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Stock Market News for July 28, 2014

Zacks Equity Research

Benchmarks settled in the red on Friday following Amazon’s dismal quarterly results and Visa’s disappointing full-year revenue forecast. The blue-chip index dropped below the 17,000 mark for the first time since Jul 18. The S&P 500 also retreated from its record high; trimming its weekly gains. The Dow suffered its biggest weekly loss in six weeks, but Nasdaq managed to end in the positive territory.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article

The Dow Jones Industrial Average (DJI.V) dropped 0.7% to close Friday’s trading session at 16,960.57. The Standard & Poor 500 (S&P 500) declined 0.5% to finish at 1,978.34. The tech-laden Nasdaq Composite Index closed at 4,449.56; declining 0.5%. The fear-gauge CBOE Volatility Index (:VIX) surged 7.2% to settle at 12.69. Total volume for the day was roughly 4.95 billion shares, lower than this month’s average of 5.56 billion. Decliners outpaced advancing stocks on the NYSE. For 64% stocks that declined, 33% advanced.

Amazon.com Inc. (AMZN) was the S&P 500’s biggest percentage decliner on Friday. Shares of Amazon.com plunged 9.7%, a day after the company reported wider-than-expected second quarter loss. Amazon reported a loss of 27 cents a share in the second quarter, wider than the Zacks Consensus Estimate of a loss of 13 cents. The world’s largest online retailer reported its results after the markets closed on Thursday.

Amazon’s dismal quarterly result weighed on the consumer discretionary sector. The Consumer Discretionary Select Sector SPDR (XLY) led declines among the S&P 500’s sectors, losing 1.1%. Key stocks from the consumer discretionary sector such as The Walt Disney Company (DIS), Comcast Corporation (CMCSA), The Home Depot, Inc. (HD), Ford Motor Co. (F) and Twenty-First Century Fox, Inc. (FOXA) decreased 0.7%, 1.3%, 0.2%, 1.2% and 0.3%, respectively.

The blue-chip index was weighed down by decline in Visa Inc.’s (V) shares. The credit-card company’s stock declined 3.6% after the company reduced its revenue forecast for the year. The company expects its annual revenue growth to be 9% to 10%, less than the previous forecast of 10% to 11%.

Shares of Pandora Media, Inc. (P) dropped 10.3%, its biggest drop in three months. The slump came a day after the company posted wider loss. The Internet-based radio company reported loss of 6 cents per share in the second quarter of 2014, wider than the Zacks Consensus Estimate of a loss of 4 cents. Pandora reported its results after the markets closed on Thursday.

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Shares of Starbucks Corporation (SBUX) dropped 2.1% on Friday. The world’s biggest coffee-shop chain suffered the biggest drop in three months due to concerns that its profit growth might take a hit over inflating coffee prices, labor costs and investment costs involved in opening more stores.

Among the gainers, shares of Baidu, Inc. (BIDU) soared 10.9% a day after the company reported better-than-expected second quarter earnings results. China’s no. 1 search engine posted second quarter 2014 earnings per share of $1.73, better than the Zacks Consensus Estimate of $1.24. Baidu reported its results after the markets closed on Thursday.

The day’s stand out performance was by El Pollo Loco Holdings, Inc. (LOCO). Shares of the fast-food chain soared 60.2% to $24 on its trading debut. The initial public offering was priced at $15.

Meanwhile, The Goldman Sachs Group, Inc. (GS) trimmed its rating on stocks to “neutral”, for the next three months. The financial behemoth reduced the ratings on stocks as it sees a slide in bonds that would lead to a temporary selloff in equities.

Economic data was limited to June’s durable goods orders report. According to the US Census Bureau, new orders for manufactured durable goods in June increased 0.7%, more than the consensus estimate of an increase by 0.4%. Excluding transportation, new orders for manufactured durable goods increased 0.8% in June. Unfilled orders for manufactured durable goods in June were up 0.8%.

Nine out of 10 sectors of the S&P 500 ended in the red. The SPDR S&P Homebuilders (XHB) declined 1.0%, the second largest decliner among the S&P 500 sectors. Key housing stocks from the sector such as Toll Brothers Inc. (TOL), PulteGroup, Inc. (PHM), Lennar Corp. (LEN) and KB Home (KBH) decreased 1.0%, 2.7%, 2.1% and 2.1%, respectively.

For the week, the Dow dropped 0.8%, the S&P 500 gained a meager 0.03% and the Nasdaq advanced 0.4%.

Benchmarks finished on a mixed note for the week as investors received mixed corporate results. Facebook, Inc. (FB), Ford Motor Co. (F), Apple Inc. (AAPL) and Biogen Idec Inc. (BIIB) reported upbeat quarterly performances. Earnings results from Chipotle Mexican Grill, Inc. (CMG), Comcast Corporation (CMCSA) and Verizon Communications Inc. (VZ) were also encouraging.

However, Caterpillar Inc. (CAT), General Motors Company (GM) and DR Horton Inc. (DHI) posted dismal corporate results. Caterpillar too reported weak monthly sales. Analysts also took a dim view of The Boeing Company’s (BA) results as they were concerned about the company’s cash flow and the rise in cost of its military tanker program.

Economic data also came in mixed. Report on initial claims data was encouraging. The Labor Department said initial claims declined 19,000 to 284,000 in the week ending Jul 19. This claim for unemployment benefits was at the lowest level since Feb 18, 2006. Investors were also encouraged by strong existing home sales data that hit the highest level in June since Oct 2013. The National Association of Realtors reported existing home sales rose 2.6% to a seasonally adjusted annual rate of 5.04 million in June from May’s upwardly-revised figure of 4.91 million.

However, new home sales numbers were discouraging. The U.S. Census Bureau and the Department of Housing and Urban Development revealed sales of new single-family houses decreased 8.1% to 406,000 in June. New home sales registered its biggest drop in almost a year.

Ongoing geopolitical tensions had kept investors jittery on Monday. Investors remained cautious about Israel’s ground invasion in Gaza. They were also concerned about the possibility of further tougher sanctions against Russia.


Read the analyst report on AMZN

Read the analyst report on DIS

Read the analyst report on CMCSA

Read the analyst report on HD

Read the analyst report on F

Read the analyst report on FOXA

Read the analyst report on P

Read the analyst report on SBUX

Read the analyst report on BIDU

Read the analyst report on GS

Read the analyst report on TOL

Read the analyst report on PHM

Read the analyst report on LEN

Read the analyst report on KBH

Read the analyst report on FB

Read the analyst report on AAPL


Zacks Investment Research