Steep sell-offs inGoogle (
),Mellanox Technologies (
) andAlign Technology (
) mauled the stock market Thursday as a throng of companies
reported earnings and mixed economic data were released.
SPDR S&P 500
) fell 0.26% to 145.82. It remains above the 50-day moving
average, looking bullish.
PowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
dropped 1.16% to 67.29. It appears to have hit price resistance
at the key 50-day moving average, which is bearish.
SPDR Dow Jones Industrial Average (DIA) shed 0.05% to 135.36.
It's also holding above the 50-day line, which is positive.
Mike Binger, senior portfolio manager at Gradient Investments,
in a commentary released Thursday cited five reasons why SPY has
rallied 18% this year and should continue to climb:
1. The market likes corporate profits that are going
2. The market also likes a good economy and stimulus.
3. And the market also yields more than Treasuries now.
4. Housing has been a problem, but this month's new-housing
5. And finally, the unemployment rate has now dropped below
Binger concluded: "Remember, just because an asset class has
risen doesn't necessarily make it expensive. Fundamentals drive
prices over time, not headlines. Market direction will change
when the fundamentals change, the rest is just short-term
Despite losses across the board, the number of stocks hitting
new highs outnumbered by a considerable margin those hitting new
lows on both the NYSE and Nasdaq, indicating there's more
strength pushing stocks up than down.
Major Economic Releases
U.S. initial employment claims last week rose to 388,000 vs.
consensus forecasts of 365,000 and a prior (upwardly revised)
342,000 as California's impact was fully factored. The four-week
average is 366,000.
"The volatility in the last few weeks appears to reflect
seasonal-adjustment challenges around the start of a quarter,"
wrote Jim O'Sullivan, chief U.S. economist at High Frequency
Economics in Valhalla, N.Y. "The latest reading also included the
Columbus Day holiday. The volatility makes reading the trend
difficult, cautioning against simply extrapolating, even on a
smoothed 4-week-average basis. Still, the trend in claims appears
to be flat at worst -- if anything, down slightly, even with this
week's higher-than-expected number."
The Philadelphia Fed manufacturing survey showed manufacturing
in the Mid-Atlantic region improved in October, suggesting
expanding business activity. It rose to 5.7 in October from -1.9
in September and -7.1 in August -- higher than the 1.0 consensus.
But many of the subindexes remained weak.
"While the headline index signals some improvement in
manufacturing, the details remain quite weak," O'Sullivan wrote.
"In interpreting the data, we expect manufacturing numbers to be
weaker than other data now because of greater exposure to
The Conference Board said its index of leading economic
indicators rose 0.6% in September, better than the expected 0.2%
increase, with gains in building permits. But new orders were
weak, and the board says poor demand continues to be a drag on
Major Stock Movers
Web-search giant Google plunged 8% to 695.00 in four times
average trade. It broke below its 50-day moving average for the
first time in three months. Disappointing third-quarter earnings
were released hours ahead of schedule, a very unusual
Q3 earnings fell 7% year over year to $9.03 a share -- 15%
below analysts expectations. Sales climbed 45% year over year to
$14.1 billion. It is the third-largest holding in QQQ.
Mellanox plunged 20.5% to 77.99 in nearly six times average
volume after releasing fourth-quarter guidance that missed
analysts' expectations. Shares of the Israeli chip designer fell
to a three-month low and below its 50-day line for the first time
in as many months. Pacific Crest, FBN Securities and Harel
Finance all cut their price targets on the stock, while rating it
outperform. But the company reported superb third-quarter
earnings of $1.37 a share, up 303% from a year ago and topping
views by 21%. Sales surged 130% to $156.5 million.
Orthodontics-devices maker Align gapped down 20.4% to 28.18 --
a six-month low in record volume. Shares fell below both their
50- and 200-day moving averages, which is very bearish.
Third-quarter earnings rose 4% to $0.28 a share -- missing
targets by 3%. Sales rose 8% to $136.5 million. Cantor Fitzgerald
and JMP Securities cut their price targets. Cantor rates shares
hold, while JMP rates them market perform. Credit Suisse rated
"The real story in the quarter was the revenue shortfall
driven by: 1) lower-than-expected case shipment growth, and 2)
disappointing scanner/services revenue," a Credit Suisse analyst
wrote. "We would highlight that margins came in relatively in
line, with the offset to the disappointing revenue being a
lower-than-expected tax rate."
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