Stocks Struggle on GDP Data; NASDAQ Gains

Published on Friday, 27 January 2012 19:53 Written by Christopher Lynn

New York, January 27^th (TradersHuddle.com) – Stocks struggled in the session, with the major benchmark indices ending mixed after GDP data in the U.S. disappointed investors. Ongoing jitters in the euro zone weighed as well. The NASDAQ was able to outperform in the session, capping its forth-consecutive weekly gain.

The Dow Jones Industrial Average fell 74.17 points, or 0.58%. The S&P 500 index lost 2.10 points or 0.16%, while the NASDAQ climbed 11.27 points, or 0.40%.

For the week the Dow fell 0.47%, while the NASDAQ climbed 1.07% and the S&P 500 added 0.07%.

The market started under pressure after the first reading of fourth quarter GDP disappointed investors, which have been expecting a number with a 3 handle. The economy however still grew at a pace of 2.8%; however factoring the inflation, real GDP increased 1.7%. Overseas trade turned lower following the data, which came amid a new earnings parade from Chevron (NYSE: CVX), Procter & Gamble (NYSE: PG), and Ford (NYSE: F).

In Europe, equity markets closed lower after earlier optimism over progress in Greece’s debt restructuring negotiations was outweighed over concern about the pace of economic growth in the world’s largest economy. Automotive stocks suffered in the session after Ford missed earnings expectations and as GDP in the U.S., the world’s second largest automotive market came below expectations. Jitters about Portugal, needing another bailout continued in the background.

Most of the S&P 500 Select sectors closed in negative territory. Financials, materials, and healthcare gained, while utilities, consumer staples, and energy posted the biggest declines. The Utilities SPDR ETF (NYSE: XLU) fell more than 1%, posting the biggest declines with American Electric Power (NYSE: AEP) tumbling more than3% to $39.95 after it posted inline earnings on better than expected revenues; the stock was downgraded to a Hold from Buy at Deutsche Bank, as the firm cited fair valuation given earnings outlook. The Utilities sector was the best performer last year, and it now has dragged at the start of the year, losing 3.5%.

In the earnings front, Chevron (NYSE: CVX) led the declines in the Dow Jones Industrial Average and weighed on the energy sector after the company’s fourth-quarter results missed Wall Street estimates thanks to losses in the company’s downstream operations. Chevron CEO John Watson said his company plans to use its $10 billion cash hoard for major liquid natural gas projects overseas and to reward shareholders through dividends and share repurchases. Watson added a major acquisition probably isn’t in the cards for his company.

Also in the sector, but helping limit the gains, Halliburton (NYSE: HAL) gained more than 2.6% on news that a U.S. federal judge ruled BP (NYSE: BP) would have to indemnify Transocean (NYSE: RIG) for third-party claims related to the 2010 Gulf of Mexico oil spill. Analysts and investors viewed the news as a victory for Transocean, the world’s largest provider of offshore drilling services. The ruling also was viewed as positive for other oilfield services providers and drillers.

Alpha Natural Resources (NYSE: ANR), the steam and metallurgical coal producer, was the biggest gainer in the sector with a 5.9% jump. Shares closed at $21.65.

In the consumer staples sector, Procter & Gamble (NYSE: PG) was weaker. The global consumer products company slid 0.77 after it issued third quarter EPS and fiscal 2012 EPS guidance below consensus. Procter actually beat earnings expectations by $0.02 per share on revenues that climbed 3.7% year over year to $22.4 billion.

Technology on the other hand, unchanged but it helped the tech heavy NASDAQ to outperform the broad market, with the benchmark index, actually ending with gains for the session. First Solar (NASDAQ: FSLR) surged to the top of the S&P 500, as shares rallied more than 11% to $45.54 after the German government could not reach an agreement on cuts to the country’s solar energy subsidy program.

Apple (NASDAQ: AAPL) was able to also muster a gain in the session, with shares adding 0.6% to $447.28. Main smartphone rival Samsung Electronics posted record profits, as the Korean electronics giant also benefited from strong sales in smartphones during the holiday quarter. According to the latest data, Apple was able to toppled Samsung as the top smartphone maker in the world in the fourth quarter, however for the total 2011 year. The Korean company outsold Apple with 97.4 million smartphones versus 93 million iPhones.

Weighing on the performance of the sector was shares of Juniper Networks (NASDAQ: JNPR), which tumbled 3% after it provided a weak outlook. The company did beat the Street by a $0.01 per share on revenues that climbed 5.7% year over year. Also weighing on the networking space, were shares of Riverbed Technology (NASDAQ: RVBD). The company disappointed investors by providing downside guidance for the current quarter. Riverbed shares plunged 18% to $24.45.

The weakness in the space weighed on rival and Dow component Cisco (NASDAQ: CSCO). The networking giant fell more than 1%, posting the second biggest decline in the blue chip index.

Materials received a lift after Eastman Chemical (NYSE: EMN) surged to the top of the sector, with shares rallying 7% to $50.41 on news that it agreed to purchase Solutia (NYSE: SOA) in a deal worth $3.38 billion. The company that had sold its PET business last year was looking to expand its presence in other markets and in Asia Pacific. Shares of Solutia surged 41% to $27.52.

Elsewhere, Ford (NYSE: F) tumbled more than 4% in the session after an earnings miss; however shares were able to bounce back from below the $12 level mark to close at $12.21. The automaker results were pressured from overseas markets and rising commodity costs.

And according to the Wall Street Journal, Facebook would likely file for an IPO as early as Wednesday next week, with Morgan Stanley taking the lead role as underwriter. The highly anticipated IPO is expected to yield a valuation for Facebook of $75 to $100 billion, which could be one of the biggest IPOs in the U.S.

Shares of Morgan Stanley (NYSE: MS) jumped 2.26% to $18.56 on the news.