Europe Trumps Earnings (IBM, JNJ, KO, GS, MTH, XRS)

It was a relatively solid day of earnings, but stocks got the biggest lift on news that Germany and France had reached an agreement to significantly increase the size of the Eurozone’s rescue fund, taking it to 2 trillion euros ($2.7 trillion) up from 440 billion euros ($604 billion). The British newspaper The Guardian also reported that the European Financial Stability Facility (EFSF) would be given other powers, including the ability to “offer first-loss guarantees for bondholders, be they private or public.” Expect Europe to continue to dominate the headlines and influence the U.S. market in the near term.

The Homebuilder Stocks Index was the top performing tickerspy Index on the day, led by Meritage Homes (MTH) with a 13% gain. The Chinese Education Stocks Index was the day’s worst performing tickerspy Index, with TAL Education (XRS) down -13%.

Stocks climbed on the day, led by a 25-point, or 2.0%, gain in the S&P to 1,225. The Dow jumped 180 points to 11,577, while the Nasdaq ran up 43 points to 2,657. Oil soared $1.96 to $88.34 a barrel, while gold fell -$23.80 to $1,652.80 an ounce.

In economic news, the Labor Department said producer prices rose 0.8% in September after being flat in August. Economists expected a September increase of just 0.2%. The September increase was the largest in five months. Core PPI, which excludes food and energy costs, rose 0.2%, above the 0.1% gain economists were anticipating.

In earnings news, shares of Dow component International Business Machines (IBM) fell -4.1% after the New York-based tech company reported third-quarter sales of $26.2 billion, below the $26.3 billion analysts expected. Operating profit rose to $3.28 a share, topping the $3.22 analysts expected. IBM’s services business saw its sales rise 8% in the quarter compared with 10% growth in the second quarter. Software sales rose 13% compared with 17% in the second quarter. The company guided for operating earnings to be at least $13.35 a share this year, up from a prior projection of at least $13.25 and above analyst estimates of $13.33.

Drug and consumer products giant Johnson & Johnson (JNJ) said its third-quarter profit fell -6% to $3.2 billion, or $1.15 per share, from $3.42 billion, or $1.23 per share, a year earlier. On an adjusted basis, the company earned $3.4 billion, or $1.24 per share. Revenue came in at $16 billion. Analysts had expected a profit of $1.21 a share on revenue of $16.02 billion. Johnson & Johnson raised the lower end of its 2011 profit forecast to $4.95-$5.00 a share from a previous forecast of $4.90-$5.00 a share. Shares of Johnson & Johnson rose 1.0%.

Coca-Cola (KO), the world’s largest soft-drink maker, said its third-quarter profit jumped 8% to $2.22 billion, or 95 cents per share, from $2.06 billion, or 88 cents per share, a year earlier. Revenue rose 45% to $12.25 billion. On an adjusted basis, the company earned $1.03 a share. Analysts had expected a profit of $1.02 on sales of $12.05 billion. The company also raised its share repurchase plans to $3.0 billion from $2.5 billion. Shares of Coca-Cola fell -0.4%. Nearly 300 pros held Coca-Cola in their portfolios at end of Q2 and more than 2,200 tickerspy members own the stock in their portfolios.

Shares of investment bank Goldman Sachs (GS) surged 5.5% despite the company reporting a third-quarter loss of -$428 million, or -84 cents a share. The bank earned $1.7 billion, or $2.98 per share, a year earlier. Revenue plunged -60% to $3.6 billion. It was just the second ever quarterly loss for Goldman, which went public 12 years ago. Nearly 80 pros held Goldman Sachs in their portfolios at the end of Q2 and more than 2,800 tickerspy members own the stock in their portfolios.

Tags: GS, IBM, JNJ, KO, MTH, XRS