Wall Street off on downbeat tech earnings
U.S. stocks were trading lower on Friday after rising to record highs in the previous session, as disappointing earnings results from two Microsoft and Google weighed on investor sentiment, positioning the tech-heavy Nasdaq index for its first weekly drop in four.
With no economic data on the calendar today, investors were left to focus on quarterly earnings reports, and news that Detroit, once a powerhouse because of the auto-industry and its music scene, yesterday submitted the largest municipal Chapter 9 bankruptcy filing in U.S. history after emergency manager Kevyn Orr failed to cut a deal with creditors. Still, Moody's has affirmed the U.S.'s AAA rating and raised the sovereign outlook to Stable from Negative, citing major reductions in government spending growth.
As of just before noon ET, the Dow was down 36 points to 15,513, the Nasdaq was lower by 30 points to 3,581, and the S&P 500 fell 1 point to 1,688. The Nasdaq was set to close the week with an approximate 0.5% loss, while the Dow and S&P 500 were still on track for weekly gains.
On Thursday, stocks surged to record closing highs after Ben Bernanke's two-day testimony to Congress reassured investors and as encouraging earnings and jobless claims data spurred optimism. The Dow climbed 78.02 points, or 0.5%, to end at an all-time high of 15,548.54, after the central bank boss reiterated that the tapering of monetary stimulus has no "preset" course, with the slowing of monthly bond purchases dependant on the progress of the economy. He also said it is "way too early" to call whether a September slowdown of asset purchases is in the cards, and stressed that there is a separation between reduced quantitative easing and lifting the Fed funds rate.
On the corporate front Friday, tech sector losses offset positive earnings reports from the likes of General Electric (NYSE:GE), Honeywell (NYSE:HON) and Schlumberger (NYSE:SLB), which all beat estimates.
Earnings from Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) last night brought down the tech sector in the U.S., with Microsoft shares plummeting more than 11% after its fiscal fourth quarter earnings missed forecasts amid continued slumping PC sales. Google shares were down 1.3% Friday after the Internet search giant's earnings were also below consensus estimates, with the company citing the impact of mobile on its ad prices.
Advanced Micro Devices Inc. (NYSE:AMD), the second-biggest maker of personal-computer processors, slumped 14%, shaving this year's gains, after forecasting a decline in third-quarter gross margin, even as it projected higher sales. The Sunnyvale, California-based company said gross margin, or the percentage of sales left after deducting the cost of production, will drop to about 36 percent this quarter from 40 percent in the second quarter. Credit Suisse Group AG and Morgan Stanley downgraded their recommendations on the stocks, to "underperform" and "underweight" respectively.
In consumer discretionary shares, Chipotle Mexican Grill Inc. (NYSE:CMG), a burrito chain, rose 7.5% to a 52-week high of $404.88 after posting a second-quarter profit of $2.82 a share, one cent above estimates.
In other news, Time Warner Cable Inc. (NYSE:TWC) shares rose 3% after calling CBS's demands over a new carriage agreement "unreasonable". CBS has reportedly said its broadcast network could be removed from Time Warner’s service if an agreement isn’t reached. The company also gained as it is being pursued, based on a report that billionaire-backed cable provider Charter Communications (NASDAQ:CHTR) is teaming up with Goldman Sachs Group (NYSE:GS) to buy the company.
Gold futures rose $11 to $1,296 an ounce on Friday, while oil for August delivery edged down 31 cents to $107.74 a barrel.
European markets finished lower today with shares in France leading the region as Angela Merkel ruled out further debt writedowns in Greece and as Spanish protestors demand Prime Minister Rajoy's resignation. The CAC 40 finished down 0.23% while Germany's DAX settled off 0.07% and Britain's FTSE 100 ended lower by 0.06%.