Crude tops $90; Microsoft shares soar

Crude oil closed above $90 a barrel for the first time today, and Microsoft (MSFT, news, msgs) shares rose more than 11% in after-hour trading to its highest levels in nearly six years, thanks to a bigger-than-expected increase in quarterly earnings.

That sets up the stock market for a strong opening on Friday morning, but, in the longer term, the oil-price gain may mean more pain for consumers.

The reason: Higher oil prices should mean higher prices for energy stocks. Oil, oil services and natural stocks were all higher today, and Wall Street sees little suggestion of a sell-off in the offing. One analyst said crude oil is likely to hit $100 soon.

At the same time, the Microsoft report showed big gains across the software giant's business and included a 23% boost in earnings. It helped related technology stocks such as Intel (INTC, news, msgs), Hewlett-Packard (HPQ, news, msgs) and Dell Inc. (DELL, news, msgs) move higher in after-hours trading.

Add those gains to the big momentum seen by the likes of Apple (AAPL, news, msgs) and Google (GOOG, news, msgs), and technology looks headed to a good day.

The downside to this cheery scenario is that many investors are very worried about the health of financial stocks after Merrill Lynch (MER, news, msgs) shocked Wall Street by taking a $8.4 billion charge for problems related to the subprime-mortgage mess.

Financial stocks were mostly weaker today, despite a late-day rally. But if the Federal Reserve cuts rates as expected on Wednesday, the financial stocks may get some breathing room.

At the same time, reports on existing-home and new-home sales strongly pointed to continued weakness in housing through 2008.

The Dow Jones industrials, meanwhile, finished with a tiny loss of 3 points to 13,672 after falling as much as 130 points in the early afternoon on worries -- and a lot of rumors -- that big financial-services companies had been severely weakened by the subprime-mortgage crisis.

The Standard & Poor's 500 Index was off 1.5 points to 1,514. The Nasdaq Composite Index, meanwhile, was down nearly 24 points to 2,751.

Investors love Microsoft earnings

Microsoft shares jumped after the software giant reported a 23.3% increase in first-quarter profit boosted by healthy demand for personal computers loaded with its Windows Vista operating system and strong sales of its "Halo 3" video game.

Microsoft, the publisher of MSN Money, also boosted guidance for the second quarter and the 2008 fiscal year.

• Video: CNBC's Jim Goldman looks at Microsoft earnings

The stock traded at $35.56 in after-hours trading, up $3.57, or 11.2%, from a regular close of $31.99. The stock had moved 2.4% higher in the regular session.

The regular closing price was its best close since March 11, 2002. The stock hasn't traded above $35 even on an intraday basis since January 2002. Through today's close, the stock is up 8.6% for October and 7% for the year.

The company said it earned $4.29 billion, or 45 cents per diluted share, compared with a profit of $3.48 billion, or 35 cents per diluted share, a year earlier. The earnings were 6 cents ahead of the Reuters consensus estimate of 39 cents. The earnings reflect a 5.6% decline in the average number of shares outstanding.

Revenue rose 27% to $13.76 billion. The consensus estimate had been $12.54 billion. About $205 million of the revenue gain came from translating foreign revenue into U.S. dollars.

Market research firms Gartner and IDC said global PC shipments rose about 15% in the September quarter, which helped Microsoft as well as the quarterly results of chip maker Intel.

Microsoft also enjoyed strong sales of "Halo 3," the latest installment of its flagship shooter game franchise. Revenue for the Entertainment and Devices Division, which includes games and the Xbox games was up 91% from a year ago to $1.93 billion. All other divisions saw revenue jump at least 16% from a year ago.

Microsoft expects second-quarter earnings at 44 cents to 46 cents; the consensus estimate was 44 cents. The revenue estimate was $15.6 billion to $16.1 billion. Wall Street has been expecting $15 billion.

For the fiscal year, which ends next June, revenue is projected at $58.8 billion to $59.7 billion, with earnings at $1.78 to $1.81. The Wall Street estimates have been $57.3 billion and $1.73.

Microsoft's big earnings report was boosting related stocks as well. Intel was up 1.8% to $26.35 in after-hours trading. Hewlett-Packard rose 1.5% to $52.15, and Dell jumped 3% to $28.74.

Microsoft's results came after it agreed on Wednesday to pay $240 million for a 1.6% stake in the online social-networking Web site Facebook. Microsoft won out against rival search giant Google. Microsoft's stake in the private Facebook values the company at about $15 billion.

