October 19, 2012|Atossa Araxia Abrahamian |
Reuters
(BRENDAN MCDERMID, REUTERS)
NEW YORK (Reuters) - Stocks ended the week on Friday with their worst
day since late June after Dow components General Electric and
McDonald's, both barometers of the overall economy's health, added to a
disappointing earnings season.
Technology shares kept up a
pattern of recent weakness, hurt by anemic results from Microsoft and
another losing day for Google . The Nasdaq closed down 2.2 percent.
For the Dow, Friday's slide marked its biggest loss since June 21 -
with the sell-off coming on the 25th anniversary of Black Monday, when
the Dow plunged 22.6 percent in its worst single-day percentage drop
ever.
For the week, though, the Dow still managed to squeak out a
gain of 0.1 percent, while the S&P 500 gained 0.3 percent despite
Friday's losses.
Wall Street's mood was sour, given that a large
number of companies have fallen short of top-line expectations. Of the
116 S&P 500 companies that have reported results so far, 58 percent
have missed on revenue expectations, according to Thomson Reuters data.
"Traders are going to look at things that mimic the U.S. economy - and
currently, everything that mimics the economy has been performing
awfully," said Todd Schoenberger, managing principal at the BlackBay
Group in New York.
General Electric Co shares fell 3.4 percent to $22.03 after quarterly revenue fell short of estimates.
McDonald's Corp lost 4.5 percent to hit $88.72. Chipotle Mexican Grill
fell 15 percent to $243 after quarterly profits missed analysts'
expectations.
The technology sector has been a drag on the stock
market, which is a concern because it is seen as a leading indicator of
market direction. The S&P information technology sector index
<.GSPT> has dropped 5.3 percent in the last 10 days, compared with
a 1.9 percent decline for the S&P 500 in that time period.
"Tech has been lagging for almost a month now. It is obviously very
sensitive to the U.S. economy, and the global economy for that matter,"
said Ryan Detrick, senior technical strategist at Schaeffer's Investment
Research in Cincinnati, Ohio.
Microsoft dropped 2.9 percent to
close at $28.64 after it said it fell short of revenue expectations
because of poor sales of PCs.
"The fact they are missing consistently is bringing up a 'sell first, ask questions later' mentality," Detrick said.
Tepid results are being met with particular disappointment because
expectations were low to begin with this season, with 95 negative
pre-announcements for earnings per share and only 24 positive
pre-announcements issued by S&P 500 corporations, Thomson Reuters
data shows.
Earnings are expected to drop 1.8 percent in the third quarter from a year ago.
The Dow Jones industrial average <.DJI> lost 205.43 points, or
1.52 percent, to close at 13,343.51. The Standard & Poor's 500 Index
<.SPX> fell 24.15 points, or 1.66 percent, to 1,433.19. The
Nasdaq Composite Index <.IXIC> slid 67.24 points, or 2.19 percent,
to close at 3,005.62.
For the week, the Nasdaq lost 1.3 percent.
The sharp decline took the S&P 500 from within striking distance of
its highest close of the year - at 1,465.77 set on September 14 - to
testing its 50-day moving average. On Friday, the S&P 500 appeared
to be testing its 50-day moving average at around 1,433. If the S&P
500 falls below that level, it could trigger more selling.
"The
S&P 500 has broken trend-line support at 1,441, and is slipping a
bit below its 50-day moving average of 1,433," said Stifel Nicolaus
option market strategist Elliot Spar.
Near-term volatility is
expected to rise. The CBOE Volatility Index <.VIX>, Wall Street's
gauge of investor anxiety, rose 13.5 percent to close at 17.06, off its
session high at 17.60. Options expiration added a bit of volatility to
Friday's trading.
Volume was roughly 7.27 billion shares traded
on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared
with the year-to-date average daily closing volume of 6.52 billion.
Decliners outnumbered advancers on the NYSE by a ratio of more than 3
to 1. On the Nasdaq, about four stocks fell for every one that rose.
(Reporting by Atossa Araxia Abrahamian in New York; Additional
reporting by Doris Frankel in Chicago and Chuck Mikolajczak in New York;
Editing by David Gaffen and Jan Paschal)
