U.S. Stocks Rebound; Goldman Loss, Bank of America Swings to Profit

Nichole Harper
18 Oct, 2011
New York City

U.S. indexes turned positive and erased losses of 0.8% on the rising optimism about bank earnings and housing market. Bank of America reported better than expected earnings and Goldman Sachs lost money in the quarter as estimated. IBM

[R]12:05 PM New York – U.S. indexes turned positive and erased losses of 0.8% on the rising optimism about bank earnings and housing market. Bank of America reported better than expected earnings and Goldman Sachs lost money in the quarter as estimated. IBM’s quarterly revenues were lower than expected.[/R]

Stocks in New York trading rose in at mid-day after banks reported better than expected earnings. Goldman Sachs reported a quarterly loss and Bank of America earnings were higher than expected.

However, global economic scenario showed more weakness. European markets extended losses after worries that France may lose its highest debt rating and China reported robust but a slower economic growth for the third week in a row.

Markets in Asia and in Japan declined and Thailand floods forced the government to cuts its estimate of economic growth to 2% from 4% and may prompt central bank to cut rates for a short time.

European Anxieties

European indexes extended losses for the second day in a row after investors turned cautious ahead of the economic summit this weekend. China’s slowdown also contributed to the market nervousness.

The details of “Grand Plan” are still vague and France and Germany are at odds with the timetable of recapitalizing banks.

Separately a private survey indicated investors’ sentiment in Germany fell to a 3-year low in October with the rising worries on the debt crisis.

The ZEW showed economic sentiment dropped to -48.3 from -43.3 in September, the eighth monthly decline in a row.

The survey data contributed to the renewed speculation that Germany and the euro zone will have a soft recession in the fourth quarter of 2011 and in the first quarter of 2012.

Slower but Robust Growth in China

In addition, resource prices were lower after China reported third quarterly economic growth that showed a slowing growth. The third quarter growth fell to annual growth rate of 9.1% after the economy expanded at 9.5% in the second quarter and 9.7% in the first.

The slowing growth in China added more volatility to commodities prices and crude oil, copper and gold declined in Asian trading.

Industrial production increased 13.8% in September after rising at 13.5% in August and retail sales increased 17.7% compared to 17% in August.

Stock Movers

Bank of America Corporation ((BAC)) increased 7.1% or 43 cents to $6.46 after the bank holding company reported third quarter revenue increased to $28.5 billion from $26.7 billion in the same quarter last year.

Net income in the quarter swung to $6 billion or 56 cents per diluted share compared to net loss of $7.6 billion or 77 cents per share a year ago.

International Business Machines Corporation ((IBM)) decreased 4.4% or $8.29 to $178.30 after the software and technology provider reported third quarter total revenues rose 8% to $26.2 billion from $24.3 billion in the same quarter last year. Net income in the quarter rose 7% to $3.8 billion or $3.19 per diluted share compared to $3.6 billion or $2.82 per share a year ago.

IBM raised expectations for full year GAAP diluted earnings per share to a range between $12.95 and $12.87.

Johnson & Johnson ((JNJ)) fell 0.09% or 6 cents to $63.73 after the holding company reported third quarter revenues grew 6.8% to $16 billion from $15 billion in the same quarter last year. Net earnings in the quarter fell 6.3% to $3.2 billion or $1.15 per diluted share compared to $3.4 billion or $1.23 per share a year ago period.

The Goldman Sachs Group, Inc. ((GS)) increased 2% or $2.03 to $98.93 after the financial holding and investment company reported third quarter revenue declined 60% to $3.6 billion from $8.9 billion in the same quarter last year.

Net loss in the quarter swung to $428 million or $0.84 per diluted share compared to net earnings $1,737 million or $2.98 per share a year ago quarter.

The Coca-Cola Company ((KO)) fell 0.2% or 17 cents to $66.83 after the beverage company reported third quarter revenue soared 45% to $12.2 billion from $8.4 billion in the same quarter last year. Net earnings in the quarter rose 8% to $2.2 billion or 95 cents per diluted share compared to $2.0 billion or 88 cents per share a year ago.

The Charles Schwab Corporation ((SCHW)) fell 0.3% or 4 cents to $11.90 after the investment and loan services provider reported third quarter revenue increased 11% to $1.2 billion from $1.1 billion in the same quarter last year.

Net income in the quarter soared 77% to $220 million or 18 cents per diluted share compared to $124 million or 10 cents per share a year ago earlier.

UnitedHealth Group Incorporated ((UNH)) decreased 5% or $2.35 to $44.25 after the healthcare and insurance company reported third quarter revenue rose 7% to $25.3 billion from $23.7 billion in the same quarter last year. Net earnings in the quarter were flat to $1.27 billion or $1.17 per diluted share compared to $1.28 billion or $1.14 per share a year ago.

The company raised its 2011 revenues to exceed $101 billion and net earnings in the range of $4.40 to $4.45 per share.