Earnings worries set up a weak open

By Charley Blaine and Elizabeth Strott

Stocks face a weak open on Thursday after Apple (AAPL, news, msgs) and Amazon.com (AMZN, news, msgs) earnings appeared to disappoint investors and Starbucks (SBUX, news, msgs) said a weak economy would cut into future profits.

Apple shares traded erratically in after-hours trading and were off 0.3% to $162.43 in after-hours trading. The stock had closed at $162.89, up 1.7%, in regular trading. Amazon.com shares slipped 5.2% to $76.80 from a regular close of $81, and Starbucks was off nearly 11% to $15.92 from a regular close of $17.85.

All three companies announced the developments after today's close. The Dow Jones industrials had finished up 43 points, 0.3%, to 12,763. The Nasdaq Composite Index had closed up 28 points, or 1.2%, to 2,405, and the Standard & Poor's 500 Index was up 4 points, 0.3%, to 1,380.

Gains for Boeing (BA, news, msgs) and Microsoft (MSFT, news, msgs), which reports third-quarter earnings on Thursday, were the Dow's main drivers.

Apple's guidance doesn't excite

Apple shares fell after the company said it expected to earn $1 a share in its fiscal third quarter. Wall Street had been expecting $1.11, Reuters said. Apple usually offers lower guidance than Wall Street expects.

Apple's earned $1.16 a share in its second quarter, up 33%, and ahead of the $1.07 a share that Wall Street had expected.

• Top Stocks blog: Apple's quarterly guessing game

Revenue was $7.6 billion, up nearly 43% from a year ago; Wall Street had expected $6.96 billion.

Revenue was fueled by a 51% gain in sales of Macintosh computers. Apple sold 856,000 Mac desktops, up 37% from a year ago, and 1.4 million laptops, up 61% from a year ago.

But sales of Apple's iPod players were up less than 1% to 10.6 million units.

The company sold 1.7 million iPhones, down from the first quarter's 2.3 million units. But the company was confident it will sell 10 million iPhones in fiscal 2008.

Amazon sees lower profit margins

Amazon.com made investors nervous when it said its profit margins would narrow this year, although its first-quarter results were strong.

Amazon reported 34 cents a share, 2 cents better than the consensus estimate and 31% higher than a year ago.

Revenue of $4.1 billion was up 36% from a year ago and a touch ahead of the Wall Street estimate of $4.08 billion.

Amazon.com said the sales gain was helped by low prices, a strategy that in part pushed gross margins, a continuous source of investor worry, below year-ago levels.

• Talk back: Time to invest in emerging markets now?

"It's a good revenue story, but the margins are not expanding as the more bullish people have been hoping," said Global Crown Capital analyst Martin Pyykkonen. "They are indicating they can sell more and they are selling more but presumably in here there is a lot of price competition."

Starbucks: Consumers pass on lattés

Starbucks, meanwhile, said second-quarter earnings would be lower than forecast because of the weak economy. While revenue for the quarter will rise 12%, it said it expects earnings to be 15 cents a share, down from earlier guidance of 19 cents a share. Wall Street had been expecting earnings of 21 cents a share.

Full-year earnings would fall under 87 cents, its earnings for 2007.

The company said same-store sales, a key measure, were likely to be in the mid-single digits because of falling traffic. Especially hard hit have been stores in California and Florida, where Starbucks gets 32% of its U.S. revenue.

"The current economic environment is the weakest in our company's history, marked by lower home values, and rising costs for energy, food and other products that are directly impacting our customers," CEO Howard Schultz said in a statement.

Starbucks stock has already fallen more than 50% since the end of 2006 on investors' worries about slowing growth of its U.S. business. The company expects to offer details on its turnaround plan for the next three years next week.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$118.30	$118.07	$0.23	16.46%	23.25%
Heating oil (per gallon)	$3.3250	$3.3169	$0.0081	9.04%	25.50%
Natural gas (per million BTU)	$10.7810	$10.6070	$0.1740	6.73%	44.07%
Unleaded gasoline (per gallon)	$3.0507	$3.0164	$0.0343	16.60%	22.48%

Boeing, Microsoft push the market higher

Boeing was easily the leader among the 30 Dow stocks, rising 4.5% to $82.09. The gain added 29 points to the Dow's gain.

