Stock Market News for April 28, 2014 – Zacks Investment Research
Disappointing corporate earnings results and escalating tension between Russia and Ukraine dragged the benchmarks down on Friday. Amazon’s and Ford Motors’ quarterly results had a negative impact on the markets and caused a selloff in the consumer discretionary sector. Microsoft’s upbeat quarterly results, reported after the closing bell on Thursday, failed to restrict the day’s loss. Also, encouraging economic data on consumer sentiment made no difference to the bearish mood.
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The Dow Jones Industrial Average (DJI) dropped 0.9% to close Friday’s trading session at 16,361.46. The Standard & Poor (S&P 500) declined 0.8% to finish at 1,863.40. The tech-laden Nasdaq Composite Index fell 1.8% to 4,075.56. The fear-gauge CBOE Volatility Index (VIX) went up 5.6% to settle at 14.06. Total volume for the day was roughly 6.26 billion shares, lower than this month’s average of 6.57 billion. Advancing stocks were outnumbered by declining stocks on the NYSE. For 33% stocks that advanced, 64% declined.
Amazon.com Inc. (NASDAQ:AMZN) reported earnings per share of 23 cents in the first quarter, just ahead of the Zacks Consensus Estimate of 22 cents per share. Amazon’s revenues increased 22.8% year on year. However, Amazon’s operating expenses of $5.54 billion were up 35.5% from the year-ago quarter. Shares of Amazon plunged 9.9% and were a big drag on the S&P 500 and Nasdaq.
Much of the decline in Amazon’s share was due to the second-quarter operating loss forecast. Reportedly, Amazon expects operating loss of $55 million to $455 million in the second quarter, as compared to profit of $79 million in the second quarter 2013. Amazon’s outlook was affected by its spending plans. The company’s costly foray into new products like Amazon Fire set-top box to delivery services was attributed to higher forecast for second quarter operating expenses. Also, the cost of sales jumped to $14 billion from $11.8 billion in the year-ago quarter.
Ford Motor Co. (NYSE:F) posted earnings per share of 25 cents in the first quarter of 2014, down from 41 cents in the first quarter of 2013 (all excluding special items). The company’s first quarter earnings per share was also less than the Zacks Consensus Estimate of 32 cents per share. A higher warranty cost for older vehicles in North America was cited to be the reason behind the decrease in earnings. Shares of Ford Motor dropped 3.3%.
The Consumer Discretionary Select Sector SPDR (XLY) decreased 1.7%. Key stocks from the sector such as The Walt Disney Company (NYSE:DIS), Comcast Corporation (NASDAQ:CMCSA), The Home Depot, Inc. (NYSE:HD), Twenty-First Century Fox, Inc. (NASDAQ:FOXA) and The Priceline Group Inc. (NASDAQ:PCLN) dropped 1.7%, 0.8%, 0.5%, 0.7% and 4.9%, respectively.
Separately, Microsoft Corporation’s (NASDAQ:MSFT) better-than-expected quarterly results impressed investors. Microsoft reported its fiscal third quarter results after the market closed on Thursday. The software giant’s third-quarter earnings per share of 68 cents beat the Zacks Consensus Estimate of 62 cents per share. Shares of Microsoft rose 0.1%.
Escalating tension between Russia and Ukraine weighed on the benchmarks. The U.S. President Barack Obama and four of his European allies France, Germany, Italy and UK agreed to “impose costs” on Russia after Russian President Vladimir Putin failed to observe the Geneva accord, signed on Thursday.
On Thursday, Russia started military drills near the borders of Ukraine after Ukrainian forces reportedly killed five-pro Moscow rebels. In response, the U.S. Secretary of State John Kerry said that it will be “an expensive mistake” if Putin fails to ease tensions in Ukraine.
Earlier this month, in Kramatorsk, Ukrainian forces stormed an airport held by pro-Russian militants. Ukraine’s forces also countered militants in the eastern Donetsk region. The U.S. has supported Ukraine in its mission to uproot pro-Russian militants occupying government buildings.
Coming back to the corporate results, Visa Inc. (NYSE:V) stated that U.S. sanctions on Russia affected its card transaction volumes. The credit-card company, after the market closed on Thursday, reported that its total operating revenue for the second-quarter fiscal 2014 stood at $3.16 billion, lagging the Zacks Consensus Estimate of $3.20 billion. However, second-quarter fiscal 2014 operating earnings of $2.20 per Class A common share beat the Zacks Consensus Estimate by a penny. Shares of Visa plunged 5.0%.
On the economic front, the University of Michigan and Thomson Reuters’ final reading on consumer sentiment increased in April and touched the highest level since July 2013. The gauge was at 84.1 in April, from a preliminary reading of 82.6. This rise in consumer sentiment was more than the consensus forecast of it rising to 82.9.
For the week, the benchmarks ended in the red. The S&P 500, Dow and Nasdaq slipped 0.1%, 0.3% and 0.5%, respectively.
Benchmarks declined for the week following disappointing corporate results and discouraging economic data. Verizon Communications Inc. (NYSE:VZ), 3M Company (NYSE:MMM), AT&T, Inc. (NYSE:T), Amgen Inc. (NASDAQ:AMGN) and Biogen Idec Inc. (NASDAQ:BIIB) reported disappointing corporate results, which had a negative impact on the benchmarks. Decline in new home sales data added to the bearish sentiment. Also, reports of military tension near the Ukraine border unnerved investors.
The week’s, upbeat quarterly earnings by Apple Inc. (NASDAQ:AAPL), The Boeing Company (NYSE:BA), Gilead Sciences Inc. (NASDAQ:GILD), Comcast Corporation (NASDAQ:CMCSA), Harley-Davidson, Inc. (NYSE:HOG), Netflix, Inc. (NASDAQ:NFLX), The Travelers Companies, Inc. (NYSE:TRV), United Technologies Corp. (NYSE:UTX), Halliburton Company (NYSE:HAL), Hasbro Inc. (NASDAQ:HAS), Kimberly-Clark Corporation (NYSE:KMB) and SunTrust Banks, Inc. (NYSE:STI) failed to restrict the benchmarks from ending in the negative territory. At the same time, an increase in Conference Board’s leading economic index and new deals in the health care sector failed to restrict the week’s losses.
Eight out of 10 sectors of the S&P 500 ended in the red. The SPDR S&P Homebuilders ETF (XHB) led the decline among the S&P 500 sectors. The sector fell 2.2%. Key housing stocks from the sector such as PulteGroup, Inc. (NYSE:PHM), Lennar Corp. (NYSE:LEN), DR Horton Inc. (NYSE:DHI) and Beazer Homes USA Inc. (NYSE:BZH) decreased 2.9%, 2.3%, 2.8% and 1.5%, respectively.
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Stock Market News for April 28, 2014 – Zacks Investment Research
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