MarketView for April 19

Summary 

Saving what had all the earmarks of another down day on Wall Street, share prices rallied late in the trading day as the Street moved to reassess the potential damage of the fraud case against Goldman Sachs.  Goldman’s share price reversed course to rise 1.6 percent to $163.32. Apparently the furor over Goldman started to die down during trading, allowing people to refocus on coming earnings. Interestingly, Goldman is expected to report earnings prior to the opening bell on Tuesday and they are expected to produce another record set of numbers.

Citigroup rose 7 percent to $4.88 after the bank turned in its best result since 2007, and the Dow was led by a handful of companies that will report results later this week. IBM was up 1.2 percent to $132.23 ahead of its results, which came after the closing bell. But the stock eased 1.8 percent to $129.82 in after-hours trading even as the company nudged up its outlook for the full year and reported stronger-than-expected results.

Adding to Monday’s late rally was a report by Bloomberg indicating that the SEC had split 3-2 along party lines to approve an enforcement case against Goldman, citing two people with knowledge of the vote. The vote fell exactly along party lines, two Democrats for and two Republicans against, with SEC head Mary Shapiro, an Obama appointee, casting the deciding tie-breaking vote.

The Nasdaq equity index remained just below break-even, despite a decline by some of the major computer chip manufacturers and a decline by Research In Motion of 1.3 percent to $71.09. Palm fell 12 percent to $4.92 after the resignation of the chief of its webOS phone software, while Morgan Keegan downgraded the manufacturer of the Pre handset.

Adding to concerns about the company, Sprint Nextel said RadioShack is phasing out Palm's Pre and Pixi phones for two other Sprint devices. Shares of Sprint added 2.7 percent to $4.19.

On the economic front, the index of leading indicators, which is a gauge of future economic activity, came in higher than expected to hit a record high in March, again pointing to a steady economic recovery.

Leading Economic Indicators Hit Record High in March

The Conference Board’s index of leading indicators, a gauge of the economy going forward, came in better than expected hitting a record high for March, pointing to a steady economic recovery. According to the Conference Board, the index increased 1.4 percent, rising for the 12th straight month, after an upwardly revised 0.4 percent gain in February.

indicators point to a slow recovery that should continue over the next few months. The leading, coincident and lagging series are rising. Strength in demand remains the big question going forward," said Ken Goldstein, an economist at the Conference Board.

Seven of the 10 indicators that make up the leading index rose last month, with the interest rate spread, average weekly manufacturing hours and stock market prices making the largest contributions. The drag on the index came from the real money supply, manufacturers' new orders for nondefense capital goods and consumer expectations.

The coincident index, which measures current economic conditions, edged up 0.1 percent in March after a 0.1 percent gain the prior month. The lagging index rose 0.2 percent after a 0.1 percent increase in February.

IBM Releases Results

After the markets closed for regular trading, IBM raised its full-year outlook as it reported stronger-than-expected quarterly results. Shares of IBM fell 2 percent despite the positive numbers, mirroring the performance of other tech companies like Oracle and Google.

Some analysts were slightly disappointed by IBM's quarterly gross margin of 43.6 percent. IBM, the world's largest technology services provider, raised its 2010 profit target to "at least $11.20" from a previous forecast of "at least $11." Many analysts had not expected the company to change its outlook so early in the year, and the average Wall Street estimate had been for full-year EPS of $11.12.

IBM said its first-quarter profit rose to $2.6 billion, or $1.97 per share, from $2.3 billion, or $1.70 per share, a year earlier. The consensus had been for $1.93. Revenue rose 5 percent to $22.9 billion, accelerating from a 1 percent year-on-year gain in the previous quarter. Wall Street had forecast revenue of $22.7 billion.

Some on the Street indicated that they did not think it was an amazing quarter for IBM, but called the performance solid. Many said they were particularly impressed by its 18 percent rise in consulting services signings and 11 percent rise in software revenue.

Services signings fell 2 percent, while services revenue rose 4 percent and systems and technology revenue rose 5 percent, IBM said.

Shares of IBM fell 2.1 percent to $129.40 in extended trading following the report. It had closed up 1.22 percent at $132.23 in regular trading. The stock is still up about 6 percent from a low in February.