Google shares slump, pull market lower

The search giant's results -- released early -- disappoint and slam tech shares. Microsoft's earnings don't excite. Investors hate Chipotle's results. Travelers and Verizon earnings impress. Gold and oil slip.

By Charley Blaine Oct 18, 2012 1:17PM
Charley BlaineUpdated: 7:37 p.m. ET

Tech stocks took a dive today after earnings from Internet search giant Google (GOOG) were released early -- and disappointed investors.

Google shares slumped $68.10 to $687.39 before trading was halted and closed down $60.49 to $695. (Trading resumed at 3:20 p.m. ET.) Earnings of $9.03 a share (after one-time charges) missed the Street estimate by $1.62 and were down from $9.72 a year ago. Revenue of $11.33 billion, up 45% from a year ago, nonetheless missed the consensus estimate of $11.86 billion.

Google's miss was so bad that CEO Larry Page, his voice sounding strained, began the company's conference call by apologizing for the "scramble" in the afternoon. The scramble  pulled shares of Facebook (FB), Yelp (YELP), Groupon (GRPN) and Zynga (ZNGA) lower. Tech shares were already weak because of a decline in shares of Apple (AAPL).

Microsoft (MSFT) was lower in regular trading and fell further after hours after its fiscal-first-quarter earnings were released. Shares of Chipotle Mexican Grill (CMG) fell more than 10% after hours as results disappointed investors. (Microsoft publishes MSN Money.)

The damage from Google was largely confined to tech land. The Nasdaq Composite Index ($COMPX) closed down 31 points to 3,073. The Nasdaq-100 Index ($NDX) tumbled 31 points to 2,744. Both moved up from lows when Google trading resumed. But the Dow Jones industrials ($INDU) were off just 8 points to 13,549. Right after the Google news, the blue chips had been down as many as 31 points. The Standard & Poor's 500 Index ($INX) fell 4 points to 1,457. Google is an S&P 500 component, but isn't in the Dow.

Article continues below.
Gold (-GC) and oil prices were lower today as the dollar rose against the euro. Gold closed down $8.30 to $1,744.70 an ounce. Crude oil (-CL) in New York dropped 2 cents to $92.10 a barrel. Brent crude, the benchmark North Sea crude that has the most influence on gasoline prices, was off 81 cents to $112.41 a barrel.

The national average retail price of gasoline was $3.737 a gallon, according to AAA's Daily Fuel Gauge Report. That's down from Wednesday's $3.773 and down 1.9% this week.

The 10-year Treasury yield rose to 1.826% from Wednesday's 1.811% and 1.663% on Oct. 12.

Friday's earnings include results from General Electric (GE), McDonald's (MCD) and Baker
Hughes
(BHI). The National Association of Realtors reports on September existing-home sales.

Futures trading suggests a flat open for stocks. That probably reflects investors' waiting for the outcome of the election and any negotiations about the fiscal cliff -- the combination of required spending cuts and automatic tax increases if Congress and the White House can't agree on a spending plan.

Microsoft shares fall on earnings
Microsoft shares were down 45 cents, or 1.5%, to $29.05 after hours. The stock had closed at $29.50, down 9 cents.

Revenue of $16.01 billion and earnings of 53 cents a share using generally accepted accounting were off 8% and 22%, respectively, from a year ago. Wall Street was expecting 56 cents and revenue of $16.42 billion.

When deferred revenue for pre-sales of the new Windows 8 operating system are added -- about $1.36 billion -- the company earned 65 cents a share on revenue of $17.4 billion. Under that scenario, earning were down 4% from a year ago. Revenue was even with a year ago.

Revenue from the Windows division fell 33.4% to $3.24 billion from a year ago. Operating profit for the business was off nearly 50% to $1.65 billion. Much of the decline was believed to be customers waiting for Windows 8, but the slowdown in personal computer sales also was a factor.

Microsoft's other businesses mostly saw revenue gains. The entertainment and devices business saw operating profit fall 94%. The online business group, which includes Bing and the MSN portfolio of websites enjoyed an 8.7% revenue gain to $697 million. Its loss fell 29% to $364 million.

Chipotle growth slow; stock is punished
Chipotle was punished basically because its same-store sales growth fell to 4.8% in the third quarter, the slowest growth in 10 quarters. Most of the other quarters showed growth of 10% a year or more. Analysts estimated an increase of 4.9%, according to Bloomberg News. 

