Stocks finished the day higher on Monday as the Dow closed with the smallest gains as a more than 7% decline in shares of tech giant IBM dragged down the index. Both the S&P 500 and Nasdaq opened the week with gains.
First, the scoreboard:
- Dow: 16,386.80, +6.4, (+0.04%)
- S&P 500: 1,903.21, +16.4, (+0.8%)
- Nasdaq: 4,313.85, +55.9, (+1.3%)
And now, the top stories on Monday:
1. IBM had a big earnings miss on Monday morning and the stock finished the day down more than 7%. IBM reported earnings per share of $US3.68, missing expectations for $US4.32, on revenue of $US22.4 billion, which also missed expectations and was a 4% decline over last year. IBM shares were down about 7% in pre-market trade and stayed there for most all of the trading session on Monday, and the decline in IBM weighed on the Dow, which falls 6.42195 for every 1-point move in one of the index’s stocks.
2. The IBM decline wasn’t just about the numbers, which were disappointing, but also about the commentary from IBM CEO Ginni Rometty, who said in the company’s earnings press release that the company, “saw a marked slowdown in September in client buying behaviour, and our results also point to the unprecedented pace of change in our industry.” Back in July, hedge fund manager Stanley Druckenmiller said that IBM was the “poster child” for poor corporate behaviour that engaged in financial engineering rather than investing in their business.
3. The Robin Hood Investor Conference was held Monday in New York, and among the big hedge fund names who gave some investment thoughts were David Einhorn, who recommended SunEdison, as well as going long Greek banks Alpha Bank and Piraeus Bank, according to Business Insider’s Julia LaRoche. Einhorn also said being short French debt.
4. In an interview with New York Magazine, noted tech investor Marc Andreessen said that the American middle class is an accident of history, as it was the only major industrial country that wasn’t bombed during World War II. You can Andreessen’s full comments from Business Insider’s Shane Ferro here.
5. Apple is set to report earnings after the market close on Monday, and per Business Insider’s Jay Yarow, expectations are for earnings per share of $US1.31, revenue of $US39.85 billion, iPhone sales of 38 million units, iPad sales of 13 million units, with expectations for the company’s fourth quarter currently at $US63.52 billion. BI will have full live coverage of the report after the market close.
6. In a note to clients over the weekend, Goldman Sachs’ David Kostin said that a potential pause in the pace of corporate buybacks could explain the recent pullback in the S&P 500. “Most companies are precluded from engaging in open-market stock repurchases during the five weeks before releasing earnings,” Kostin wrote. “For many firms, the beginning of the blackout period coincided with the S&P 500 peak on September 18. So the sell-off occurred during a time when the single largest source of equity demand was absent.” Kostin still sees the S&P 500 finishing the year at 2,050 as buybacks pick up into year-end.
7. Monday marks the 27-year anniversary of Black Monday, the day the Dow fell more than 22% in the worst single day drop in its history. Here are some memories of the event from Gluskin Sheff’s David Rosenberg, who said it was the scariest thing he’s seen in his time on Wall Street, and a quick recap of how Nightly Business Report covered the crash.