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Well, hello there green arrow; nice to see you, too! After suffering through a miserable week, the broad-based S&P 500 (INDEX: ^GSPC ) put the pessimists in their place, at least for one day, and rose by a modest 4.22 points (0.30%), to 1,412.97.
Much of today's rally early in the day can be attributed to positive economic data, including a 9.9% rise in demand for durable goods in September, as well as a drop in jobless claims, to 369,000, from 392,000 the week prior. Both of these figures would suggest a strengthening economy.
Following a midday swoon, the late-day surge can be mostly attributed to a lack of poor earnings dragging down the markets.
The semiconductor sector had a notably strong day, with semiconductor test equipment maker Teradyne (NYSE: TER ) , and networking and storage chip maker LSI (NYSE: LSI ) , rising 8% and 7%, respectively, following their quarterly reports.
Teradyne was able to record a 56% increase in net income in the third-quarter on a 35% improvement in revenue, but it also followed in its rivals' footsteps by issuing a downbeat fourth-quarter forecast. Revenue is expected to come in between $235 million and $260 million, which is well below Wall Street's expectation of $341.4 million. Perhaps investors were expecting an even worse forecast?
LSI, which I suspected might get thrown to the short-sellers this week, proved me both right and wrong at the same time. LSI reported a 35% rise in net income for the third-quarter, as sales advanced 14%, to $624 million. However, adjusted EPS merely met estimates, and revenue fell $14.1 million shy of the consensus figure. Furthermore, LSI's guidance calls for fourth-quarter EPS of $0.11-$0.17, just shy of the $0.18 Wall Street was looking for. This appears to have been yet another case of "it could've been worse."
The same can't be said for F5 Networks (Nasdaq: FFIV ) or Best Buy (NYSE: BBY ) , which both decisively alluded to weakening quarterly results, and paid dearly for it, sinking 11% and 10%, respectively.
F5, which provides application delivery networking technology, failed to deliver both in its fourth-quarter results, as well as its first-quarter forecast. The company blamed global weakness for weighing on customer orders, and forecast a first-quarter profit of $1.14 to $1.16 on sales of $363 million to $370 million. Wall Street was expecting EPS of $1.20 on sales of $373.7 million. Investors really shouldn't be too surprised, as the same swan song of despair has been sung by networking companies for months now.
Best Buy's despairs clearly aren't a surprise to anyone, and yet the stock still sunk like a rock after it updated its third-quarter outlook. Best Buy now anticipates that comparable-store sales will decline at a rate that's similar to the previous two quarters (5.3% and 3.2%), and expects gross margins to be similar to the second-quarter. In short, nothing's changed! It's going to take some time to enact Best Buy's strategic initiatives, but shareholders have shown they have little tolerance for failure.
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