Tuesday’s Market Recap: Hewlett-Packard Reports Drop In Profits

The NASDAQ (^IXIC) was up 0.13%, closing the day as the only major index in the black.  The S&P (^GSPC) was down 0.17% to end the day at 908.13, with the Dow Jones (^DJI) down 0.34% to close the day at 8474.85.  The 10-year treasury saw prices increase as the yield decreased to 3.245%.  Crude and gold were both up today settling at %59.65 and $926.70 respectively.

In earnings news today, Hewlett-Packard (HPQ) announced earnings after hours, reporting earnings of $1.7 billion, or $0.70 per share as opposed to the street’s estimate of $2.1 billion, or $0.80 per share.  Sales were down 3% to $27.5 billion as both individuals and businesses spent less on computers, printers, and other services.  HP reported that revenue in its personal systems group dropped 19% to $8.2 billion, with revenue falling in laptops and desktops, declining 13% and 24% respectively.  The tech giant also announced that its printing and imaging unit was hurt reporting a decline in revenue of 23% to $5.9 billion, as shipments fell 27%.  Many thought that the computer giant’s sales and earnings would not be as bad as they were as the stock was up over 2% during the day, but as they reported earnings and forecasted earnings in line with analyst expectations saw the price drop over 3% afterhours.  HP has forecasted that earnings will come in between $0.88 and $0.90 per share for the third quarter with revenues staying flat or declining as much as 2%.

Home Depot (HD) announced Q1 results today, reporting that they earned $514 million, or $0.30 per share beating analyst expectations of $0.27 per share.  Sales fell 9.7% to $16.2 billion, while sales from stores open a year or more fell -10.2%, as consumers have been buying less big ticket items as their spending has declined due to the poor economy.  Home Depot also incurred a $117 million charge to shut down its Expo design and decor business, which were hurt because they were to upscale for the current economic environment, and without this cost earnings would have been $0.35 per share.  Despite posting a 44% increase in profits Home Depot was down over 5% as many investors believe that these results are disappointing when comparing them with Lowe’s (LOW) who reported yesterday.  Investors believe that Lowe’s has more growth opportunities then Home Depot and is better positioned going forward.

Homebuilders Centex (CTX) and Pulte Homes (PHM) were both down over 2% today, as April housing starts dropped 13% to a record low annual rate of 458,000 homes.  The future for home starts also does not look that positive as permits were down 3%, both were expected by economists to be positive numbers.  Multi-family homes declined 46.1%, as analysts believe that this will help to reduce market inventory, while single -family homes rose 2.8%.  Many economists believe that this reduction in housing starts will help the market start to eliminate high housing inventories, helping the market recover from a housing slump.

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