Stocks Selloff on Weak Earnings and Spain

Published on Tuesday, 23 October 2012 17:07 Written by Christopher Lynn

New York, October 23^rd (TradersHuddle.com) – Stocks tumbled amid a broad selloff sparked by disappointing earnings results from key economic bellwethers. The Dow had its largest single session drop since June, as results were impacted by a sluggish global economy and a strong Dollar and after renewed fears over Spain’s weakened economy.

The Dow Jones Industrial Average tumbled 243.36 points or 1.82%. The S&P 500 index lost 20.71 points, or 1.44%, while the NASDAQ fell 26.50 points, or 0.88%.

The market started the session under heavy pressure amid weak corporate results and after negative headlines coming from Spain. Moody’s downgraded 5 different Spanish regions on concern over liquidity levels, while its GDP showed a 0.4% quarter over quarter contraction, which was better than expected but still highlighted the precarious state of the country’s economy. Meanwhile in the U.S., economic bellwethers like DuPont and 3M disappointed investors and sparked a risk aversion trade.

The selloff was broad based and pressure stayed on equities through out the session. All of the S&P 500 sectors ended in negative ground, with materials tumbling 3%, energy more than 2%, while only the consumer discretionary sector ended with a loss of less than 1%.

DuPont (NYSE: DD) was a major source of weakness in the sector and in the Dow Jones Industrial Average, as shares plunged 9% to $45.25. The chemical company profit fell from a year ago, missing consensus, on lower revenue impacted by soft pigment sales. DuPont announced a new aggressive cost cutting plan, planning on 1,500 layoffs. Other names that were under pressure on the material sector were United States Steel (NYSE: X), slumping 4.4% despite AK Steel (NYSE: AKS) beat earnings expectations on revenue that was inline with consensus.

Meanwhile, DuPont rivals, LyondellBasell (NYSE: LYB) and Dow Chemicals (NYSE: DOW) fell 4.4% and 4%, respectively.

In the energy sector, the decline was lead by refiners, with Tesoro (NYSE: TSO) tumbling 4.5% and Hess Corp. (NYSE: HES) falling 3.9%.

United Technologies (NYSE: UTX) also fell in the blue chip index and was a source of weakness in the industrial sector. Shares fell nearly 1% after its earnings beat expectations but its revenue fell short of consensus. The company also reaffirmed its full year earnings guidance, but lowered its revenue guidance for full year 2012.

A bigger source of weakness in the sector was 3M (NYSE: MMM), shares tumbled 5%, posting the biggest decline in the space. The industrial conglomerate reported inline earnings but with revenue that was shy of consensus. On the flip side, Ryder Systems (NYSE: R) rallied 5.5% after beating earnings expectations on revenue that was shy of consensus. However, the company issued earnings guidance for the current quarter on the high-end of expectations.

United Parcel Services (NYSE: UPS) gained 3% after it posted quarterly results that met expectations, while issuing inline guidance.

In tech land, Yahoo (NASDAQ: YHOO) rallied 5.7% to $16.67 after posting a new 52-week high of $16.79 after it reported much better than expected results.

Apple (NASDAQ: AAPL) was under pressure, tumbling more than 3% to $613, as participants remain jittery ahead of its quarterly results scheduled for next Thursday. The company unveiled the new iPad mini that will retail for $329 for the base model, while introducing a new iPad 4 and an improved 13-inch MacBook Pro and Mac Mini. Apple is bringing both iPads just in time for the holiday shopping season.

Elsewhere, Facebook (NASDAQ: FB) gained 0.9% to $19.50 ahead of its quarterly results. In after hours, the social media giant reported results that topped expectations, sending its shares rallying more than 9% to $21.31. The company said it earned $0.12 per share, $0.01 better than consensus, on revenue that climbed 32% from a year ago to $1.26 billion versus consensus of $1.22 billion.

Facebook reported monthly active users of 1.01 billion as of September 30, 2012, an increase of 26% from a year ago, while daily active users were 584 million on average for September 2012, an increase of 28% from September 2011. Mobile users came in at 604 million a jump of 61% from the same period last year. CEO Mark Zuckerberg said people who use its mobile products are more engaged, hence Facebook believes it can increase engagement even further as it continues to introduce new products and improve the platform.