Disappointing corporate earnings results and escalating
tension between Russia and Ukraine dragged the benchmarks down on
Friday. Amazon's and Ford Motors' quarterly results had a
negative impact on the markets and caused a selloff in the
consumer discretionary sector. Microsoft's upbeat quarterly
results, reported after the closing bell on Thursday, failed to
restrict the day's loss. Also, encouraging economic data on
consumer sentiment made no difference to the bearish mood.
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FORD MOTOR CO (F): Free Stock Analysis Report
TWENTY-FST CF-A (FOXA): Free Stock Analysis
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VISA INC-A (V): Free Stock Analysis Report
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) dropped 0.9% to close
Friday's trading session at 16,361.46. The Standard & Poor
(S&P 500) declined 0.8% to finish at 1,863.40. The tech-laden
Nasdaq Composite Index fell 1.8% to 4,075.56. The fear-gauge CBOE
Volatility Index (VIX) went up 5.6% to settle at 14.06. Total
volume for the day was roughly 6.26 billion shares, lower than
this month's average of 6.57 billion. Advancing stocks were
outnumbered by declining stocks on the NYSE. For 33% stocks that
advanced, 64% declined.
Amazon.com Inc. (NASDAQ:
) reported earnings per share of 23 cents in the first quarter,
just ahead of the Zacks Consensus Estimate of 22 cents per share.
Amazon's revenues increased 22.8% year on year. However, Amazon's
operating expenses of $5.54 billion were up 35.5% from the
year-ago quarter. Shares of Amazon plunged 9.9% and were a big
drag on the S&P 500 and Nasdaq.
Much of the decline in Amazon's share was due to the
second-quarter operating loss forecast. Reportedly, Amazon
expects operating loss of $55 million to $455 million in the
second quarter, as compared to profit of $79 million in the
second quarter 2013. Amazon's outlook was affected by its
spending plans. The company's costly foray into new products like
Amazon Fire set-top box to delivery services was attributed to
higher forecast for second quarter operating expenses. Also, the
cost of sales jumped to $14 billion from $11.8 billion in the
Ford Motor Co. (NYSE:
) posted earnings per share of 25 cents in the first
quarter of 2014, down from 41
cents in the first quarter of
2013 (all excluding special items). The company's first
quarter earnings per share was also less than the Zacks Consensus
Estimate of 32 cents per share. A higher warranty cost for older
vehicles in North America was cited to be the reason behind the
decrease in earnings. Shares of Ford Motor dropped 3.3%.
The Consumer Discretionary Select Sector SPDR (XLY) decreased
1.7%. Key stocks from the sector such as The Walt Disney Company
), Comcast Corporation (NASDAQ:
), The Home Depot, Inc. (NYSE:
), Twenty-First Century Fox, Inc. (NASDAQ:
) and The Priceline Group Inc. (NASDAQ:
) dropped 1.7%, 0.8%, 0.5%, 0.7% and 4.9%, respectively.
Separately, Microsoft Corporation's (NASDAQ:
) better-than-expected quarterly results impressed investors.
Microsoft reported its fiscal third quarter results after the
market closed on Thursday. The software giant's
third-quarter earnings per share of 68 cents beat the Zacks
Consensus Estimate of 62 cents per share. Shares of Microsoft
Escalating tension between Russia and Ukraine weighed on the
benchmarks. The U.S. President Barack Obama and four of his
European allies France, Germany, Italy and UK agreed to "impose
costs" on Russia after Russian President
Vladimir Putin failed to observe the
Geneva accord, signed on Thursday.
On Thursday, Russia started military drills near the borders of
Ukraine after Ukrainian forces reportedly killed five-pro Moscow
rebels. In response, the U.S. Secretary of
State John Kerry said that it
will be "an expensive mistake" if Putin fails to
ease tensions in Ukraine.
Earlier this month, in Kramatorsk, Ukrainian forces stormed an
airport held by pro-Russian militants. Ukraine's forces also
countered militants in the eastern Donetsk region. The U.S. has
supported Ukraine in its mission to uproot pro-Russian militants
occupying government buildings.
Coming back to the corporate results, Visa Inc. (NYSE:
) stated that U.S. sanctions on Russia affected its card
transaction volumes. The credit-card company, after the market
closed on Thursday, reported that its total operating revenue for
the second-quarter fiscal 2014 stood at $3.16 billion, lagging
the Zacks Consensus Estimate of $3.20 billion. However,
second-quarter fiscal 2014 operating earnings of $2.20 per Class
A common share beat the Zacks Consensus Estimate by a penny.
Shares of Visa plunged 5.0%.
On the economic front, the University of Michigan and Thomson
Reuters' final reading on consumer sentiment increased in April
and touched the highest level since July 2013. The gauge was at
84.1 in April, from a preliminary reading of 82.6. This
rise in consumer sentiment was more than the consensus forecast
of it rising to 82.9.
For the week, the benchmarks ended in the red. The S&P 500,
Dow and Nasdaq slipped 0.1%, 0.3% and 0.5%, respectively.
Benchmarks declined for the week following disappointing
corporate results and discouraging economic data. Verizon
Communications Inc. (NYSE:
), 3M Company (NYSE:
), AT&T, Inc. (NYSE:
), Amgen Inc. (NASDAQ:
) and Biogen Idec Inc. (NASDAQ:
) reported disappointing corporate results, which had a negative
impact on the benchmarks. Decline in new home sales data added to
the bearish sentiment. Also, reports of military tension near the
Ukraine border unnerved investors.
The week's, upbeat quarterly earnings by Apple Inc. (NASDAQ:
), The Boeing Company (NYSE:
), Gilead Sciences Inc. (NASDAQ:
), Comcast Corporation (NASDAQ:
), Harley-Davidson, Inc. (NYSE:
), Netflix, Inc. (NASDAQ:
), The Travelers Companies, Inc. (NYSE:
), United Technologies Corp. (NYSE:
), Halliburton Company (NYSE:
), Hasbro Inc. (NASDAQ:
), Kimberly-Clark Corporation (NYSE:
) and SunTrust Banks, Inc. (NYSE:
) failed to restrict the benchmarks from ending in the negative
territory. At the same time, an increase in Conference Board's
leading economic index and new deals in the health care sector
failed to restrict the week's losses.
Eight out of 10 sectors of the S&P 500 ended in the red. The
SPDR S&P Homebuilders ETF (XHB) led the decline among the
S&P 500 sectors. The sector fell 2.2%. Key housing stocks
from the sector such as PulteGroup, Inc. (NYSE:
), Lennar Corp. (NYSE:
), DR Horton Inc. (NYSE:
) and Beazer Homes USA Inc. (NYSE:
) decreased 2.9%, 2.3%, 2.8% and 1.5%, respectively.