• Blog: Why Microsoft-Facebook deal is a snooze

While Microsoft shares moved higher, shares of Google shares fell 1% to $668.51. In after-hours trading, it moved up to $670.

Late Thursday, The Wall Street Journal said that Facebook was looking to hedge funds and private-equity investors to raise cash beyond the $240 million Microsoft investment.

No additional deals have yet been signed, sources told The Journal, though an announcement could come soon. Facebook hopes to raise an additional $260 million in investments that would value the company at $15 billion, as the Microsoft investment did.

Get ready for crude at $100

Crude moved higher after the government surprised traders on Wednesday with a report showing smaller-than-expected supplies of oil, gasoline and heating oil. As a result, many traders see crude hitting $100 a barrel relatively soon.

"It's not a question of when we'll hit $100 but how quickly," said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA in New York.

Domestic crude supplies fell 5.29 million barrels to 316.6 million, the lowest since January, according to Wednesday's Energy Department report. New U.S. sanctions against Iran, warnings of a Turkish assault on Kurdish militants in Iraq and a falling dollar also pushed prices higher today.

Crude is up 2% this week, 11% this month and 48% this year.

Wholesale gasoline was up 4% today as well to $2.2358, and those increases should work their way to the gas pump in a few weeks. That will be an unwelcome surprise because pump prices have been relatively stable in recent weeks. AAA's daily survey put the national average price of gasoline at $2.82 a gallon today. That was roughly the same as Wednesday and little changed in the last month.

The oil price increase pushed the Amex Oil Index ($XOI.X) 1% higher to 1,475, and the Philadelphia Oil Service Sector Index ($OSX.X) moved up 0.7% to 298. ConocoPhillips (COP, news, msgs) was up 2.5% to $83.69. Anadarko Petroleum (APC, news, msgs) jumped 2.7% to $56.95.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$90.46	$87.10	$3.36	10.78%	48.17%
Heating oil (per gallon)	$2.4084	$2.3420	$0.0664	7.62%	50.72%
Natural gas (per million BTU)	$7.1880	$6.9720	$0.2160	4.63%	14.11%
Unleaded gasoline (per gallon)	$2.2358	$2.1475	$0.0883	8.10%	39.55%

Financial stocks remain a big worry

While crude moved higher, many investors spent much of the day worrying about the health of the financial-services industry. The Dow had slumped in the wake of big losses from Merrill Lynch, mortgage insurer MBIA (MBI, news, msgs) and others.

Merrill Lynch, which fell 5.8% on Wednesday, was off an additional 3.7% to $60.90.

Bank of America (BAC, news, msgs) was down 1% to $47 on the day on news it will lay off 3,000 people and restructure its investment banking business. The head of the business is retiring. The bank's investment banking unit suffered a 93% drop in profit in the third quarter, dragging down the company's overall results.

• Video: What moved markets today

MBIA, the mortgage insurer, slumped 15% to $46.99 today, thanks to losses in credit derivatives.

At the same time, semiconductors were also quite weak after Broadcom's (BRCM, news, msgs) disappointing earnings report on Wednesday. Broadcom was down 3.2% to $33.80. Applied Materials (AMAT, news, msgs) was down 3.8% to $19.36. The Philadelphia Semiconductor Index ($SOX.X) was off 2% to just under 453, and 18 of the 19 stocks in the index were lower.

The one exception: Taiwan Semiconductor (TSM, news, msgs), up a penny to $9.78.

A jittery market lets rumors run wild

The market has been so jittery this week that rumors have easily produced big market moves. Wednesday, the market tumbled on rumors investment bank Lehman Bros. (LEH, news, msgs) was about to report a huge loss, then rebounded on a rumor that the Federal Reserve might trim one of its key rates.

Today's rumor was that American International Group (AIG, news, msgs) was going to announce a huge write-down like Merrill's big charge on Wednesday. There was big buying of put options -- contracts to sell the stock at specified prices, and AIG shares fell to $58.46, an 8.4% decline, optionMONSTER.com's Jon Najarian said in a note to clients.

The company denied the reports, and the stock recovered back to $61.79. That's still a 3.2% decline.

The deceptive new-home sales report

On the surface, the Commerce Department reported better-than-expected new-home sales for September. The department said that sales rose 4.8% to a seasonally adjusted annual rate of 770,000 in September, up from a revised 735,000 in August.

• Get free, real-time stock quotes on MSN Money

While the sales were better than economists' forecast of 758,000, the fact is the sales rate is down 23.3% from a year ago. And the inventory of unsold homes is still high: an 8.3-month supply. While that's down from nine months in August, the inventory has averaged an eight-months' supply all year.

