MarketView for April 13

Summary 

It was positive numbers, even though they were small numbers, for Wall Street’s major equity indexes on Tuesday as the Street looked ahead to earnings from the large banks and tech bellwethers, despite Monday’s disappointing revenue number from Alcoa. Alcoa late on Monday reported revenue that failed to meet expectations, sending its stock down 3.2 percent to $14.11.

With the Standard & Poor's index up about 40 percent over the past year, there have been comments to the effect that stock gains during earnings season could be minimal as equities tend to do worse in earnings periods after making gains in anticipation of strong results.

After the close of regular trading, Intel reported a stronger-than-expected first-quarter profit, sending its shares up 3.8 percent to $23.63 in extended-hours trading. Intel rose 0.6 percent to $22.68 in the regular session. Intel also lifted shares of rival Advanced Micro Devices and stock index futures, suggesting higher share prices when the market opens on Wednesday.

CSX rose 1.3 percent to $53.98 in extended trading after the transportation company posted first-quarter earnings that beat expectations. Bank shares fell after UBS cut its rating on regional banks including KeyCorp, down 1.9 percent at $8.18.

Ambac Financial fell 12 percent to $1.98 and was the most actively traded stock on the New York Stock Exchange. Earlier, JPMorgan analysts said that the bond insurer's stock had little value.

Petrohawk Energy agreed to sell half its stake in its Haynesville operations to Kinder Morgan Energy Partners LP for $875 million. Petrohawk shares gained 3.1 percent to $23.32 while Kinder slid 1.5 percent to $66.24.

Among companies reporting, retailer Talbots gained 5.5 percent to $15.18 after posting an adjusted fourth-quarter profit that was sharply higher than consensus.

Intel Posts Outstanding Results

Intel's sales and margin forecasts exceeded Street expectations on Tuesday, thereby reinforcing support for the recovery of the tech sector while at the same time sending Intel’s share price up 3.5 percent.

Intel said it foresees a gross margin of 64 percent -- plus or minus "a couple percentage points" -- for both the current quarter and all of 2010. Wall Street had expected about 60 percent. That put the company, which said on Wednesday it was seeing technology upgrades by corporations, on track to potentially surpass the record 64.7 percent margin chalked up in its fourth quarter. Intel forecast current-quarter revenue of 10.2 billion, plus or minus $400 million.

Intel's margins should expand -- defying fears that they had peaked in 2009's final quarter -- because sales were going to more expensive chips, like servers bought by corporations now less constrained by the tight budgets of last year.

The company said on Tuesday net income totaled $2.4 billion, or 43 cents a share, in the three months ended March 27, compared with net income of $629 million, or 11 cents a share, in the year-ago period. That exceeded average expectations for 38 cents a share.

Revenue rose to $10.3 billion, above the Wall Street target of roughly $9.84 billion.

Geithner To Take Hard Line With China

Treasury Secretary Timothy Geithner said on Tuesday the Obama administration will push China forcefully to open its markets and maintain fair trading rules. Geithner repeated that it was important for China to move toward a flexible currency rate regime and added that he felt Beijing understands it was in that nation's own interest to do so.

"We have an enormously productive, beneficial relationship with China today," he said. "It's hugely important to companies large and small across the country."

Geithner also said it was "very important" that China rely less on exports and "move over time to a more flexible exchange rate system." Geithner said that by maintaining a fixed currency rate, China effectively is losing control of its own interest-rate policy and said that would change if it moved to a more flexible currency system.

"It's China's choice to do it but I believe ... that they will decide it's in their interests to move," Geithner said. "As a strong, large, independent, growing economy it doesn't make sense for that country to run a monetary policy, exchange rate regime that effectively lets the Federal Reserve set interest rates for their economy as a whole."

Geithner, who recently made a brief visit to Beijing, said the United States wants and will push for fair "rules of the game" in trade with China and other countries. "We will be very forceful and aggressive in making sure we are promoting changes for the prospects of a level playing field in those markets," Geithner said.

China's President Hu Jintao is in Washington for nuclear summit talks and met with President Barack Obama and Geithner on Monday. Hu told Obama China won't be pushed on currency reform and would base any decision on revaluing its yuan on its own economic needs. Yet,

Hu also made clear that Beijing was committed to change without indicating when it might happen.

In wide-ranging questioning, Geithner also said it was "completely untenable" to take a position that the drive toward a U.S. regulatory overhaul should be slowed down as some Republican opponents claim. He said there was still a "terrible mess" to be cleaned up after the financial crisis. He said he was optimistic that lawmakers, just back from a recess and starting to work on financial regulation, will agree on rules to lessen reckless risk-taking that helped create the crisis.