It’s been another interesting and volatile day in the stock market.
Goldman Sachs (GS) and Best Buy (BBY) both posted strong earnings before the open and the market gapped up 10 points.
But investors sold the gap up and the S&P traded down 20 points to 1435 in the first two and a half hours of trading.
Then, stocks turned around and rallied the next two and a half hours, taking back all of those losses, plus a couple more points, up to around 1458 (S&P Intraday Chart).
Frankly, the earnings from Goldman and Best Buy were good.
Goldman posted a 14% increase in revenue, this time driven by strong performance in its fee based businesses: Commissions, Investment Banking, Asset Management and Securities Services. Trading didn’t have the blowout quarter it did last quarter but the numbers still held up at high levels (GS FY 4Q Earnings Release).
Net Income was up 2% and Earnings Per Share (EPS) 7% due to share buy backs.
Goldman’s shares opened up a touch around $210 before selling off all the way down to $198 before rallying to back to around $202 – down 3%.
It wasn’t a bad quarter but trading didn’t show phenomenal growth and I think that there must be worry about if they can repeat the superb short subprime bet that helped them so much last quarter (See “How Goldman Won Big On Mortgage Meltdown” (subscription required), Friday December 14, Front Page, The Wall Street Journal)
Best Buy also reported a good quarter with sales up 17%, same store sales up 6.1% and Net Income up 52% (BBY FY 3Q Earnings Release).
The problem, however, is that this quarter included the week after Thanksgiving while last year’s did not. That added 2.5% to same store sales and surely helped the top and bottom lines as well. And that will make for a negative comparison for their all important 4th quarter, which includes the heart of the holiday shopping season.
That said, 3.6% same store sales increase is not bad and the numbers looked good. They also raised guidance for the full year.
One other concern is that sales growth was driven by Entertainment which is primarily video game consoles and video games (+23.1% comparable sales) while Electronics (+2.4% including the post Thanksgiving week) was weak.
At one point Best Buy’s shares were down more than 4%. But they are currently about flat.
All in all, a good day for the bulls with strong earnings and positive market action.