The company earned $72.3 million, or $2.27 a share, in the quarter, up 20% from a year ago. Analysts had expected $2.29 a share in earnings. Revenue was up 18% to $700.5 million.

The company expects same-store sales to be flat or grow a little.

Chipotle fell $29.83 to $256.10 after a fall of $4.07 to $285.93. If the after-hours price holds through Friday, the stock will have declined more than 40% since mid-April.

EBay, Lam Research, Green Mountain Coffee can't carry the Nasdaq
The Nasdaq-100's decline came despite sizable gains for Lam Research (LRCX), Green Mountain Coffee Roasters (GMCR) and eBay (EBAY). EBay was up $2.63 to $50.83 after its earnings, reported late Wednesday, cheered investors.

Lam Research was the top S&P 500 and Nasdaq-100 performer. EBay was second on the Nasdaq-100 and third among the S&P 500 stocks.

Apple fell $11.97 to $632.64, its first decline after two days of gains. The stock is down 5% this month, although it is still up nearly 58% this year.

IBM (IBM) was the Dow loser, down $5.67 to $194.96. The shares are down 7.6% in the two days since reporting earnings Tuesday that disappointed investors -- subtracting 123 points from the Dow in the process.

Advertising pressures weigh on Google's miss
Google results were released, apparently by mistake, in a Securities and Exchange Commission filing. Google blamed RR Donnelley (RRD). A Donnelley subsidiary made the early SEC filing.

RR Donnelley, one of the nation's largest printers of everything from telephone books and magazines to fliers and financial documents, was off 10 cents to $10.76.

The release includes the phrase "PENDING LARRY QUOTE" in a spot for a to-be-added quote from CEO Larry Page. The company had expected to release its report after today's close.

The problem with the earnings wasn't just the miss. Cost per click -- a key measurement of the company's revenue growth -- fell 3% in the third quarter from the second. And it was off 15% from the 2011 third quarter.

Advertising revenue overall was up 16% from a year ago. Google generally pulls in less revenue from the advertising placed on mobile devices than from ads that appear on traditional personal computers, The Wall Street Journal noted. That's helped create a downward trend for advertiser prices on Google, which has caused some concern. It's also been a worry for Facebook.

The rest of the revenue gain over a year ago came from Motorola. A stronger dollar through the quarter depressed reported international revenue by $136 million.  About 53% of revenue comes from outside the United States, down slightly from a year ago.

Revenue from its Motorola Mobility business was down 21% to $2.58 billion from a year ago. The business reported a loss of $527 million under generally accepted accounting. That includes $349 million in restructuring charges. The loss drops to $151 million under non-GAAP rules.

Energy prices -- New York close



Thur.     Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$92.10

$92.12

-0.10%

-6.81%
(per barrel)











Heating oil (-HO)

$3.1866

$3.1894

0.87%

9.35%
(per gallon)











Natural gas (-NG)

$3.5870

$3.4700

8.04%

20.01%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7269

$2.7642

-6.62%

2.62%
(per gallon)











Brent crude 

$112.39

$113.22

-1.95%

4.67%
(per barrel)











Retail gasoline

$3.7370

$3.7560

-1.32%

14.07%
(per gallon; AAA)












Jobless claims jump
The market opened lower after initial jobless claims jumped to a seasonally adjusted 388,000 in the latest week from 342,000 a week earlier. The big swing is due to incomplete processing of claims in California two weeks ago, resulting in a big drop in reported claims. And then the data were updated for the latest week.

A boost to the market -- before the Google earnings -- was the Philly Fed Index, the measure of manufacturing activity in the region served by the Federal Reserve Bank of Philadelphia.

The index rose to 5.7 for October, compared with expectations for a gain to 1.9. The index was at -1.9 in September. In addition, The Conference Board’s index of leading economic indicators climbed 0.6% in September.

Homebuilding shares and shares of companies tied to housing were mostly higher. One reason: Executives at USG (USG), one of the largest makers of wallboard, said they worried that labor shortages may be a big headache as the nascent housing recovery moves into 2013. USG shares fell 10% after the company released its third-quarter earnings.

But the shares were up $1.94 to $24.67.

Travelers, Verizon earnings impress
Travelers (TRV) earned $864 million, or $2.21 a share, up from $333 million, or 79 cents a share, a year ago -- and well ahead of the consensus forecast. Revenue was up 2% to $6.51 billion. A big drop in catastrophe losses helped the bottom line. Shares jumped $2.56 to $73.94. The stock was the top performer among the 30 Dow stocks.

