Tech led the stock market lower Wednesday as investors recoiled over earnings from Intel
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] that, while beating profit estimates, fell short in gross margins outlook.

The damage spread across the sector’s biggest  names, with IBM
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]tumbling and Apple
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], which has come off its lofty pedestal, continuing to show inclination to give back the meteoric gains it had seen since November.

But taken on balance, the group’s strong cash position, innovation potential and expected growth mean it likely will remain a favorite for many investors.

After all, the earnings season, though still young, has has seen about 80 percent of companies in the space beat expectations, according to Mary Ann Bartels, technical research analyst at Bank of America Merrill Lynch.

“That’s a big number during earnings season,” Bartels said in an interview. “You’re always going to have select disappointments. But as long as the aggregate is strong — in fact, it’s been doing better than last quarter — that doesn’t concern me.”

Jeff Cox
Senior Writer
CNBC.com

Tech stocks have led the market rally a fairly large margin.

The Nasdaq 100
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], which is composed mostly of companies in the sector, has roared ahead 16 percent in 2012. On the Standard Poor’s 500
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], information technology has gained just over 20 percent, making it the strongest of the index’s 10 sectors.

With the Nasdaq pulling back nearly 3 percent over the past three weeks, Bartels believes now is a good time to jump in.

“A pullback to the 2,800 or 2,900 area would just be a test of the breakout,” she says. “We’re looking to get a dip and get back in. We’re definitely of the mentality that investors should be buying aggressively on the pullback in technology and the Nasdaq.”

Intel slid Wednesday primarily because traders didn’t like the quality of its earnings beat. Company officials warned that its gross profit margin would decline in the second quarter due to costs associated with a new production process.

But Craig Berger, semiconductor analyst at FBR Capital Markets, said Intel can be trusted to do its best to help shareholder value.

“It’s not a big problem, it’s a small problem,” Berger said, during a CNBC “Squawk Box” interview, regarding the margins issue. “The company’s bought back a ton of stock over the last four to six quarters. They keep buying back, so they have a lot less net cash on the balance sheet because they reduced 20 percent of the outstanding share count. So that’s really helped” the stock price.

Still, Berger said investors looking for a mega-cap company in the chip space might do better with Qualcomm
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] than Intel. One of Intel’s main challenge to improve its margins will be to get smartphone makers Apple and Samsung to buy its processors, Michael McConnell, an analyst at Pacific Crest, told CNBC’s “Squawk on the Street.”

But while Intel was disappointing the market, Yahoo‘s
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] earnings Tuesday had the opposite effect, with a modest growth in revenue cheering traders, who sent the company’s stock to a solid gain Wednesday despite the broader market weakness.

Yahoo officials told analysts in a conference call that a potential buyback of its stake in China’s Alibaba Group Internet company was progressing.

“We see potential positive catalysts related to better focus and execution from new management, new offerings, and the Alibaba Group investment,” SP Capital IQ analyst Scott Kessler said in a note in which he raised his full-year earnings target for Yahoo from 90 cents to 95 cents a share.

To be sure, tech stocks do present some challenges.

Price-to-earnings multiples in some cases are stretched, particularly among start-ups, and a blip in the space could cause market havoc. Apple, Microsoft
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] and IBM alone comprise 8.3 percent of the entire SP 500′s market cap, so they have outsized influence in the way the widely followed index moves.

But Bartels, at BofA, says chart analysis shows the group strong from an advance-decline perspective, and others tout corporate liquidity that will keep tech strong. There’s also that Facebook initial public offering in May to pique investor interest.

“Techs are going to continue to attract money,” says Keith Springer, president of Springer Financial Advisory in Sacramento, Calif. “It’s institutional money first, then the individuals tend to follow. Tech has been one of the leaders in this market rally for three years. But even trees don’t grow straight to the key. You’ve got to give them a chance to pull back a little.”

Article source: http://www.cnbc.com//id/47088082

Wall Street traders have become fixated on Spain, which has seen sovereign yields rise in recent weeks on concerns the country’s lack of growth makes its high debt levels unsustainable. Spain is auctioning 2.5 billion euros in debt, including 10-year notes Thursday. The yield on its 10-year Wednesday was at 5.83 percent, and there’s concern a sloppy auction could send rates higher, hit the euro and equities markets.

The early focus Thursday may also be on France, which holds its own debt auctions. That is of particular interest, ahead of the first round of the French presidential election Sunday. Political rhetoric leading up to that vote has increasingly gotten the market’s attention.

On Wednesday, socialist challenger Francoise Hollande, leading contender against President Nicolas Sarkozy, said IMF projections on the French economy were unacceptable. He also said new measures to spur growth may be necessary, which immediately had traders speculating France could increase stimulus spending, if he wins.

