After taking a battering for much of Friday’s session, there were some signs of stability returning to the US indices at the open today, with the Dow and S&P 500 both kicking off in positive territory following better-than-expected results from US oilfield services giant Halliburton.
Halliburton’s share price rallied over 5% this afternoon to reach $28.92 a share, after unveiling an 83% surge in quarterly profits thanks to robust US onshore drilling revenues and an increase in global market share.
The company’s second-quarter net income rose to $480 million, equivalent to 53 cents a share. After excluding discontinued operations, earnings per share came in at 52 cents, exceeding the 37 cent a share estimate shown in a survey compiled by Thomson Reuters. Top line growth was also encouraging, with revenues climbing 15.8% from a year earlier to $4.4 billion, beating expectations of a rise to $4.1 billion.
Halliburton, which did cementing work on BP’s well in the Gulf of Mexico, said it expects its 2010 earnings to be down by 5 to 8 cents per share due to a ban on US deepwater drilling, however. Analysts polled by Reuters expect the company to earn $1.44 per share in 2010, still 13.4% above the prior year’s comparative.
The latest quarterly results seem to quash some of the negative preconceptions about the US quarterly earnings season. We are all eagerly waiting for the results of tech giants IBM and Texas Instruments. These reports are due after the market closes today and likely to set the direction for global equity markets this week.
Analysts surveyed by Thomson Reuters expect earnings at IBM to rise by 11.2% to $2.58 a share and revenues to climb to $24.2 billion, while Texas Instruments is expected to unveil earnings of $0.62 a share on revenues of $3.52 billion due to stronger demand from tablet PC’s. IBM’s shares were up by nearly 1% to $129.29 a share while Texas Instruments climbed 1.05% to $25.03 a share this afternoon.
By 4.10pm (London time), Wall Street had pared most of its earlier gains, as investors decided to take some profits following a disappointing US construction report. The Dow Jones Industrial Average was trading at 10113.41, representing a 0.15% gain over Friday’s close, while the broader S&P 500 traded 0.60 points (+0.06%) above its previous close at 1065.48.
The National Association of Home Builders/Wells Fargo confidence index dropped to a reading of 14 this month, the lowest level since April 2009, from 17 in June. Readings lower than 50 mean more respondents anticipate a deterioration in construction activity. ‘The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one,’ said David Sloan, a senior economist at 4Cast Ltd. ‘This will weigh on growth in the third quarter and well into the fourth quarter as well.’
Lennar Corp retreated 1.1% to $13.86, KB Home fell 1.2% to $10.39 and D.R. Horton slid 1.3% to $9.97 after a report from the National Association of Home Builders revealed that US house builders became more pessimistic about the sector in July.
Lingering concerns about the state of the European economy have also weighed on sentiment. Earlier today, Moody’s downgraded Ireland’s credit rating by one notch to Aa2, citing growth worries, but raised its outlook on the country from ‘negative’ to ‘stable’. The agency said that the reason for the downgrade was due to the government’s ‘gradual but significant loss of financial strength’ arising from the cost of bank bailouts. In addition, Hungarian credit default swaps rose today after the EU and International Monetary Fund (IMF) decided to withdraw a €20 billion Hungarian lending facility, saying they require the new Hungarian government to provide further details of how it intends to cut spending.
