Wall St falters on J&J, banks; Intel beats Street

Written by Reuters
Wednesday, 14 October 2009 06:51

NEW YORK: U.S. stocks weakened on Tuesday, Oct 13 as disappointing sales from Johnson & Johnson stirred jitters about the strength of earnings, snapping the S&P 500's six-day winning streak, according to Reuters.

With the last two earnings periods characterized by cost cutting, investors have been hopeful that companies may start to show revenue growth in third-quarter results or improved outlooks.

Though investors remain optimistic about the earnings season, the hope for strong revenue could be premature. Indeed, Johnson & Johnson beat Wall Street's earnings expectations, but reported revenue that was below forecasts, sending its shares down 2.4 percent to US$61.01.

But after-hours results from Intel could bode well for Wednesday's session after the chip maker reported earnings and revenue that surpassed expectations.

"People are on the edge of their seats," said Ronald Knipping, managing principal at the wealth management division of Rehmann, a Michigan-based financial advisory firm.

"The leading indicator is going to be revenue growth, and right now there's none."

Financial shares were pressured, with several major banks reporting results this week. Goldman Sachs Group Inc fell 1.5 percent to US$187.23 after influential banking analyst Meredith Whitney downgraded the stock, saying the upside could be limited for the company in the medium term.

The Dow Jones industrial average declined 14.74 points, or 0.15 percent, to end at 9,871.06. The Standard & Poor's 500 Index slipped 3.00 points, or 0.28 percent, to 1,073.19. But the Nasdaq Composite Index inched up just 0.75 of a point, or 0.04 percent, to 2,139.89.

The Nasdaq stayed above water after Cisco Systems Inc agreed to buy Starent Networks Corp for US$2.9 billion, or US$35 per share. Cisco's stock added 0.5 percent to US$23.89, while Starent, which makes telecommunications equipment, surged 16.8 percent to US$33.91.

INTEL IN FOCUS

Intel also forecast revenue for the current quarter that was ahead of Wall Street's targets on recovering demand for personal computers.

Stock index futures jumped following the results, while Intel shot up 5.2 percent to US$21.56 in extended trade.

Healthcare stocks slid during the session after a key Senate committee endorsed a sweeping healthcare overhaul as it gained the support of an influential Republican. The proposal will be merged with the Senate health panel's version and moved to the full Senate for debate in the next few weeks.

The Morgan Stanley Healthcare Payor index fell 2.3 percent on concerns about what a potential healthcare overhaul would mean for health insurers' profits.

The S&P financial index lost 1.1 percent, with JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs and Bank of America all reporting throughout the week. - Reuters