Stock Market News for October 20, 2009

With buyers back in action, US stocks rose to their fresh one-year highs and remained near their high points as optimism grew that an economic recovery, helped by solid third-quarter earnings reports and increased M&A activity, is on cards. 

The Dow Jones industrial average rose 96.28 points, or 0.96%, to close at 10,092.19.  The broader S&P 500 index jumped 10.23 points, or 0.94%, to 1,097.91 and the tech-heavy Nasdaq climbed 19.52 points, or 0.91%, to 2,176.32, its highest point since September 26, 2008.  Market breadth was positive, with advancing shares ahead of decliners by a margin of three-to-one.  Only five of the DJIA thirty declined in price.

After the close, iPhone maker Apple Inc. (NASDAQ:AAPL - Analyst Report) and Texas Instruments (NYSE:TXN - Analyst Report) reported better-than-estimated numbers, fuelling hopes for the technology industry.  Last week Google Inc. (NASDAQ:GOOG - Analyst Report) and Intel Corp’s (NASDAQ:INTC - Analyst Report) numbers had come in above expectations.

Although there were some jitters last week after some major banks reported higher loan losses during the quarter, expectations that companies across a broad range of industries would report numbers above projections kept the momentum going.   Nevertheless, companies could find it relatively easy to beat analyst’s lowered bars of expectations and then turn in splendid performance in the future quarters as the economy moves into a recovery mode.

This week is likely to be decisive with 13 of the Dow 30 and more than 130 of the S&P 500 slated to report their results.  The numbers could well be the fodder for the next rally – or a downward spiral – even as a call for a 10-15% correction has gone unmet.  This morning's lengthy list of key corporate results, however, continues to surprise on the upside, adding fuel to the rally's fire.

On Monday, the S&P 500 broke above the 1100 mark before retreating a little to settle at 1097, its highest close since October 2, 2008. All ten industry sectors rose, led by gains in basic materials (+1.7%), utilities (+1.4%), oil and gas (+1.2%) and consumer services (+1.2%). 

Caterpillar (NYSE:CAT - Analyst Report), due to report its earnings today, led the gainers with a 6% jump as analysts upgraded shares of Bank of America (NYSE:BAC - Analyst Report) and RBC Capital that took price targets on the stock to $65 per share.  American Express (NYSE:AXP - Analyst Report), due to report after the close Thursday, climbed 2.3% after FBR lifted its price target on the firm to $37 from $25.  On the downside, General Electric (NYSE:GE - Analyst Report) shares fell 1.5% as questions continued regarding the price of the 20% stake Vivendi owns in NBC Universal.

Today's market action will be interesting to watch to find how the better-than-expected results from Apple (NASDAQ:AAPL - Analyst Report) and Texas Instruments (NYSE:TXN - Analyst Report) are seen by the broader indices.  Both companies posted strong results, beating top and bottom line expectations. Apple (NASDAQ:AAPL - Analyst Report) said results were helped by record quarterly sales of Macintosh computers and iPhones, permitting earnings of $1.82 on strong sales of $9.87 billion.  The shares hit an all-time high of $204.  TI (NYSE:TXN - Analyst Report) also bettered projections, reporting strong demand across all business segments.  The company reported earnings of 42 cents a share, ahead of estimates of 39 cents, as revenues of $2.88 billion beat estimates of $2.82 billion, and presented a sequential quarterly gain of 17%.

Today’s list includes Coca-Cola (NYSE:KO - Analyst Report), SanDisk (NASDAQ:SNDK - Analyst Report), Caterpillar (NYSE:CAT - Analyst Report), DuPont (NYSE:DD - Analyst Report), Pfizer (NYSE:PFE - Analyst Report), Untied Technologies (NYSE:UTX - Analyst Report), Yahoo (NASDAQ:YHOO - Analyst Report), State Street (NYSE:STT - Snapshot Report), and Bank of New York Mellon (NYSE:BK - Snapshot Report).