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Daily Blog -01/22/09- 2:43 P.M.

A Seasick Microsoft Stinks Up the Market

It was all about tech stocks on Thursday. A surprise earnings report from Microsoft and a bad one at that left investors feeling sick. Once again the market reversed course and stocks where down sharply midday. The DJIA was down more than 270 points at its worst levels and the NASDAQ fell more than 4% at its lows.

The main story of the day was an early morning earnings report from software titan Microsoft (MSFT). The company traditionally reports after the closing bell and the surprise announcement this morning caught many professionals off guard. Dow-component MSFT missed estimates of 49 cents by two cents a share. Revenues came in light. Furthermore the company claims that due to the economic turmoil they are no longer offering any earnings guidance for the rest of fiscal year 2009. That definitely raised a few eyebrows. The Redmond, Washington based firm also announced job cuts of 5,000 employees. Shares of MSFT are down 9.7% at $17.50 and trading at levels not seen since early 1998.

There seemed to be a wave of negative news out of the tech sector this morning. Another Dow-component, Intel (INTC) said they were cutting 6,000 manufacturing jobs across their company's many divisions. Meanwhile Nokia (NOK) is down more than 10% after a disappointing fourth quarter earnings report where the company admitted they lost market share in the high-end phone category.

Internet big-cap stock EBAY is off almost 11% after reporting this morning. The company missed earnings estimates and issued a warning for the first quarter. The stock traded to $11.44 before bouncing. The November low was $10.91. Another tech company that missed earnings and guided lower was Seagate Technologies (STX). The company missed by 18 cents and guided revenues lower. The stock is off almost 20% and hitting new multi-year lows at $3.40.

Apple Inc. (AAPL) is one of the few bright spots in the tech sector today. The stock is up 8.4% at $89.90 after last night's earnings announcement. OptionInvestor.com has a strangle on AAPL and the position is currently profitable with the calls trading over $7.50 this afternoon.

Banking stocks were taking a hit again as well. Tuesday saw the banking sector get eviscerated. Wednesday we saw a huge bounce in the group. Today some of the big banks are seeing double-digit percentage losses. Citigroup is off 11.4%. BAC is down 12.2%. WFC is down 3.3%. The stand out on the group is JPM, which is positive with a 2.8% gain. State Street (STT +26%) is also see a big bounce after Tuesday's massive loss.

BAC made some headlines today with the shocking news that John Thain was leaving the company. Thain was the former head of Merrill Lynch. BAC recently acquired MER less than a month ago. The Wall Street Journal is reporting that BAC's CEO Ken Lewis visited Mr. Thain this morning and shortly thereafter Thain announced his resignation. Some say it was due to MER's $15 billion in losses for the quarter, which were significantly worse than expected. Others suggest it may have been Thain's expensive tastes. Rumor has it that Thain spent more than $1 million decorating his new office at BAC.

Sector winners today are gambling stocks (DJUSCA +3.6%), the healthcare stocks (HMO 2.9%), and the oil sector (OIX +2.9%).

Currently the market is doing a pretty good job of bouncing off its lows. The DJIA was down 271 at its worst levels of the day but it's currently down 50-something points around 8180. The S&P 500 was down almost 30 points at its worse but has bounced back to minus four at 835. The tech-heavy NASDAQ was off more than 4% this morning but has recovered to -1.3% at 1485.

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