A day after the benchmarks had their best run in nearly a month,
insipid results from two tech-bellwethers and European economic
concerns dragged the markets lower on Wednesday. Incidentally,
benchmarks' robust performance on Tuesday was largely boosted by
the same fronts, except that corporate results came in strong and
Europe had positive news to share about. Unfortunately, IBM and
Intel's results failed to lift investors' sentiment yesterday, and
bad loans of Spanish banks reached to the highest level since
1994.
The Dow Jones Industrial Average (DJI) slumped 0.6% to close at
13,032.75. The Standard & Poor 500 (S&P 500) was down 0.4%
and finished yesterday's trading session at 1,385.14. The
tech-laden Nasdaq Composite Index dropped 0.4% to sign off at
3,031.45. The fear-gauge CBOE Volatility Index (VIX) edged up by
almost a percent to settle at 18.64. Consolidated volumes on the
New York Stock Exchange, the American Stock Exchange and Nasdaq
were roughly 5.95 billion shares, sharply lower than this year's
daily average of 6.67 billion. The declining stocks outpaced the
advancing ones on the NYSE; as for every two stocks that ended in
the red zone, only one stock could manage to settle in the
green.
Only seven of the 30 Dow components ended in the green zone with
gains going only as high as 0.9%, which was attained by
Hewlett-Packard Company (NYSE:
HPQ
). While it was HPQ who led the gainers, it was also the technology
stocks that suffered the biggest losses among the remaining 23 Dow
components. International Business Machines Corporation (NYSE:
IBM
) and Intel Corporation (NASDAQ:
INTC
) were the biggest laggard in the Dow and they skidded 3.5% and
1.8%, respectively.
It was the insipid results, rather, less-than-stellar results
from IBM and Intel that dragged them lower, which in turn also
dragged the broader markets. Looking at IBM, its first-quarter 2012
earnings per share (
EPS
) came in at $2.78 per, topping estimates of $2.63. Strong margin
growth and share repurchases boosted the quarter's performance and
the tech-giant also raised its full-year earnings projections.
However, investors focused on the revenue numbers, which remained
flat year on year (currency adjustment of 1.0%) at $24.67, and was
also below Street estimates. That definitely did not go down well
with the investors and the stock was heavily battered.
The negative sentiment was evident in the broader markets and
was further intensified by Intel's earnings, which were below
average earnings surprise. Intel's first-quarter EPS beat the
Street estimates by roughly 6%, which was lower than the average
earnings surprise of 12% considering the past four quarters.
Investors opted for some profit booking and eventually the shares
and the benchmarks were led lower.
Also affecting the investor sentiment yesterday was the report
of ratio of bad loans of Spanish banks hitting an 18-year high. The
Bank of Spain confirmed that in February the bad loans totaled $182
billion, surging 8.15% of total credits. This report added to the
lingering concerns over the surging borrowing costs of Spain. Since
the last couple of weeks, borrowing costs in Spain had been
trending up and also crossed 6% recently. On Tuesday, the 10-year
bond yield had dropped below 6%, easing concerns. But, with the
addition of this report, investors were surely worried about the
nation's economy.
The financial sector could obviously not have been in a healthy
situation amidst such concerns and it did end up in the red zone.
The Financial Select Sector SPDR (
XLF
) was down 0.7% and the KBW Bank Index (BKX) dropped 0.6%. As for
the financial stocks, JPMorgan Chase & Co. (NYSE:
JPM
), The Goldman Sachs Group, Inc. (NYSE:
GS
), U.S. Bancorp (NYSE:
USB
), KeyCorp (NYSE:
KEY
) and Regions Financial Corp. (NYSE:
RF
) slumped 1.4%, 1.3%, 0.8%, 2.1% and 1.3%, respectively.
GOLDMAN SACHS (
GS
): Free Stock Analysis Report
HEWLETT PACKARD (
HPQ
): Free Stock Analysis Report
INTL BUS MACH (
IBM
): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
Report
KEYCORP NEW (KEY): Free Stock Analysis Report
REGIONS FINL CP (RF): Free Stock Analysis
Report
US BANCORP (USB): Free Stock Analysis Report
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