Massive decline in technology stocks following earnings releases from Apple and Microsoft dragged major benchmarks to negative territory for the second-consecutive day. Meanwhile, another slump in oil prices also weighed on energy shares, which in turn had a negative impact on markets. However, encouraging existing home sales data boosted housing stocks on Wednesday.
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The Dow Jones Industrial Average (DJI) lost 0.4% to close at 17,851.04 The Standard & Poor’s 500 (S&P 500) declined more than 0.2% to 2,114.15. The tech-laden Nasdaq Composite Index closed at 5,171.77, decreasing 0.7%. However, the fear-gauge CBOE Volatility Index (VIX) declined 0.8% to settle at 12.12. A total of about 3.7 billion shares were traded on NYSE on Wednesday. Decliners outpaced advancing stocks on the NYSE. For 57% stocks that declined, 40% advanced.
On Wednesday, shares of Apple Inc. (AAPL – Analyst Report) dropped 4.2% as weak guidance offset impressive fiscal third quarter earnings results. The tech giant reported fiscal third quarter earnings per share (EPS) of $1.85, surging 44.5% year over year on higher revenues from iPhone and Mac sales, higher services revenues and sales of Apple Watch. The EPS also beat the Zacks Consensus Estimate of $1.80. Moreover, revenues increased 32.5% year over year to $49.6 billion, ahead of the Zacks Consensus Estimate of $49.1 billion.
However, dismal fourth quarter revenue guidance dampened investor sentiment. For the fourth quarter of fiscal 2015, Apple forecasts revenues in the range of $49 to $51 billion. The company’s revenue estimate came in below the market’s expectations of $51.13 billion.
Meanwhile, another tech behemoth Microsoft Corporation (MSFT – Analyst Report) tumbled yesterday following dismal fourth quarter fiscal 2015 earnings results. With the inclusion of $8.4 billion in restructuring costs, originating mainly from its $7.6 billion write down of Nokia assets, Microsoft posted fourth quarter net loss of $3.2 billion, the company’s largest-ever loss. However, excluding restructuring charges, Microsoft’s earnings per share came in at 62 cents, beating the Zacks Consensus Estimate of 56 cents. Meanwhile, revenues of $22.18 billion dropped 5.1% from last year. Shares of Microsoft declined 3.7% following its earnings release.
Additionally, Yahoo! Inc.’s (YHOO – Analyst Report) shares lost 1.2% after posting second quarter adjusted earnings of 3 cents, missing the Zacks Consensus Estimate by a couple of cents. Also, Yahoo’s GAAP net loss was $21.6 million or loss of 2 cents per share compared to net income of $269.7 million or 27 cents per share in the June quarter of last year. However, Yahoo reported GAAP revenues of $1.24 billion, which was up 1.4% sequentially and 14.7% year over year.
These disappointing tech earnings results weighed on the Technology Select Sector SPDR (XLK), which declined 1.6%. It was also the biggest loser among the S&P 500 sectors yesterday. Key technology stocks including Micron Technology, Inc. (MU – Analyst Report), International Business Machines Corporation (IBM – Analyst Report), Facebook, Inc. ( (FB – Analyst Report) and QUALCOMM Incorporated (QCOM – Analyst Report) declined 4.7%, 1.7%, 1.4% and 1.5%, respectively.
However, The Boeing Company’s (BA – Analyst Report) shares gained 1% after reporting second quarter revenues of $24.5 billion, improving 11% year over year. The figure also came in higher than the Zacks Consensus Estimate of $24.2 billion.
Separately, prices of WTI crude oil and Brent crude oil plunged 3.4% and 1.6% to $49.19 per barrel and $56.13 a barrel, respectively. This was the 16 th time in the last 20 days that the price of WTI crude oil experienced a loss. Also, the price declined below $50 for the first time since early April. Decline in oil prices dragged down the Energy Select Sector SPDR (XLE) by 0.8%. Key energy stocks including EOG Resources, Inc. ( (EOG – Analyst Report), Cabot Oil & Gas Corporation (COG – Analyst Report), Chesapeake Energy Corporation (CHK – Analyst Report) and Kinder Morgan, Inc. ( (KMI – Analyst Report) lost 1.6%, 1.9%, 2.6% and 1.3%, respectively.
In economic news, the National Association of Realtors reported that existing home sales increased 3.2% to a seasonally adjusted annual rate of 5.49 million in June, beating consensus estimate of 5.4 million. Sales increased at the fastest rate since Feb 2007. The median existing-home price witnessed a year-on-year gain of 6.5% in June to $236,400, hitting its all-time record high.
This impressive housing data had a positive impact on SPDR S&P Homebuilders (XHB), which gained nearly 2%. It was also the best performer among the S&P 500 sectors. Key energy stocks including DR Horton Inc. (DHI), Toll Brothers Inc. (TOL), PulteGroup, Inc. (PHM) and Lennar Corporation ( LEN) gained 2.8%, 2.5%, 2.4% and 2.3%, respectively. Six out of 10 S&P 500 sectors ended in the green on Wednesday.
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