U.S. stocks fall as Europe fear overrides earnings
SAN FRANCISCO (MarketWatch) -- A rash of selling on Friday wiped out July gains for both the Dow Jones Industrial Average and the Nasdaq Composite Index as investors reacted to earnings-driven developments and resurfaced European concerns.
The Dow (DJIA) fell 120.79 points, or 0.9%, to close at 12,822.57, with 27 of the index's 30 components lower. The index, which hit an intraday low of 12,810.35, is down nearly 0.5% for July, but still finished up 0.4% for the week.
The Nasdaq (COMP) shed 40.6 points, or 1.4%, to close at its intraday low of 2,925.30. The index is down 0.3% for July, but up 0.6% for the week.
The S&P 500 Index (SPX) lost 13.85 points, or 1%, to finish at 1,362.66, just shy of its low on the day of 1,362.19. The index is up less than 0.1% for July, and up 0.4% for the week.
Following headlines that have focused on U.S. earnings all week, a rise in Spanish bond yields showed that investors remain wary of Spain's ability to control its debt problems.
From an investor standpoint, fear and concern over ongoing financial pressure in Europe are still playing strong, said Frank Fantozzi, president and senior adviser at Planned Financial Services.
While euro-zone ministers approved a bailout plan for Spanish banks on Friday, Spain's Valencia regional government stepped up and said it would apply for help from the new government fund in an effort to meet its refinancing needs. Read more on Valencia.
"People don't believe it's done, like, who else is going to ask for a handout?" Fantozzi said. "Think of it as an entitlement program. That puts downward pressure on the market."
Europe stocks tumbled, with Spain's benchmark down 5.8% and Italy's down 4.4%. Read more on European stocks.
Earnings news still holds some sway
U.S. earnings news, however, still held sway over many individual movers.
"A lot of the best- and worst-performing names are all earnings-driven," said Dan Greenhaus, chief global strategist at BTIG LLC. Greenhaus pointed to
Chipotle shares dropped more than 21% after quarterly results showed the burrito chain's slowest sales growth since early 2010. Read more on Chipotle.
Investor reaction to Chipotle is interesting because it's showing what happens when a high-growth, high price-to-earnings ratio stock slows down in today's market environment, according to Greenhaus. The strategist also said that revenue misses appear to be a key theme in this earnings season.
Decliners outnumbered gainers by two to one on the New York Stock Exchange, and by three to one on the Nasdaq. Composite volume for NYSE-listed shares topped 3.5 billion, while Nasdaq-listed shares topped 1.6 billion.
U.S. stocks gained for three straight days as of Thursday's close as the first heavy week of earnings reports showed large-cap companies largely beating lowered expectations. But revenue growth has failed to impress.
Industrial and financial conglomerate General Electric reported second-quarter profit of $3.1 billion, or 29 cents a share, down from $3.8 billion, or 35 cents a share, earned in the year-earlier quarter. Operating profit reached 38 cents a share. Revenue rose 2% to $36.5 billion. It was one of the few gainers on the Dow with shares closing up 0.4%. Read more on GE.
Analysts polled by FactSet were looking for a profit of 37 cents a share on revenue of $36.77 billion. GE shares closed up 0.4%.
"For the earnings-reporting season, expectations had been set low enough across the board for earnings beats," said Art Hogan, managing director at Lazard Capital Markets. "But we are not seeing robust revenue growth in most cases and guidance has been lackluster."
Microsoft, also a Dow component, said late Thursday that it swung to a fourth-quarter net loss due to a large write-down in its online-services division and deferred revenue from its Windows 8 upgrade promotion.
Revenue increased 4% to $18.06 billion, short of forecasts, though revenue edged past analyst projections excluding the Windows 8 revenue deferment. The software giant's shares fell 1.8%. Read more on Microsoft.