Stocks Slumped, But Logged Gains for July

Published on Tuesday, 31 July 2012 18:06 Written by Christopher Lynn

New York, July 31^st (TradersHuddle.com) – Stocks fell, but still logged a gain of more than 1% for the month of July, on a quiet session amid anticipation for the result of the two-day Fed meeting tomorrow and the ECB meeting on Thursday. The market traded in a tight range, with earnings driving most of the big movers in the session and with the blue chip index able to close just barely above the 13,000 mark.

The Dow Jones Industrial Average lost 64.33 points or 0.49%. The S&P 500 index slumped 5.98 points, or 0.43%, while the NASDAQ dropped 6.32 points, or 0.21%.

For the month, the blue chip index gained 1%, while the S&P 500 jumped 1.3% and the NASDAQ climbed 0.15%.

The market started near the flat line under slightly downward pressure amid a busy earnings-reporting morning and as participants grew cautious ahead of the Fed two-day meeting and the ECB meeting later in the week. Hopes for additional stimulus measures had pushed the market higher in the past sessions, with the Dow breaking above 13,000. Economic data was slightly better than expected.

Personal income increased by 0.5% in June, while Personal spending was unchanged, instead of increasing by 0.1% as had been widely expected. Core personal consumption expenditures ticked up 0.2% month over month, in-line with expectations, and consumer confidence came in at 65.9, well above consensus for a reading of 61.0.

Stocks traded in a tight range, with lackluster volume amid anticipation of the Fed and the ECB action and as summer vacations coupled with the Olympics might be impacting investor participation. Among the S&P 500 sectors, consumer discretionary, energy, and utilities logged the worst performance, while technology was the lone sector ending in positive territory.

Apple (NASDAQ: AAPL) helped drive the gains in the sector, with shares jumping 2.6% to $610.76, adding to its prior session gains and erasing the losses stemming from its big earnings miss last week. The stock reacted positively to a report from Bernstein, which suggested the stock could split, enabling it to be added to the Dow Jones Industrial Average.

Yesterday, Apple gained amid reports the company will unveil its iPhone 5 and possibly the iPad mini on September 12^th. Separately, the patent infrigement trial in a California Federal Court between Apple and Samsung started today, as the smartphone ad tablet rivals face off over the control of the U.S. market after Apple accused Samsung of producing illegal knockoffs of its iPhone and iPad products.

First Solar (NASDAQ: FSLR) surged 9.4% to $15.54, posting the biggest gain in the technology sector, while Sprint Nextel (NYSE: S) lost 3.3%, giving up part of its big surge from the prior sessions. The stock lost despite getting an upgrade to Overweight from Neutral at Atlantic Equities.

The consumer discretionary sector offered quite a mixed bag amid reaction to quarterly results in the sector and as retailers fell on news that personal spending stagnated in June. Coach (NYSE: COH) plunged to the bottom of the S&P 500 after the company missed revenue expectations, raising doubts over its future growth rate and competitive standing particularly in North America. Coach earned $0.86 per share, $0.01 better than consensus, on revenues that climbed 12% from a year ago to $1.16 billion. The company was cautious with its commentary for fiscal 2013, citing muted consumer environment in North America and a softening global macroeconomic outlook.

Other luxury retailers were under pressure following the Coach news, with Tiffany (NYSE: TIF) losing nearly 4% and Fossil (NASDAQ: FOSL) tumbling 4.25%.

Meanwhile, Goodyear Tire & Rubber (NYSE: GT) surged 10.4% to $11.45 to the top of the consumer discretionary sector after the company it posted stronger-than-expected second-quarter profit on strong demand in North America.

Other stock making strong moves to the upside due to earnings, were U.S. Steel (NYSE: X) rallying 9% to $20.65, TRW Automotive (NYSE: TRW) jumping nearly 8%. Additionally, Cummins (NYSE: CMI) gained nearly 6% to $95.90.

U.S. Steel beat earnings expectations, with participants shrugging off the steelmaker’s warning that third quarter results would weaken due to the global economic slowdown and lower prices. Meanwhile, TRW advanced after it reported better-than-expected second-quarter profits. However, the company lowered its 2012 outlook due to the economic slowdown in Europe.

Cummins, the engine maker, reported quarterly results that topped expectations, as sales in North America offset weakness in emerging markets like China and Brazil. Cummins reported hit a record high on gross margins this quarter.

In the healthcare sector, Pfizer (NYSE: PFE) gained 1.4%, posting the biggest gain in the Dow Jones Industrial Average, after the company results beat earnings and revenue expectations.

However, the sector saw weakness from Humana (NYSE: HUM), with shares plunging 12.7% to $61.6 after logging a new 52-week low of $59.92. The stock declined after the company missed revenue expectations and issued poor guidance.

Elsewhere, Facebook (NASDAQ: FB) saw another bout of sharp selling, with shares hitting a new all-time los of $21.61. The stock lost 6.22% to $21.71 after participants continued to worry over its revenue growth and monetization strategy for its mobile platform. Facebook received a halfhearted upgrade from Bernstein, which upgraded its rating to Market Perform from Underperform, setting its target price at $23 per share.