorado sky yesterday holding what many believed to be a six-year-old boy, one could not help but draw the ironic correlation between the landing and their portfolios.
Watching with white-knuckle attention, the balloon, which traveled at times 50 miles per hour and 8,000 feet above Earth, began to lose steam and slowly leak helium. The jiffy-pop looking machine landed safely to the ground, only to be found completely empty.
The timing of this event took place just as the stock market was about to close, with earnings reports set to be released over the next 24 hours from Google (GOOG:NASDAQ), IBM (IBM:NYSE), General Electric (GE:NYSE), and Bank of America (BAC:NYSE).
It has been the blockbuster third quarter earnings reports that have sent the Dow to new 2009 highs, not to mention crossing the headline threshold of 10,000. Since Alcoa’s (AA:NYSE) release last week, the Dow Jones Industrial Average has advanced over 450 points, or 4.8%.
But unlike the previous upbeat reports for other S&P giants, IBM, General Electric and Bank of America were not as steller as previous reports; and it looks as if the bears are about to come out of hibernation. Starting from good to bad:
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Google reported revenue received in the third quarter to be $4.38 billion from $4.04 billion in the second quarter. The Internet search engine earned $5.13 a share; well above the $4.06 a share earned in the previous quarter. Google Chief Executive Eric Schmidt said in a conference call with analysts that, “We’re very, very happy,” adding, “the worst of the recession is clearly behind us.”
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IBM’s release started with an upbeat tone, but quickly turned sour once analysts had an opportunity to dissect its sales revenue. The company reported a 14% increase in earnings, but posted a decline in sales from its largest business areas. The tech-bellwether said it earned $3.2 billion, or $2.40 a share, on revenue of $23.6 billion. Analysts had predicted the company would earn $2.38 a share, while reporting $23.86 billion in sales. IBM did raise its profit outlook for the rest of the year.
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General Electric said its third quarter earnings declined 44%, and noted its poor performance from the company’s finance division. For the quarter, the company earned $0.23 a share, with revenue dropping 20% to $37.8 billion. Wall Street analysts were expecting earnings of $0.20 a share on revenue of $39.83 billion.
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Bank of America reported more credit losses and noted the strain on its customers. The Charlotte, North Carolina-based financial firm reported a loss of $2.24 billion, or $0.26 a share, for the quarter. Equity analysts had forecasted a loss of $0.21 a share.
Stocks are certainly in need of a rest after the significant run-up over the past nine trading sessions. However, not all Wall Street prognosticators are figuring the negative earnings reports will have dire consequences for investors. As Art Hogan, chief market strategist at Jefferies & Co. told CNN this morning, the “disappointing news” from Bank of America and GE “took a little bite out of futures in the initial reaction.”
But Hogan did add the declines were slight, and premarket trading volume was slim, meaning there was a chance for stock market recovery late in the day, especially considering the positive tone of the GE report.
Investors hope the same outcome from yesterday’s balloon boy drama will resonate with their portfolios as we head into the weekend.
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