Home building stocks were mostly down on the report. The Philadelphia Housing Sector Index ($HGX.X) was off 1% to just under 155. While Pulte Homes (PHM, news, msgs) fell 3.1% to $14.53, Ryland (RYL, news, msgs) was up nearly 5.7% to $27.75.

Separately, orders for durable goods fell 1.7% in September, following a revised 5.3% drop in August. Economists had been expecting an increase of 1.1% last month.

BEA Systems ready to sell

After rejecting a $6.7 billion hostile bid from rival Oracle (ORCL, news, msgs) earlier this month, software maker BEA Systems (BEAS, news, msgs) said it is ready to sell itself -- but only for a higher price.

• Video: Want a lower interest rate? Just ask

BEA Systems said it would entertain an offer of $21 per share for a total of $8.23 billion. "We continue to believe that Oracle's unsolicited proposal to acquire BEA at $17.00 per share significantly undervalues BEA, and is therefore not in the best interests of BEA shareholders," BEA Systems said in a press release today.

BEA shares fell 2 cents to $17.53.

WellCare Health under investigation

Trading in WellCare Health Plans (WCG, news, msgs) shares was halted on the New York Stock Exchange for a while this morning after federal authorities searched the company's offices in Tampa, Fla., Wednesday.

FBI agents joined forces with the attorney general's Medicaid Fraud Control Unit to search the managed-care company. Officials gave no specific details as to what they were trying to find.

When WellCare finally opened around 10:30 a.m. ET, it tumbled.

Shares were down $72.50 -- a whopping 63% -- to $42.67 on the day. The stock had already fallen $7.10 to $115.17 in trading Wednesday.

"The ongoing investigation does not directly concern, nor should it have any impact upon, the delivery of any health-care service to any person," the U.S. Attorney's Office said in a statement Wednesday.

"These companies are making a lot of money off this Medicare Advantage product, and you just have to wonder if maybe something is wrong here," Robert Wasserman, an analyst with Jesup and Lamont in Boca Raton, Fla., speculated to Bloomberg News.

Short hits from the markets -- 4 p.m. ET

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	3.820%	3.710%	0.110	3.24%	-21.80%
5-year Treasury note yield	3.997%	3.968%	0.029	-5.49%	-14.98%
10-year Treasury note yield	4.352%	4.331%	0.021	-4.96%	-7.60%
30-year Treasury bond yield	4.655%	4.641%	0.014	-3.68%	-3.38%
Currencies
U.S. Dollar Index	77.30	77.53	-0.23	-0.42%	-7.07%
British pound in dollars	$2.0517	$2.0521	-0.0004	0.21%	4.70%
Dollar in British pounds	£0.4874	£0.4873	0.0001	-0.20%	-4.49%
Euro in dollars	1.4331	1.4337	-0.0006	0.44%	8.57%
Dollar in euros	€ 0.6978	€ 0.6975	0.0003	-0.44%	-7.89%
Dollar in yen	¥114.00	¥114.17	-0.17	-0.65%	-4.22%
Commodities
Gold	$771.00	$765.60	$5.40	2.80%	20.85%
Copper	$3.4860	$3.4525	$0.034	-4.23%	21.42%
Silver	$13.9050	$13.5900	$0.32	-0.11%	5.06%
Crude oil (NYMEX) (per barrel)	$90.46	$87.10	$3.36	10.78%	48.17%

Weak sales hurt Motorola, but profit forecast rises

Motorola (MOT, news, msgs) this morning reported a 94% plunge in profit for the third quarter. But excluding charges, Motorola beat Wall Street's consensus estimate.

The mobile-phone maker said net income was $60 million, or 3 cents per share -- a huge drop from $968 million, or 39 cents per share in the same quarter last year. Excluding one-time charges, however, Motorola earned 6 cents per share, beating the consensus estimate by 2 cents.

Sales fell 17% to $8.8 billion, in line with analysts' expectations, but sales in its mobile-phone division fell 36% to $4.45 billion. Phone shipments fell 31% in the quarter.

But Motorola forecast fourth-quarter profit between 12 cents and 14 cents per share, ahead of the consensus estimate of 11 cents per share. That drove shares up 4% to $19.30 today.

The company has struggled to find a follow-up to its Razr cell phone. CEO Ed Zander has faced pressure over profits from billionaire investor Carl Icahn, who owns roughly 3% of Motorola's stock.

By Charley Blaine and Elizabeth Strott