Stocks Down Despite Better Than Expected Earnings From Credit Suisse, Apple And Ebay

Although the early morning session saw a sell-off, traders swung into action as the day progressed, sending shares higher midday. However, prices dived as the S&P 500 approached its 850-level, and prices fell in the final hour of trading. Big-cap stocks showed weakness, as the DJIA declined 1.0%, while tech-laden Nasdaq inched up a meager 0.1% and the S&P 500 rose 0.8%. And shaky sentiment sent the CBOE Vix (^VIX) “fear factor” index up 2.6% to 38.10, and Treasury prices declined, as the 2-year eased 2/32 and its yield advanced to 0.969% and the 10-year fell 11/32 with its yield at 2.945%.

Among sector groupings, financials were the leading decliners with a 3.8% plunge; health care was off 1.4%, utilities declined 1.2%, oil and gas was down 1.2% and consumer goods was off 0.6%. On the upswing were industrials, up 1.3%, basic materials up 0.8%, telecommunications up 0.7%, technology up 0.3% and consumer services up 0.2%. Of the 113 companies that have reported results since April 7, profits are down 25% on average; however, analysts had entered earnings season well prepared, anticipating an earnings decline of 37.4%, according to Thomson Reuters (TRI).

Boosting the sentiment were Altria (MO), AT&T (T), Ingersoll-Rand (IR), McDonald’s (MCD), Texas Instruments (TXN) Wells Fargo (WFC), and Yahoo (YHOO) that beat analyst expectations. Wells Fargo (WFC) reported better-than-expected results on strength in its mortgage operations. McDonald’s (MCD) beat profit estimates, with CEO Skinner making note of improving comparable sales trends, with April “trading at least as strong as or better than first quarter sales in every area of the world.” Boeing’s (BA) results missed estimates; however, the firm’s full-year guidance topped most analysts’ projections.

A 81% dividend cut after losses at Morgan Stanley (NYSE:MS) that was worse than expected halted a string of impressive financial firm results.  The company said real estate and debt-related write downs exceeded gains in its trading operations. This morning’s announcement from Credit Suisse (CS) came as a sweet surprise. Credit Suisse announced first quarter earnings that doubled Street expectations on improved trading revenues, which offset write downs in commercial real estate assets and asset management losses. The bank, however, warned that volatility could continue throughout the year. Despite Geithner’s remarks suggesting that the “vast majority” of banks have more capital than they need, tomorrow’s release of the stress test criteria will keep sentiments under check.

Today’s economic posts cover two of the most critical areas - employment and housing. Last week jobless claims plummeted 53,000 to 610,000, although continuing claims increased 172,000 to a record 6+ million. This week’s estimates place the number of first-time claims at 630,000, up 20,000. On the housing front, economists place little hope in a continuation of the 5.1% rebound in existing home sales recorded in February, driven by depressed prices, first-time buyers, and distress sales. Economists anticipate sales dropped to 4.65 million in March from 4.72 million. However, better-than-expected numbers from Apple (AAPL) and eBay (EBAY) have painted a more optimistic face on consumer resiliency, improving sentiment this morning.

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