Stocks Snapped Winning Streak; Gained for the Week

Published on Friday, 20 July 2012 18:11 Written by Christopher Lynn

New York, July 20^th (TradersHuddle.com) – Stocks tumbled, snapping a three session winning streak, as positive earnings results failed to offset fresh fears over the euro zone sovereign debt crisis. Nevertheless, stocks were able to gain for the week, thanks to earlier gains on the back of hopes for further stimulus and strong performance, particularly in tech.

The Dow Jones Industrial Average lost 120.79 points, or 0.93%. The S&P 500 index fell 13.85 points or 1.01%, while the NASDAQ tumbled 40.60 points, or 1.37%.

For the week, the Dow added 0.36%, while the S&P 500 gained 0.43% and the NASDAQ jumped 0.58%.

The market started on the weak side as participants took a breather from three day of gains and as overseas markets showed poor performance. The euro was under some pressure, while Spanish bond yields edged above the 7% level. Technology is outperforming following positive responses to better than expected earnings from Microsoft (NASDAQ: MSFT), SanDisk (NASDAQ: SNDK), and Google (NASDAQ: GOOG).

General Electric (NYSE: GE) also joined the earnings parade, topping earnings expectations on revenues that were inline with consensus. Shares of GE gained 0.35%. Meanwhile, Chipotle Mexican Grill (NYSE: CMG) plunged, as momentum traders exited the stock after the company missed revenue expectations, while reaffirming 2012 comps. Chipotle was crushed more than 21%, posting the biggest decline in the S&P 500 after the stock was downgraded to a Hold at Deutsche Bank, while Goldman Sachs removed it from its coveted Conviction Buy List.

Stocks had gained for most of the week thanks to gains in technology stocks, strong corporate results, and after Federal Reserve Chairman Ben Bernanke provided a gloomy economic outlook, but reaffirmed that the central bank stands ready to provide additional stimulus. However, European woes took center stage again today, as euro zone finance ministers gave the green light for the 100 billion euros Spanish banking bailout. Yields in the country moved higher amid speculation that it will eventually need a sovereign bailout.

The move to the downside was broad, with most of the S&P 500 sectors ending in negative ground. Financials, healthcare, consumer discretionary, industrials, and technology logged the biggest declines, while energy and utilities closed with gains.

Financials were bogged down by Europe and concerns over weak economic growth and its impacts on the labor and housing markets. Bank of America (NYSE: BAC) tumbled 2.6$ to $7.07, extending its weekly loss making it the worst Dow component for the week, despite the Charlotte, NC based lender topped earnings expectations last Wednesday.

Healthcare was pressured by weak performances from Intuitive Surgical (NASDAQ: ISRG) and Quest Diagnostics (NYSE: DGX). The maker of surgical robots tumbled to the bottom of the sector, with shares dropping more than 7% after the company topped both earnings and revenue expectations, but reported continued difficulty in European sales, while procedures growth did not impressed. Mizuho cut its target price on Intuitive to $540 from $600. Meanwhile, Quest lost another 3.7% to $58.76 after the stock was downgraded to Sector Perform from Outperform at RBC Capital. Yesterday, quest reported its quarterly results that were inline with earnings expectations but below revenue consensus, while it cut full year revenue guidance.

Technology saw some strong performances on the back of solid earnings reports, but it also was weighed down by some less than stellar results. Google (NASDAQ: GOOG) rallied nearly 3% to $610.82 after the company topped earnings and revenue expectations. The positive results were helped by strength in its core Internet business, as clicks surged offsetting falling advertising rates.

SanDisk (NASDAQ: SNDK) surged 10.3% to $38.70 after the company’s quarterly results beat on both the top and bottom lines. Also, SanDisk provided an upbeat revenue outlook for the current quarter.

However, Microsoft (NASDAQ: MSFT) lost 1.8% to $30.11, erasing earlier gains, as the company reported its first quarterly loss as a public company, taking a massive one-time charge of $6.2 billion to write-off its struggling online business. Microsoft did post better than expected results if you remove the non-recurring items.

Advanced Micro Devices (NYSE: AMD) plunged 13.17% to $4.22, positing the worst performance in the sector. The chipmaker missed earnings expectations on revenues that fell 10.2% from a year ago to $1.41 billion. Additionally it forecast revenue below consensus, prompting numerous brokerage houses slashing their price targets on the stock.

Apple (NASDAQ: AAPL) was also dragged down in the overall market weakness. The stock lost 1.63% to $604.30 amid reports of a low-key launch of its new iPad in China, which had been delayed due to the trademark dispute. Apple basically erased its gains for the week, ending with a loss of 0.11%. Yesterday, Wedbush reaffirmed its Outperform rating and a target price of $800 ahead of its quarterly earnings report scheduled for July 24^th after the closing bell.

On the flip side, the energy sector was able to close in positive territory despite lower crude oil prices, natural gas prices rallied and as oil services stocks moved to the upside on the back of strong results from Baker Hughes (NYSE: BHI) and Schlumberger (NYSE: SLB). Baker Hughes rallied more than 9% after it beat earnings expectations by $0.22 per share on revenues that climbed 12.3% from a year ago to $5.33 billion. Meanwhile, Schlumberger beat earnings expectations on revenues that were inline with Wall Street consensus.

Noble Corp. (NYSE: NE) was another top performer amid strength in natural gas and after the stock was upgraded to Outperform from Market Perform at BMO Capital.

Elsewhere, Kayak (NASDAQ: KYAK) soared 27.6% to  $33.18 after it debuted on the NASDAQ. The company priced its IPO of 3.5 million shares at $26 per share. The online travel firm is the first Internet tech company to go public since the Facebook (NASDAQ: FB) IPO flop.