Stocks Move Back To The Downside On Disappointing Earnings - U.S. Commentary

(RTTNews) - After falling sharply at the open, stocks fluctuated over the course of the trading day on Friday but maintained a negative bias throughout the session. The losses on the day partly offset the strength seen in the previous session.

The major averages closed firmly in negative territory but well off their worst levels of the day. The Dow tumbled 149.76 points or 0.9 percent to 15,698.86, the Nasdaq fell 19.25 points or 0.5 percent to 4,103.88 and the S&P 500 slid 11.60 points or 0.7 percent to 1,782.59.

With the losses on the day, the major averages all moved lower for the week. The Dow dropped by 1.1 percent, while the Nasdaq and the S&P 500 fell by 0.6 percent and 0.4 percent, respectively.

The weakness on Wall Street was partly due to disappointing quarterly results from big-name companies such as Amazon (AMZN) and Mattel (MAT).

Shares of Amazon tumbled by 11 percent after the online retail giant reported weaker than expected fourth quarter results. The company also warned of a possible operating loss in the current quarter.

Toy maker Mattel also plummeted by 12 percent after reporting fourth quarter earnings and revenues that came in below analyst estimates.

Disappointing guidance from Wal-Mart (WMT) also weighed on the markets, as the retail giant said it now expects its fourth quarter underlying earnings to be at or slightly below the low end of its previously forecast range.

On the other hand, shares of Google (GOOG) moved notably higher after the online search giant reported weaker than expected fourth quarter earnings but on stronger than expected revenue growth.

Traders were also digesting a mixed batch of U.S. economic data, including a report from the Commerce Department showing that personal spending increased by more than expected in December even as personal income came in nearly unchanged.

The Commerce Department said personal income inched up by less than a tenth of a percent in December after rising by 0.2 percent in November. Economists had been expecting another 0.2 percent increase.

At the same time, the report said personal spending climbed by 0.4 percent in December following a 0.6 percent increase in the previous month. The spending growth exceeded economist estimates for a 0.2 percent uptick.

MNI Indicators released a separate report showing a slowdown in the pace of growth in Chicago-area business activity in January, while Thomson Reuters and the University of Michigan revealed an upward revision to their consumer sentiment index for the month.

Sector News

Networking stocks saw considerable weakness on the day, dragging the NYSE Arca Networking Index down by 1.8 percent. Juniper Networks (JNPR) and Infinera (INFN) turned in two of the sector's worst performances.

Significant weakness was also visible among oil stocks, as reflected by the 1.7 percent loss posted by the NYSE Arca Oil Index. With the drop, the index ended the session at its lowest closing level in well over three months.

Chevron (CVX) helped to lead the oil sector lower, with the industry giant falling by 4.1 after reporting weaker than expected fourth quarter revenues.

Biotechnology, retail, financial, and computer hardware stocks also ended the day notably lower, which strength was visible among housing and utilities stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific turned in a mixed performance on Friday, with many of the markets closed for Lunar New Year holidays. Japan's Nikkei 225 Index dropped by 0.6 percent, while Australia's All Ordinaries Index inched up by 0.1 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the German DAX Index slid by 0.7 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index fell by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries moved back to the upside after ending the previous session modestly lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2.5 basis points to 2.668 percent.

Looking Ahead

Next week, traders are likely to focus on the monthly jobs report, with employment expected to increase by about 185,000 jobs in January compared to the disappointing job growth seen in December.

Reports on the U.S. trade balance, manufacturing and service sector activity, weekly jobless claims, and labor productivity are also likely to attract attention in the lead up to the jobs report next Friday.

On the earnings front, Disney (DIS), Merck (MRK), Time Warner (TWX), Twitter (TWTR), and General Motors (GM) are among the companies scheduled to release their quarterly results next week.