This Is the Reason the S&P 500 Ended Modestly Higher


Well, hello there green arrow; nice to see you, too! After suffering through a miserable week, the broad-based S&P 500 (INDEX: ^GSPC) put the pessimists in their place, at least for one day, and rose by a modest 4.22 points (0.30%), to 1,412.97.

Much of today's rally early in the day can be attributed to positive economic data, including a 9.9% rise in demand for durable goods in September, as well as a drop in jobless claims, to 369,000, from 392,000 the week prior. Both of these figures would suggest a strengthening economy.

Following a midday swoon, the late-day surge can be mostly attributed to a lack of poor earnings dragging down the markets.

The semiconductor sector had a notably strong day, with semiconductor test equipment maker Teradyne (NYS: TER) , and networking and storage chip maker LSI (NYS: LSI) , rising 8% and 7%, respectively, following their quarterly reports.

Teradyne was able to record a 56% increase in net income in the third-quarter on a 35% improvement in revenue, but it also followed in its rivals' footsteps by issuing a downbeat fourth-quarter forecast. Revenue is expected to come in between $235 million and $260 million, which is well below Wall Street's expectation of $341.4 million. Perhaps investors were expecting an even worse forecast?

LSI, which I suspected might get thrown to the short-sellers this week, proved me both right and wrong at the same time. LSI reported a 35% rise in net income for the third-quarter, as sales advanced 14%, to $624 million. However, adjusted EPS merely met estimates, and revenue fell $14.1 million shy of the consensus figure. Furthermore, LSI's guidance calls for fourth-quarter EPS of $0.11-$0.17, just shy of the $0.18 Wall Street was looking for. This appears to have been yet another case of "it could've been worse."

The same can't be said for F5 Networks (NAS: FFIV) or Best Buy (NYS: BBY) , which both decisively alluded to weakening quarterly results, and paid dearly for it, sinking 11% and 10%, respectively.

F5, which provides application delivery networking technology, failed to deliver both in its fourth-quarter results, as well as its first-quarter forecast. The company blamed global weakness for weighing on customer orders, and forecast a first-quarter profit of $1.14 to $1.16 on sales of $363 million to $370 million. Wall Street was expecting EPS of $1.20 on sales of $373.7 million. Investors really shouldn't be too surprised, as the same swan song of despair has been sung by networking companies for months now.

Best Buy's despairs clearly aren't a surprise to anyone, and yet the stock still sunk like a rock after it updated its third-quarter outlook. Best Buy now anticipates that comparable-store sales will decline at a rate that's similar to the previous two quarters (5.3% and 3.2%), and expects gross margins to be similar to the second-quarter. In short, nothing's changed! It's going to take some time to enact Best Buy's strategic initiatives, but shareholders have shown they have little tolerance for failure.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of F5 Networks and Best Buy. Motley Fool newsletter services have recommended buying shares of F5 Networks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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