Stocks Struggled amid Mixed Earnings

Published on Wednesday, 25 July 2012 18:16 Written by Christopher Lynn

New York, July 25^th (TradersHuddle.com) – Stocks wavered amid mixed earnings reports and support provided by speculation that the ECB might approve steps to increase the firepower of the euro zone’s permanent bailout fund. Weak new home sales added to the woes on the U.S. economic recovery, while weak results from Apple, which weighed on the tech heavy NASDAQ, highlighted the difficult global macro environment, while positive action from some Dow components, helped the blue chip index to snap a three-day losing streak.  

The Dow Jones Industrial Average gained 58.73 points, or 0.47%. The S&P 500 index lost less than 1 point, or 0.03%, while the NASDAQ fell 8.75 points, or 0.31%.

The market started with some support, but with the major benchmark indices mixed. The S&P 500 and the Dow received support from positive earnings from Caterpillar and Boeing, and after reports that the ECB could provide a banking license to the permanent euro zone bailout fund in order to boost its firepower. Meanwhile, the big earnings miss from Apple weighed down the NASDAQ.

On economic news, new home sales dropped 8.4% in June, the biggest decline in more than a year and weaker than what economists had expected. The disappointing new home sales figures weighed on the homebuilder space, with PulteGroup (NYSE: PHM) tumbling 4.39% to $10.02 ahead of the company’s quarterly results scheduled for tomorrow before the opening bell. Yesterday, Susquehanna downgraded Pulte to a Negative rating.

Stocks remained mixed through out the session, with the Dow able to snap a three consecutive triple digit decline streak thanks to positive earnings and good performance from JPMorgan (NYSE: JPM), which gained 1.3%. The stock has seen upside this week, despite the downward pressures in the broad market after it was disclosed that its CEO Jamie Dimon bought 500,000 shares for $17 million last week.

Big earnings were the highlight for the session. Apple (NASDAQ: AAPL) tumbled 4.3% to $574.97, breaking below its 50day moving average, but closing off its lows of the session. The tech giant missed big on both the top and bottom lines, as iPhone shipments came well below expectations, amid anticipation for the release of the iPhone 5 and flat year over year growth in European shipments. Apple did beat quarterly shipment expectations with its iPad, but it also issued a particularly weak guidance for the current quarter, citing margin compression due to product transitions and the impacts from a strong Dollar.

Raymond James downgraded Apple from a Strong Buy to a Buy and at least six brokerage houses cut their target price on the stock. Both Jim Cramer and Piper Jaffray Gene Munster said that the miss provided an opportunity to buy the stock at a discount ahead of the iPhone 5, new iPads, and the iTV.

Among other big earnings for the day, Caterpillar (NYSE: CAT) gained 1.44% to $83.60, posting one of the biggest gains in the Dow Jones Industrial Average. The world’s largest earthmoving equipment maker topped earnings expectations and boosted its 2012 earnings forecast. The stock saw choppy trading following comments in the conference call, in which management said that yearly sales from Buycrus would be lower than expected, amid increased worries over a weak underground coal mining market.

Boeing (NYSE: BA) rallied to the top of the blue chip index, as shares jumped 2.78% to $74.03. The aircraft maker posted an earnings report that topped expectations thanks to gains in airplane deliveries.

The S&P 500 sectors were a mixed bag, with technology, consumer discretionary, and utilities posting declines, while financials, healthcare, and industrials posted the biggest moves to the upside.

Netflix (NASDAQ: NFLX) was the biggest drag on the S&P 500 after shares got crushed 25% to $60.28, actually posting a new 52-week low of $59.20. The video streaming and DVD rental company swung to a profit in the quarter, topping earnings and revenue expectations, but spooked investors by issuing a cautious subscriber outlook and said a push into a fourth international market in the fourth quarter will lead to a loss.

Along with Netflix in the consumer discretionary space, International Game Technology (NYSE: IGT) and TripAdvisor (NASDAQ: TRIP) saw big moves to the downside. IGT plunged 20% to a new 52-week low of $11.53 after it missed earnings expectation by $0.05 per share on revenues that were shy of consensus. Meanwhile TripAdvisor tumbled 16.8% to $36.18 on negative reaction to its quarterly results. The travel site posted earnings of $0.41 per share, inline with consensus, but its revenues fell short of expectations. The company reaffirmed 2012 total revenue growth in the high teens, while current consensus calls for a year over year jump of 21.4%.

Also in the consumer arena, PepsiCo (NYSE: PEP) gained 2.2% to $70.30 after it posted better than expected earnings despite negative currency exchange impacts, thanks to price increases. The company reaffirmed its full year outlook.

In tech land, there were some positive stories. Symantec (NASDAQ: SYMC) rallied to the top of the S&P 500 after its shares jumped 13.4% in the session. The company reported positive results combined with a better than expected outlook, while it announced the firing of Chief Executive Officer Enrique Salem who will be replaced by the company's Chairman, Steve Bennett.

Altera (NASDAQ: ALTR) and Juniper Networks (NASDAQ: JNPR) joined the earnings parade. Juniper rallied more than 11% after posting better than expected earnings, while offering a cost cutting target for 2013 that could boost profit. The company did disappointed investors with its downside guidance for the current quarter. Meanwhile, Altera surged 12% to $34.41 after its results beat estimates, despite profit declining 24% from a year ago as revenues fell.

Broadcom (NASDAQ: BRCM), the provider of chips that enable broadband digital data transmission, rallied 7.18% to $32.98 after reporting better than expected quarterly results and issuing inline guidance for fiscal third quarter.. The company expects third quarter non-GAAP product gross margins to remain roughly flat sequentially, with revenues of $2 to $2.15 billion.

Elsewhere, ConooPhillips (NYSE: COP) fell 2.56% to $53.24 after the energy company reported earnings that showed a drop in profit, due to lower energy prices and lower production output.