Dismal earnings from tech bellwether Apple on one hand and
strong results from Caterpillar and Boeing on the other kept the
markets confused about a definite and uniform direction. The Nasdaq
could not escape a negative finish as Apple's rare earnings miss
weighed down on the tech-laden index. Eventually, the Dow emerged
as the sole gainer as its components managed to beat the Street's
estimates. The narrow loss for S&P 500 ensured its
The Dow Jones Industrial Average (DJI) gained 0.5% and closed at
12,676.05. The Standard & Poor 500 (S&P 500) slipped a
meager 0.03% to end at nearly the same level it started the day
with at 1,337.89. The Nasdaq Composite Index dropped 0.3% and
finished yesterday's trading session at 2,854.24. The fear-gauge
CBOE Volatility Index (VIX) dropped 5.5% to settle at 19.34.
Consolidated volumes on the New York Stock Exchange, American Stock
Exchange and Nasdaq were roughly 6.43 billion shares, lower than
the year-to-date daily average of 6.74 billion shares. Advancing
stocks edged past the decliners on the NYSE; as for 52% stocks that
gained, 45% stocks ended in the red zone.
The S&P 500 was nearly unchanged, thanks the gains by the
telecom sector that almost offset weakness from the tech counter.
However, the tech-heavy Nasdaq could not limit its losses, as its
biggest component and tech-bellwether Apple Inc. (NASDAQ:
) fell short of the Street's estimates. During most of the past few
quarters, the iPhone and iPad maker has stormed past estimates. An
earnings miss from the largest company in terms of market value was
therefore a major headline, and unfortunately a dismal one.
Lower-than-expected iPhone sales primarily affected the
company's quarterly results. Units of iPhone sold during the
quarter were up 28% year on year (y/y), lower than estimates. The
26.02 million units of iPhone sold also reflected a 26% sequential
decline, which dragged the segment's revenue down 28%. Analysts at
Zacks noted that 'consumers deferred their purchases based on the
rumors surrounding the release of iPhone 5'.
Apple's shares dropped a sharp 4.3%. The decline subsequently
affected the Nasdaq, as Apple accounts for 12.7% of the benchmark.
The dismal results also weighed on the broader markets and the
Technology Select Sector SPDR (XLK) dropped 0.4%. Among other
technology stocks, Microsoft Corporation (NASDAQ:
), Oracle Corporation (NASDAQ:
), Hewlett-Packard Company (NYSE:
) and Dell Inc. (NASDAQ:
) dropped 1.1%, 0.2%, 1.1% and 0.7%, respectively.
While the negative sentiment arising out of Apple's earnings
miss weighed on the markets, investors received another set of
contrasting earnings reports. Market heavy-weight Caterpillar Inc.
) posted a stellar performance, not only storming past the Street's
estimates, but also raising its EPS estimates. Reported earnings
soared 67% y/y, while revenues increased 22% from the year-ago
quarter. Caterpillar also noted that the world economy is expected
to grow by roughly 2.5% in 2012. Shares of Caterpillar gained
Also helping to improve the mood was the earnings beat by The
Boeing Company (NYSE:
). Earnings were well ahead of the Street estimates and also
increased from the prior-year quarter. The largest aircraft
manufacturer in the world in terms of revenues also upped its
fiscal 2012 earnings per share guidance to within $4.40-$4.60.
Further, the company expects revenues for 2012 in the range of
$79.5 billion - $81.5 billion, up from its previous forecast of
$78.0 billion-$80.0 billion. Boeing's shares jumped 2.8%.
Separately, PepsiCo, Inc. (NYSE:
) also came out with encouraging second quarter numbers and the
shares gained 2.2%.
While investor sentiment tried to balance dismal and encouraging
earnings numbers, the U.S. Department of Housing and Urban
Development released disappointing housing data. According to the
report, sales of new single-family houses dropped 8.4% from May to
a seasonally adjusted annual rate of 350,000 in June 2012.
Consensus estimates were expecting a figure of 369, 000. The report
was a drag on the homebuilding segment and the SPDR S&P
Homebuilders (XHB) dropped 1.0%. Among homebuilding stocks, Lennar
), KB Home (NYSE:
), M.D.C. Holdings, Inc. (NYSE:
), Beazer Homes USA, Inc. (NYSE:
) and PulteGroup, Inc. (NYSE:
) slumped 4.0%, 3.3%, 3.3%, 5.2% and 4.4%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
BEAZER HOMES (BZH): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis
DELL INC (DELL): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
LENNAR CORP -A (LEN): Free Stock Analysis
MDC HLDGS (MDC): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis
ORACLE CORP (ORCL): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
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