NEW YORK (CNN/Money) -
U.S. stocks were primed for a weak open Friday, as IBM's solid, but not breathtaking earnings, released after the close Thursday, failed to inspire investors concerned about corporate earnings and the pace of the economic recovery.
After the close, IBM (IBM: Research, Estimates) reported earnings of $1.16 a share, 4 cents more than expected and up from 97 cents a year earlier, on revenue that was short of expectations. The company also said that 2004 earnings and sales are on track to meet analysts' consensus targets. (For more details, click here.)
IBM shares initially added 1 percent after-hours, before retreating to just above unchanged. Nasdaq & S&P futures pointed to a weaker open for the market Friday, when fair value is taken into account.
"The IBM earnings were good, but is this enough to turn things around?," said Donald Selkin, director of research at Joseph Stevens. "I guess the futures could rally overnight, but as it stands, we're headed toward a lower open."
He said that in terms of sentiment, investors are continuing to worry that stocks are expensive relative to future earnings projections, particularly in a rising-interest rate environment. So far, the forecasts from the companies that have reported have not necessarily been bullish enough to assuage those concerns.
On Thursday, the Dow Jones industrial average (down 45.64 to 10,163.16, Charts) and the Standard & Poor's 500 (down 4.78 to 1,106.69, Charts) index both lost just over 0.4 percent, and the Nasdaq composite (down 2.17 to 1,912.71, Charts) lost 0.1 percent.
Throughout the session, the three major indexes straddled both sides of breakeven, caught between opposing influences.
A warning from Nokia and solid results from SanDisk and Apple Computer gave investors plenty to focus on, but they did little to dispel the confusion and concern surrounding tech earnings right now, analysts said.
Adding to the reluctant tone of the session was the mix of economic news, including a surprisingly tame wholesale prices report and a pair of strong regional manufacturing reads.
"I think there's a lot of fear about the earnings, particularly the tech earnings," said Timothy Ghriskey, chief investment officer at Solaris Asset Management.
Prior to the start of the second-quarter reporting season, there had been some hope that particularly bullish earnings and projections might get the market out of the malaise it's been in since February. But that's not happening.
"It doesn't seem like corporations want to boost their earnings projections as much as the market would like," Ghriskey said.
Also after the bell Thursday, memory chipmaker Rambus (RMBS: Research, Estimates) reported earnings of 8 cents per share, twice what it earned a year earlier and 2 cents more than expected. The stock rallied 12 percent in after-hours trade.
No potentially market-moving earnings are due Friday. Economic reports are due in the morning on consumer prices and consumer sentiment.
What moved?
Flash memory card maker SanDisk (SNDK: up $4.11 to $24.09, Research, Estimates) rallied 20.6 percent in very active Nasdaq trade after reporting second-quarter earnings late Wednesday that shot past estimates.
Other companies in the same sector as SanDisk rallied as well, including Lexar Media (LEXR: up $0.41 to $6.54, Research, Estimates) and QLogic (QLGC: up $1.41 to $25.91, Research, Estimates).
Apple Computer (AAPL: up $3.35 to $32.93, Research, Estimates) reported earnings late Wednesday of 16 cents a share, up from 5 cents a year earlier, and more than what analysts were expecting, thanks to strong iPod sales. Shares rallied nearly 11.3 percent in active Nasdaq trade.
The biggest disappointment on the session was Nokia (NOK: down $1.79 to $12.45, Research, Estimates).
The leading handset maker plunged 12.7 percent, topping the New York Stock Exchange's most-active list, after it reported second-quarter earnings and sales that slipped from a year earlier, due to competition and a weaker portfolio.
The Finnish company also cut its third-quarter profit outlook and said that its profitability would continue to be challenged for the rest of 2004.
Rival LM Ericsson (ERICY: down $1.77 to $26.23, Research, Estimates) also declined in tandem.
In other news, Harrah's Entertainment (HET: down $3.07 to $47.91, Research, Estimates) said it was buying Caesars Entertainment (CZR: down $0.95 to $15.05, Research, Estimates) for $5.2 billion in cash and stock, creating the world's biggest casino operator. Both Harrah's and Caesars tumbled more than 5 percent in heavy NYSE trade.
Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners by more than eight to seven as 1.40 billion shares changed hands. On the Nasdaq, winners and losers were evenly split on volume of 1.66 billion shares.
PPI and jobless claims
Released at noon ET, the Philadelphia Fed index, a regional measure of manufacturing activity, jumped to 36.1 in July from 28.9 in June. Coupled with the morning's strong New York Empire State index, another regional manufacturing survey, analysts said the implication seems to be that the sector is doing fine.
The two readings countered worries sparked by the morning's surprisingly weak report on industrial production and capacity utilization.
Also providing some positive underlying support was the Producer Price Index (PPI), a measure of wholesale prices.
PPI fell 0.3 percent in June, after rising 0.8 percent in May. Wall Street economists were expecting a rise of 0.2 percent. The so-called "core" PPI, which excludes food and energy, rose 0.2 percent in June, in line with expectations, after rising 0.3 percent in May. Economists thought it would rise 0.2 percent.
The report seemed to settle nicely into the not-too-hot, not-too-cold middle ground regarding inflation that Wall Street prefers and thus proved comforting to investors.
On the downside was the weekly jobless claims report, which showed a bigger-than-expected rise in the number of Americans filing new claims for unemployment.
Treasury prices were fairly flat, with the 10-year note yield at 4.48 percent, even with late Wednesday. The dollar gained against the yen and euro.
Among commodities markets, NYMEX crude oil futures fell 22 cents to settle at $40.93 a barrel, retreating from Wednesday's sharp advance. COMEX gold fell $1.20 to settle at $404.40 an ounce.
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