Google, Mellanox, Align Lead Binders Full Of Losses


Steep sell-offs inGoogle ( GOOG ),Mellanox Technologies ( MLNX ) andAlign Technology ( ALGN ) mauled the stock market Thursday as a throng of companies reported earnings and mixed economic data were released.

Market Overview

The SPDR S&P 500 ( SPY ) fell 0.26% to 145.82. It remains above the 50-day moving average, looking bullish.

PowerShares QQQ ( 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 higher.

• 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 starts jumped.

• 5. And finally, the unemployment rate has now dropped below 8%."

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 noise."

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 declining exports."

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 the economy.

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 occurrence.

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 shares neutral.

"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."

Follow Trang Ho on Twitter @TrangHoETFs .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

Referenced Stocks: ALGN , GOOG , MLNX , QQQ , SPY

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