Microsoft's 4% gain to $31.45 added nearly 10 points to the Dow.

The software giant (and publisher of MSN Money) reports fiscal-third-quarter earnings after Thursday's close. In addition, there seemed to be some cheering for CEO Steve Ballmer's repeated vows not to raise Microsoft's bid for Yahoo (YHOO, news, msgs).

Meanwhile crude oil for June delivery closed at $118.30 a barrel in New York, up 23 cents from Tuesday. But Wall Street looked at that number with relief. The May contract expired on Tuesday with crude closing at a record $119.37.

The dollar was also higher today.

• Video: Can GE recover from its earnings miss?

The Dow loser today was American International Group (AIG, news, msgs), down 3.1% to $43.86, in part because of worries about the health of bond insurers. Ambac Financial (ABK, news, msgs) drove that theme with a weak earnings report. The stock fell 43% to $3.46, the weakest performance among S&P 500 stocks.

The S&P 500 winner was clearly Safeco (SAF, news, msgs), a big property insurance company in Seattle, up 46% to $65.94. The company announced it is being acquired by Liberty Mutual Insurance of Boston for about $6.2 billion in cash.

Boeing relieves Wall Street

Boeing's earnings shook off any worries about its Dreamliner aircraft this morning.

The Dow component said it earned $1.21 billion, or $1.62 per share -- a 38% jump from the $877 million, or $1.13 per share, a year ago. Earnings from continuing operations were $1.61 per share.

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

Boeing revenue rose slightly to $15.99 billion from $15.37 billion.

The aircraft maker backed its full-year earnings forecast of $5.70 to $5.85 per share and said it expects per-share earnings of $6.80 to $7 in 2009; analysts are expecting 2009 earnings of $6.96 a share.

Yahoo's ho-hum profit report

Yahoo's (YHOO, news, msgs) first quarterly profit jump in two years didn't do much to excite investors.

The company late Tuesday reported earnings of $542.2 million, or 37 cents per share -- a surge from the $142 million, or 10 cents per share, Yahoo earned in the same quarter last year. But that surge was mostly due to a $401 million gain from its stake in Chinese Internet company Alibaba.com.

Stripping that out, Yahoo earned 11 cents per share, flat from the year-ago period. Analysts had pegged Yahoo to earn 9 cents per share. Shares fell 1.6% to $28.08 today.

Revenue rose 9% to $1.82 billion, while its first-quarter net revenue -- which excludes payments Yahoo made to advertising partners -- came in at $1.35 billion, slightly ahead of analysts' estimates of $1.32 billion.

Yahoo said revenue would be between $1.73 billion and $1.93 billion for its second quarter. Excluding estimated traffic-acquisition costs, Yahoo's second-quarter revenue would again be approximately $1.35 billion -- shy of Wall Street's estimate of $1.37 billion.

Yahoo didn't change its full-year revenue forecast of $7.2 billion to $8.0 billion.

Impact on Microsoft bid?

Analysts and investors had been paying close attention to Yahoo's results, hoping to glean any hint of its impact on Microsoft's bid for the company.

• Top Stocks blog: Yahoo's good but not spectacular quarter

Yahoo CEO Jerry Yang was optimistic about the results. "We have the right strategy in place, and it's beginning to bear fruit," Yang said on a conference call Tuesday.

The report "refutes Ballmer's assertion that the business might be worth less today than when Microsoft made its bid," Youssef Squali, analyst at Jefferies & Co., told The Wall Street Journal. "We still believe Microsoft needs to sweeten its bid to do a quick and friendly deal."

Other analysts disagreed.

"I see no impact" on Yahoo's bargaining position, Stanford Group analyst Clay Moran told MarketWatch.com. "These (results) are as expected and you continue to see Yahoo struggle with profitability, so it doesn't really change the dynamic of the negotiations with Microsoft."

Microsoft offered $31 per share for Yahoo -- a cash-and-stock deal totaling $44.6 billion -- on Feb. 1. It was a 61% premium to Yahoo's $19.18 closing price on Jan. 31, but Yahoo rejected the bid as too low. While talk has circulated about match-ups between Yahoo and other media and Internet players, no company has made a rival bid.