“The key risk for the euro in the second quarter is economic growth and political uncertainty, and the French election is one of the key political events,” said Brown Brothers currency strategist Mark McCormick. “Just because Hollande wants to renegotiate the terms of the fiscal compact, a lot of it may be political rhetoric, but I wouldn’t rule out the possibility that he would try to dilute some of the things they put in there.”

McCormick said there is concern that victory by Hollande in the May election would damage the important alliance between France and Germany in addressing Europe’s sovereign issues. “The influence now for political support has been through the relationship between Sarkozy and (German Chancellor Angela) Merkel. I think you’re going to be hard pressed to see a relationship form between Hollande and Merkel,” he said.

The Dow slumped 82 points to 13,202 Wednesday, after its strong rally Tuesday. IBM
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], reacting to Tuesday’s disappointing earnings news, was responsible for 55 points of the decline. The SP 500 fell 5 to 1,385.

Bank of America, Nokia, Morgan Stanley, DuPont, Travelers, Verizon, Blackstone, Union Pacific, Peabody Energy, Freeport McMoran and EMC are among the companies reporting ahead of Thursday’s opening bell. Microsoft, Capital One, Advanced Micro and Chipotle Mexican Grill report after the close.

“It’s all earnings, all the time, with a modest of awareness of what’s going on in Europe,” said Dan Greenhaus, global market strategist with BTIG.

“The macro data is secondary now, although there’s a modest focus on housing.”

Existing home sales are reported at 10 a.m. EDT, as is the Philadelphia Fed survey and leading indicators. Weekly jobless claims, released at 8:30 a.m., is especially important after last week’s miss, when claims rose to 380,000. “The trend has been higher so certainly you want to see that pare back some of that negativity for sure. We certainly have a momentary pause in the improvement in the labor market,” Greenhaus said.

Some of the companies reporting after Wednesday’s close will also get attention, including Qualcomm
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] which fell sharply after the bell on its disappointing outlook, and Ebay
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] and F5 Networks
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], which both rose on positive earnings news in late trading.

“We’ve had a terrific improvement in the economy that’s helped drive the stock market higher, and now you want to see corporations affirm the macro improvement with micro improvement,” Greenhaus said. “As the days go by, you want to see that play out… So far, the earnings season is a little better than the market expected.”

On Wednesday, “after you had a not well-received earnings report from IBM, and to a lesser extent to Intel
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], the market’s doing okay. Caterpillar
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]was up, Exxon
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]was up, Hewlett-Packard
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] was up. There’s a  powerful counterbalance which is why the market is not way down on those reports,” Greenhaus said.

Luggage maker Tumi will also be of interest Thursday, after pricing its initial public offering at $18 a share, a dollar above the range previously announced.

Follow Patti Domm on Twitter: @pattidomm

Questions?  Comments? Email us at

Article source: http://www.cnbc.com//id/47093497

The minutes of the Bank of England’s Monetary Policy Committee (MPC), released on Wednesday, showed that the bank was worried about inflation in the medium term and that Adam Posen, a long-time dove, dropped his call for the bank to do more quantitative easing (QE).

“This 8-1 vote in favor of no additional QE in an environment where consumer price inflation has edged higher, business surveys are pointing to growth and today’s labor report shows employment rising 53,000 in the past three months and unemployment falling 35,000 suggest more QE is looking unlikely,” ING Bank analyst James Knightley wrote immediately after the data was released.

Also on Wednesday, European Central Bank policymaker Jens Weidmann told Reuters that Spain should take the recent spike in its bond yields as a sign it must tackle the root cause of its problems, not wait for the central bank to boost liquidity further.

He also said that none of the ECB’s policymakers were in favor of using the bank’s bond-buying program to target specific interest rates on sovereign bonds and that he saw no reason to discuss a third long-term refinancing operation (LTRO).

The central bank injected over 1 trillion euros ($1.30 trillion) into the markets via two unlimited, two-year loans at its record-low interest rate of 1 percent and for a while, yields on the bonds of periphery countries fell.

But recently yields on Spanish bonds jumped back to the worrying 6-percent level, with some analysts calling on the ECB to do more to keep them in check. 

Inflation Danger

However, inflation figures in the euro zone have given rise to new concerns, making the ECB’s task even harder as the sole mandate written in its statute is maintaining price stability.

Data out on Tuesday showed euro zone inflation was revised up to 2.7 percent for March from a figure of 2.6 percent estimated by Eurostat and versus market expectations of a flat reading of 2.6 percent.

“Overall, we continue to think that inflation risks are skewed to the upside and that they mainly relate to higher-than-expected pass-through of energy commodity prices to consumer prices and also potential further increases in indirect taxes and administered prices amid the need to correct budget deficits across various euro area economies,” Barclays Capital analyst Fabio Fois wrote in a research note.

