Stocks Fell amid Mixed Earnings and Euro Zone Debt Woes

Published on Wednesday, 18 April 2012 18:10 Written by Christopher Lynn

New York, April 18^th (TradersHuddle.com) – Stocks closed lower for the session, with selling pressure increasing in the final minutes of trading. Lackluster earnings reports from tech giants IBM and Intel amid renewed concerns over the debt woes in euro zone periphery weighed on sentiment and pressured stocks that had rallied in the prior session.

The Dow Jones Industrial Average lost 82.79 points, or 0.63%. The S&P 500 index fell 5.64 points, or 0.41%, while the NASDAQ dropped 11.37 points, or 0.37%.

The market started on the weak side after European markets were trading lower on concern over Portugal and Spain’s debt situation and over mixed reaction to earnings reports from bellwethers IBM and Intel. Portugal was in focus after its Prime Minister wrote in an editorial in the Financial Times that the country may not return to capital markets in 2013 as previously expected, while participants were jittery ahead of a key Spanish long-term debt auction scheduled for tomorrow.

Most of the S&P 500 sectors closed in negative territory, with just the consumer stocks ending near the neutral line. Technology was the worst performing sector, followed by financials and industrials.

In the tech space, IBM (NYSE: IBM) tumbled 3.5% to $200.13, posting the biggest percentage decline in the Dow Jones Industrial Average after its earnings beat expectations but investors fretted over lackluster revenue guidance. Macquarie downgraded the stock to a Neutral from Outperform.

Intel (NASDAQ: INTC) also pressured the sector and the blue chips, as shares lost 1.8% to $27.95 after the company said expenses related to ramping up new production would have a bigger impact on gross margins than expected. Intel beat on both the bottom and the top lines, while several brokerage houses raised their target price on the stock.

Apple (NASDAQ: AAPL) was also weaker on the day after rallying more than 5% in the prior session rebounding from its worst 5-day slide in 3 years. On going chatter over possible cuts in the wireless carriers iPhone subsidies weighed on the stock. Additionally, Goldman Sachs raised its target price to $750 from $700. Yesterday, Raymond James initiated coverage on the tech giant with a Strong Buy and a target price of $800 per share.

On the flip side, Yahoo (NASDAQ: YHOO) rallied more than 3% in the session after a favorable earnings report, which showed that the struggling Internet Company was making progress under its new CEO. Yahoo said it earned $0.23 per share, $0.06 better than consensus, on revenues that beat expectations. Pacific Crest downgraded the stock, but had little impact on trading. The company mentioned again that it had too many people for the amount of output the business was generating.

Western Digital (NYSE: WDC), the hard drive maker, jumped the most in the sector as shares rallied 5.2% to $41.56 reacting on sympathy to its rival Seagate (NASDAQ: STX) better than expected quarterly results. Seagate jumped 3.8% on the day, hitting multiyear highs after its third quarter profit beat expectations.

Financials were under some pressure after Genworth Financial (NYSE: GNW) plunged to the bottom of the S&P 500 Index. The stock tumbled nearly 24% to $5.87 on reports that the company had delayed the IPO of its Australian mortgage insurance business to early 2013, given market conditions, valuation considerations including business performance and regulatory approvals.

Bank of America (NYSE: BAC) ended the session unchanged at $8.92 ahead of its quarterly results scheduled for tomorrow morning, in which analysts on average expect a profit of $0.11 per share on revenues of $22.4 billion. American Express (NYSE: AXP) fell 0.24% to $58.04 ahead of its earnings report. In after hours, the stock was seeing modest weakness following its quarterly results. American Express beat earnings expectations by $0.07 per share on revenues that climbed 8.3% from a year ago period to $7.61 billion as expected.

In the energy sector, bearish inventory data weighed on crude oil prices. Chesapeake Energy (NYSE: CHK) was a notable mover as shares tumbled 5.5% to $18.06 on reports that its CEO had borrowed a whopping $1.1 billion over the last three years against his stake in thousands of the company wells. The news raised investor concerns over conflicts of interest by the CEO and a clearly dysfunctional board.

Halliburton (NYSE: HAL) jumped 4.62% to $34.17 after the company beat earnings and revenues expectations. The oil services provider beat earnings expectations by $0.03 per share on revenues that jumped 30% from a year ago period. Mainly North American operating income and better results out of Europe/Africa/CIS drove the company’s results.

Elsewhere, Intuitive Surgical (NASDAQ: ISRG) surged to the top of the S&P 500 Index as shares rallied 7.15% to $584.52. The stock logged a new all-time high of $594.89 following a positive reaction to its better than expected results. Intuitive Surgical also raised its fiscal 2012 revenue guidance.

Wynn Resorts (NASDAQ: WYNN), the upscale casino operator, lifted the performance of the consumer discretionary sector, as shares rallied 4.4% to $130.28 on reports that speculated the company was close to sign a land grand contract for a proposed resort in Cotai, Macau, later in the month. Wynn already has 2 resorts in Macau and generates more than 70% of its EBITDA and revenue in Asia’s gambling capital.