Zacks Take on Today's Stock Market - April 21, 2011

CHICAGO, April 21, 2011 /PRNewswire/ -- Today's Stock Market provided by Zacks Investment Research.  On Tuesday, stock markets ended with modest gains as an earnings-driven trading day witnessed positive results and sentiments were boosted by strong results from bellwether stocks. Earnings reports of healthcare stocks helped push the markets higher aided by steel stocks. Tech majors such as IBM and Intel also posted encouraging results surpassing estimates. Encouraging data reflecting strengthening new-home construction added to the cheer.

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The indices rebounded on Tuesday and the Dow Jones Industrial Average (DJIA) gained 0.5% to close at 12,266.75. The Standard & Poor 500 Index gained 0.6% and ended at 1,312.62, just 2.50 points lower than its 50-day moving average. The Nasdaq closed at 2,744.97 after gaining 0.4%. The fear-gauge CBOE Volatility Index (VIX) dropped below 16. On the New York Stock Exchange, for every two advancing shares, one stock was on the declining side. Volume continued to be tight and only 6.65 billion shares were traded on the NYSE, AMEX and Nasdaq, compared with last year's daily average of 8.47 billion.

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Stock markets were highly dependent on earnings reports on a day with no other significant news which could affect the indices. Investors kept a close watch on indices as bellwether companies were scheduled to report their results. Johnson & Johnson (NYSE:JNJ) surpassed estimates and was the top percentage gainer in the Dow. Tech giants including International Business Machines Corp. (NYSE:IBM), Intel Corporation (NASDAQ:INTC), VMware, Inc. (NYSE:VMW) and Yahoo! Inc. (NASDAQ:YHOO) topped analysts' expectations. In the financial sector, bellwether stocks like The Goldman Sachs Group, Inc. (NYSE:GS) and U.S. Bancorp (NYSE:USB) surpassed estimates as did Zions Bancorp. (NASDAQ:ZION). However, shares of Goldman Sachs and U.S. Bancorp slipped due to other concerns.

An encouraging earnings report from Johnson & Johnson helped to lift the markets higher and it was among the first to rally following its results. The company reported first-quarter 2011 earnings (excluding special items) of $1.35 per share ahead of estimates, despite being hampered by product recalls. Revenues for the quarter increased 3.5% year-over-year to $16.2 billion.

Stocks of steel companies boosted the markets as the nation's best steel companies were adjudged the best performers in the S&P 500 index. The Street Ratings upgraded Steel Dynamics Inc. (NASDAQ:STLD) from 'Hold' to a 'Buy' rating. The company also announced robust first-quarter results and led the gainers among the steel stocks. Shares of Steel Dynamics jumped 5.7% and settled at $18.46. Among other shares of the steel industry, AK Steel Holding Corporation (NYSE:AKS), United States Steel Corp. (NYSE:X), Nucor Corporation (NYSE:NUE) and Commercial Metals Company (NYSE:CMC) gained 4.5%, 4.5%, 2.1% and 1.1%, respectively. According to reports, the World Steel Association estimates a 5.9% increase of global apparent steel demand in 2011.

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Coming to the tech sector, IBM and Intel's results crushed the estimates and suggested a strong renewed demand for computing. IBM or "Big Blue" earned $2.41 per share with a top line of $24.6 billion, compared with the expected $2.30 per share and $24.0 billion in revenues. Profits soared 10% on a yearly basis in its first quarter and IBM's CFO Mark Loughridge said IBM enjoyed its best first quarter of constant currency revenue growth in ten years. Revenues jumped 8% year over year. 43-year old Intel also managed to beat estimates, announcing earnings per share of 59 cents for its first quarter, which topped estimates by almost 30%. Revenue increased by 25% year over year to $12.9 billion. Intel stated that this revenue was an all-time record and was driven by double-digit annual revenue growth in every major product segment and across all geographies. However, shares of IBM declined 0.3% while Intel gained 1.2%. Also joining the slew of positive results in the sector were, VMware and Yahoo with both surpassing estimates. Shares of VMware had dropped 0.6% during the day but soared 12.5% in after-hours trading and Yahoo, which had closed with a 1.4% drop, rebounded 3.5% after the bell.

Among financial stocks, Goldman Sachs reported first-quarter 2011 earnings per share of $4.38, significantly ahead of estimates. However, shares slipped 1.3% as the financial major also reported a 21% fall in first quarter profits after paying a $1.64 billion preferred dividend to Warren Buffett's Berkshire Hathaway. Including the preferred dividend of $1.64 billion related to the redemption of Goldman's Series G Preferred Stock, earnings per common share came in at $1.56 compared with $3.79 in the prior quarter and $5.59 in the prior-year quarter. U.S. Bancorp and Zions also surpassed estimates but shares of USB dropped 1.2% while Zions gained 3.9%. 

Yesterday, economic data also strengthened the bullish sentiments as new home construction and permits to begin building homes jumped significantly. Economic turmoil had hit the housing sector and this data brings optimism back to the housing recovery. Housing Starts in March increased by 7.2% to an annual pace of 549,000, higher than the expected level of 523,000, from the revised figure of 512,000 in February (originally reported at 479,000). Building Permits increased by 11.2% over the month to 594,000, higher than the expected level of 535,000, following 534,000 permits annualized in February (originally reported at 517,000).

Coming back to the earnings results, significant companies scheduled to report earnings today include Apple Inc., Abbott Laboratories, Amgen Inc., American Express Company, Piper Jaffray Companies and Wells Fargo & Company.

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