Inflation is a problem for the UK as well, with the figure rising for the first time in six months in March, according to data released on Tuesday. 

Vicky Redwood, chief UK economist at Capital Economics thinks that the Bank of England’s minutes show that quantitative easing may be halted for now, but it is not out of the cards completely.

“We still think that more asset purchases are likely later this year as the economic recovery disappoints again. But the chances that the MPC will pause in May are increasing,” Redwood said.

The weak economy but also the debt crisis showing no signs of abating as austerity brings worse recessions to euro zone periphery countries will likely make the ECB think again about its tough stance on fighting inflation and force it to loosen its purse strings once more, analysts said.

Euro Zone Not Out of the Woods

Portugal’s prime minister wrote in an editorial in the Financial Times that the country may not return to capital markets in 2013 as previously expected.

Italy may delay by one year its plan to balance its budget and raised its budget deficit forecast.

In a worrying development that shows how deep Spain’s predicament is, Spanish banks’ bad loans in February rose to 8.2 percent of their portfolios, the highest level since October 1994, amid falling home prices, data released on Wednesday showed.

Even countries that are not in the eye of the storm are likely to suffer, analysts warned. In France, labor costs are the highest among the large euro zone economies and non-wage costs of employment – such as social security taxes – are “double those in Germany and since 2000 unit labor costs have risen by 20 percent relative to those in Germany,” analysts at Credit Suisse wrote in a market note.

“France is the second most closed economy in the euro-area after Greece, and thus benefits less from a weaker euro or a global upturn,” they added.

Barclays Capital’s analyst Julian Callow noted that the International Monetary Fund, in its recent World Economic Outlook, saw the risk of “another acute crisis in Europe” and that it called for further easing from the ECB and a continuation of its LTROs and bond-buying program.

“In our view, such proposals (which echo some recommendations we have made previously) would be a sensible way to allay some risks in the euro area,” Callow said.

Article source: http://www.cnbc.com//id/47084600

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Warren Buffett tells

For several years now, the board has had someone in mind who would step in to run the company if Buffett was suddenly unable to do the job, and that someone doesn’t know he’s waiting in the wings. The board also has two or three other people in mind if needed.

While Buffett and his doctors are confident the cancer is treatable and not life threatening, the development is once again fueling the long-running guessing game on who will be running Berkshire Hathaway in the (Buffett hopes) far future.

Here are some of the leading candidates.

First, it’s almost certainly someone who is already running a Berkshire subsidiary.

In his annual letter to shareholders in February, Buffett wrote the Berkshire board is enthusiastic about his successor, “an individual to whom they have had a great deal of exposure, and whose managerial and human qualities they admire.”

A few days later, in a live CNBC interview, Buffett said, “The person who’s going to become CEO of Berkshire is probably a CEO of some operation within Berkshire Hathaway.”

Our leading candidate: Greg Abel, chairman and CEO of Berkshire’s MidAmerican Energy.

Quick, our Buffett expert, her producer Lacy O’Toole, and I all have his name at the top of our lists. Abel’s been working for MidAmerican for many years and became its CEO in 2008. Like other managers, he has been singled out for praise in several of Buffett’s annual letters.

Of course, Buffett’s insurance chief, Ajit Jain, also gets glowing praise from Buffett and he has long been seen as one of the leading contenders. CNBC’s “Squawk Box” co-anchor, Andrew Ross Sorkin, also a long-time Buffett-watcher, tells me he’s not sure who the successor is, but he thinks it should be Jain, because he’s the smartest person in the group. Andrew thinks Ajit is “closest in mindset” to Buffett, but he’s more of an insurance guru than an operating manager.

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Another possibility from Berkshire’s insurance side is Tony Nicely. He runs the GEICO auto insurance business and has also been lavished with praise by Buffett.

Burlington Northern Santa Fe CEO Matthew Rose and Lubrizol CEO James Hambrick are also possibilities, but they’re relative newcomers to the Berkshire family. Burlington Northern was acquired in 2010 and Buffett bought Lubrizol in 2011.

In that February live interview with us, Buffett said the person the board has in mind now is the same person they had in mind at least five years ago.

That means, and Buffett has confirmed, that former MidAmerican Chairman James Sokol was never the name in the board’s envelope — even before he left Berkshire after it was revealed he had bought Lubrizol shares while he knew Berkshire might acquire the company.

That underlines just how difficult this guessing game has become, because Sokol was widely seen as the leading CEO contender until he resigned in disgrace.

Current Berkshire stock prices:

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Class A:
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Keep up with Warren Buffett on CNBC.com and follow alexcrippen on Twitter.

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