The offer has since declined to $43 billion, as Microsoft's shares have fallen over the past three months

Microsoft's Ballmer repeated today in Milan, Italy, what he said on Tuesday: The software giant would pursue its original offer for Yahoo regardless of its earnings report.

Microsoft earlier this month gave Yahoo a three-week deadline to accept its bid or said it would go directly to shareholders. The deadline is Saturday.

Higher fuel costs blamed for Delta, Northwest losses

Delta Air Lines (DAL, news, msgs) was slammed by the surge in energy prices in the first quarter.

Delta said it lost $6.39 billion, a huge plunge from its loss of $130 million a year earlier. Delta's per-share loss was $16.15. Excluding a $6.1 billion goodwill charge, the airline lost 69 cents per share. Still, it was worse than analysts' expectations of a 50-cent loss per share.

Delta's CEO Richard Anderson told reporters today that domestic airlines need to boost fares by 15% to 20% to try to make up for the soaring fuel prices.

Northwest Airlines (NWA, news, msgs) also reported a first-quarter loss today of $4.14 billion, or $15.78 per share, from a loss of $292 million, or $3.34 per share, a year ago. Spending on jet fuel jumped 57%, Northwest said.

Delta shares fell 3.5% to $6.56; Northwest shares fell 5% to $7.10.

Delta and Northwest agreed to merge earlier this month, with hopes of closing a deal by the end of the year.

Soaring oil has slammed all the airline stocks in recent weeks. Earlier this month, Continental Airlines (CAL, news, msgs) and UAL's (UAUA, news, msgs) United Airlines reported wider losses for the first quarter.

Delta shares are down 53% since the beginning of the year; Northwest shares have fallen 48%.

The Amex Airline Index ($XAL.X, news, msgs) fell 2.4% to 20.01 today after plunging 12.3% on Tuesday; it is down 40% since the beginning of the year.

Ambac reports a loss

Troubled bond insurer Ambac Financial this morning reported a hefty first-quarter loss of $1.66 billion, or $11.69 per share.

The loss was far worse than the profit of $213.3 million, or $2.02 per share, Ambac earned in the first quarter last year. On an operating basis, Ambac lost $6.93 per share. Analysts had expected a loss of $1.51 per share.

The company said it lost $940.4 million on certain mortgage-backed securities and collateralized debt obligations.

Ambac has been slammed by the mortgage-market meltdown and has been struggling to maintain its AAA credit rating amid the crisis. As the subprime-mortgage market collapsed, with it went the ratings of many of those mortgages, which weighed on Ambac's overall rating. Last month, Ambac said it raised $1.5 billion to help keep that rating.

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

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.200%	1.255%	-0.055	-11.11%	-61.78%
5-year Treasury note yield	2.955%	2.957%	-0.002	16.57%	-14.47%
10-year Treasury note yield	3.730%	3.720%	0.010	7.62%	-7.56%
30-year Treasury bond yield	4.485%	4.475%	0.010	3.22%	0.58%
Currencies
U.S. Dollar Index	72.050	71.540	0.510	-0.16%	-6.06%
British pound in dollars	$1.9798	$1.9802	-0.0004	-0.20%	-0.48%
Dollar in British pounds	£0.5051	£0.5050	0.0001	0.20%	0.48%
Euro in dollars	1.5893	1.5893	0.0000	0.91%	8.74%
Dollar in euros	€ 0.6292	€ 0.6292	0.0000	-0.90%	-8.04%
Dollar in yen	¥103.43	¥103.43	0.00	3.63%	-7.53%
Canadian dollar in U.S. dollars	$0.984	$0.984	$0.0000	0.61%	-0.93%
U.S. dollar in Canadian dollars	$1.017	$1.017	$0.0008	-0.61%	0.96%
Commodities
Gold	$909.00	$925.20	-$16.20	-1.94%	8.47%
Copper	$3.9005	$3.9585	-$0.06	-1.12%	28.26%
Silver	$17.2760	$17.8240	-$0.55	-2.34%	15.79%
Corn	$5.8775	$5.9425	-$0.06	3.61%	29.03%
Crude oil (NYMEX) (per barrel)	$118.30	$118.07	$0.23	7.41%	23.25%