Stocks began the session on a sour note after some disappointing fourth quarter results from IBM (IBM) and Advanced Micro Devices (AMD). So far, Wall Street has been uninspired by fourth quarter corporate results. Of the 61 S&P 500 companies that have reported as of yesterday, about 56 percent have topped analyst earnings expectations, below the long-term average of 63 percent. About 71 percent have topped revenue forecasts, above the long-term average of 61 percent, according to Thomson Reuters.
PIMCO announced a surprise management shakeup. Mohamed El-Erian said he will step down as CEO and co-CIO of the asset management firm that has $2 trillion dollars under management. The departure leaves PIMCO founder Bill Gross as sole chief investment officer. Neither El-Erian, nor Gross offered an explanation for the departure, but it has been a rocky year for the firm, with customers withdrawing a record $41 billion dollars from the firm's flagship Total Return Fund, which is managed by Bill Gross.
United Technologies (UTX) reported earnings before the bell that beat Wall Street estimates. Excluding one-time items, fourth quarter earnings per share came in at $1.58 versus estimates of $0.05. Revenue missed estimates, coming in at $16.76 billion versus estimates of $17.09 billion and up from last year's $16.44 billion.
Coach (COH), reported profits today of $1.06 a share which missed estimates by $0.05. Revenue fell 6% to $1.42 billion and missed estimates of $1.48 billion. The luxury retailer blamed the miss on poor holiday sales in North America, specifically its women's bag and accessories business. Total North American sales for the quarter fell 9% from last year.
IBM (IBM) reported earnings yesterday of $6.13 per share which beat estimates of $5.99. Revenue came in at $27.7 billion versus estimates of $28.25 billion, and down from last year's posting of $29.3 billion. The company also saw its hardware revenue plunge 26%. IBM also said it will cut thousands more jobs this year which is expected to cost the company about $1 billion in charges.
Advanced Micro Devices (AMD), reported adjusted earnings of $0.06 a share, which was in line with estimates. Revenue rose 37% to $1.59 billion, which also beat estimates of $1.54 billion. But the company said it expects revenue to fall about 16% in the first quarter. Shares were down more than 10% in early trading.
eBay (EBAY) and Netflix (NFLX) are expected to report earnings after the bell. eBay is expected to post profits of $0.80 a share and an increase in revenue of 13.6%. Netflix is expected to post profits of $0.66 a share. Revenue is expected to rise 23.3% as well. Netflix was one of the S&P 500's best performing stocks last year, but is down about 9% so far in 2014.
The Facebook (FB) generation may be about to come to an end if Princeton University researchers are correct. A new study predicts “a rapid decline in Facebook activity in the next few years.” The study, conducted by two researchers in Princeton’s Department of Mechanical and Aerospace Engineering, applies the same model used in the study of disease to extrapolate future adoption and abandonment of social networks.
In the case of Facebook, the researchers used MySpace as a case study for a social network whose use spread rapidly, like a disease, and then quickly died out when the number of new users declined. The study finds that Facebook is “just beginning to show the onset of an abandonment phase.” The researchers believe that abandonment will accelerate to the point that Facebook could lose 80% of its users between 2015 and 2017.