Stocks Fell on EU Downgrade Woes (AAPL, ANR, BAC, C, CAT, CMG, CSX, FFIV, JPM, PCX, VMW)

Published on Friday, 13 January 2012 18:35 Written by Christopher Lynn

New York, January 13^th (TradersHuddle.com) – Stocks closed lower, with the NASDAQ snapping its six session winning streak, after weaker than expected revenues at JPMorgan and jitters from the euro zone, with reports of imminent downgrades to several of the euro zone countries weighed on sentiment. The market however was able to bounce of their worst levels of the session and still posted a gain for the week.

The Dow Jones Industrial Average fell 48.96 points, or 0.39%. The S&P 500 index lost 6.41 points or 0.49%, while the NASDAQ slid 14.03 points, or 0.49%.

For the week the Dow closed with a 0.5% gain, while the NASDAQ jumped 1.63% and the S&P 500 climbed 0.88%. 

The market started lower, with downward pressure increasing quickly through the morning, as the euro weakened. JPMorgan (NYSE: JPM) had pressured futures earlier after the lender quarterly results missed on the revenue side, while reports of an imminent downgrade by S&P on several euro zone countries, including France, weighed on the FOREX market and risk appetite.

In Europe, equity markets closed lower, with equity markets extending declines, as the euro broke below the $1.27 level against the Dollar on reports that S&P was set to downgrade several euro zone countries. Banks were one of the worst performers amid the downgrade jitters and on reports that negotiations on the Greek debt swap deal were facing challenges. Earlier in the day, Italy held a long-term bond auction that had decent demand.

Sellers gained additional control as the session progressed, amid the euro weakness, but the market found support and was able to bounce, as more details emerged from the imminent downgrade, which will have France’s AAA credit rating cut by one notch, while Italy, Spain, and Portugal will also be downgraded.

The decline was broad base with all of the S&P 500 sectors ending in negative territory. Industrials, financials, and materials posted the biggest declines, while consumer staples and utilities closed near the unchanged line. Financials received most of the focus, particularly banks, as JPMorgan (NYSE: JPM) kicked off the banks reporting season. The lender posted a profit of $0.90 per share, inline with consensus, on revenues that fell 9.6% year over year to $21.47 billion, short of consensus of $22.68 billion. JPMorgan logged the second biggest decline in the Dow Jones Industrial Average, as shares fell 2.52% to $35.92.

Rivals Citigroup (NYSE: C) and Bank of America (NYSE: BAC) fell, as participants booked some profits from the big run the stocks had had during this year, amid the downgrade jitters in the euro zone and concern over JPMorgan’s earnings report. Citigroup fell 2.72% to $30.74, trimming its year to date gain to 16.8%. Meanwhile, Bank of America lost 2.65% to $6.61; posting the biggest decline in the blue chip index and cutting its year to date jump to 18.9%. According to reports, the Charlotte, NC based lender told regulators that it was willing to cut back its presence from some parts of the country if its financial problems deteriorate. The reports also speculated that BofA could be mulling the sale of stock tracking the performance of its highly profitable Merrill Lynch unit.

Industrials were also under pressure, as the euro weakened and as the trade deficit widened to $47.8 billion, its highest level in 5-months. In the sector, railways were some of the worst performers following production cuts at Patriot Coal. CSX Corp. (NYSE: CSX) tumbled 3.12% to $22.94, cutting its weekly advance to 1.1%.

The cut in production at Patriot Coal (NYSE: PCX) weighed on coal producers, with Alpha Natural Resources (NYSE: ANR) plunging to the bottom of the S&P 500, as shares tumbled 10.47% to $20.19.

On the flip side, Caterpillar (NYSE: CAT), the world’s largest earthmoving equipment maker, gained 0.53% to $102.48 after Barclays raised its price target on the stock to $128 from $115. Caterpillar posted one of the biggest gains in the blue chip index.

In the technology space, Apple (NASDAQ: AAPL) saw weakness, falling 0.37% to $419.81 after trading in a tight range. The company suspended the sale of its iPhone 4S in retail locations and will only offer it online after a scuffle erupted outside its flagship store in Beijing, with eggs thrown to the store, as the huge crowds prevented Apple from opening the store. The tech giant also released a list of its major suppliers, saying it discovered environmental violations in their Chinese plants. Apple fell for the week 0.61% pulling back from an all-time high of $427.75 and as the company prepares to report its quarterly results on January 24^th.

Also in the sector, F5 Networks (NASDAQ:FFIV), the application delivery networking Company, tumbled 3.65% to $106.78. The company is scheduled to report its quarterly results on Wednesday after the close. Analysts on average expect a profit of $1.01 per share on revenues of $319.13 million.

In the space, VMware (NYSE: VMW), the provider of virtualization software solutions, fell 2.75% to $85.46 after Citigroup cut its rating to a Sell, while trimmed its target price to $80 from $87.

Elsewhere, Chipotle Mexican Grill (NYSE: CMG) gained 2% to $354.62 after it posted a new all-time high of $355. William Blair upgraded the stock to Outperform from Market Perform.