Verizon Communications
(VZ) earned $1.59 billion, or 56 cents a share,  in the third quarter, up from $1.38 billion, or 49 cents, as year ago. The telecom carrier’s revenue rose nearly 4% to $29.01 billion. Excluding one-time charges, earnings rose 14% to 64 cents a share. Verizon reported that wireless revenue was a big profit driver, allaying worries that heavy smartphone usage would hit profits. Shares rose $1.06 to $45.78. The stock was the second-best Dow performer.

Morgan Stanley
(MS) reported a third-quarter loss of slightly more than $1 billion, or 55 cents a share, down from earnings of $2.15 billion, or $1.15 a share a year ago. Revenue fell to $5.29 billion from $9.81 billion. Excluding a debt valuation adjustment, quarterly revenue would have been $7.6 billion and income from continuing operations would have been 28 cents a share, Morgan Stanley said. Analysts had been looking for adjusted earnings of 24 cents a share on revenue of $6.36 billion. Shares were off 70 cents to $17.79.

Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.1000%

0.110%

11.11%

900.00%
5-year Treasury note 

0.780%

0.772%

23.81%

-6.02%
10-year Treasury note

1.826%

1.811%

11.55%

-2.41%
30-year Treasury bond

3.007%

2.988%

-0.82%

4.08%
Currencies











U.S. Dollar Index

79.425

79.059

-0.75%

-1.36%
British pound

1.6059

1.6147

-0.63%

3.36%
(in U.S. $)

 








U.S. $ in pounds

£0.623

£0.619

0.63%

-3.25%
Euro in dollars

$1.31

$1.31

1.65%

0.84%
(in U.S. $)

 








U.S. $ in euros

€ 0.765

€ 0.762

-1.62%

-0.83%
U.S. $ in yen 

79.43

79.05

1.87%

3.02%
U.S. $ in Chinese

6.27

6.25

-0.12%

-0.83%
yuan











Canada dollar

$0.000

$1.023

-100.00%

-100.00%
(in U.S. $)

 








U.S. dollar 

$0.986

$0.977

0.25%

-3.34%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,744.70

$1,753.000

-1.65%

11.35%
(per troy ounce)

 








Copper (-HG)

$3.743

$3.748

-0.40%

8.93%
(per pound)

 








Silver (-SI)

$32.8680

$33.232

-4.94%

17.74%
(per troy ounce)

 








Wheat (-ZW)

$8.6850

$8.563

-3.77%

33.05%
(per bushel)

 








Corn (-ZC)

$7.6075

$7.455

0.60%

17.67%
(per bushel)

 








Cotton 

$0.7772

$0.779

10.01%

-15.23%
(per pound)

 








Coffee

$1.5860

$1.615

-8.59%

-30.94%
(per pound)

 








Crude oil (-CL)

$92.10

$92.120

-0.10%

-6.81%
(per barrel)










 

291Comments
Oct 18, 2012 1:47PM
avatar

1 CLASSIC LADY;Where were you in 2007 and 2008 when both wars were off the

budget?

Oct 18, 2012 1:43PM
avatar
The $38,000,000,000.00 spent on green energy could have paid for the full conversion of 4,750,000 vehicles to compressed natural gas, providing more jobs than the 3500 Green jobs, and moved the US closer to energy independence. Taking it one step further, if you add up all the tax breaks, subsidies, money given to GM to build the failed Volt, and the ethanol we wouldn't need anymore, we could have allocated close to 90,000,000,000.00 for CNG conversions. That would have converted about 11,500,000 vehicles and made much of our oil imports unnecessary. Of course 3 billion of that would have to be put into new fueling station construction and associated infrastructure. Who knows, maybe food prices would go down, we could feed our cattle something other than candy, and solve the trade deficit at the same time by exporting a lot more oil. There are better policy decisions that can be made if they are well planned out. We can't stand another 4 years of failed policies leaving nothing for our children but debt.
Oct 18, 2012 1:43PM
avatar
What; no debate comments? Come on folks, this blog is rapidly losing its appeal as an entertainment site. Where are you Reps and Dems?
Oct 18, 2012 1:38PM
avatar
Man Google is getting hammered today  (down 9 or 10%)..... anyone think buying on the dip?
Oct 18, 2012 1:36PM
avatar
MSN doing the best they can to put lipstick on the Obama pig - "Presidents can't control gas prices" is the big headline for today.  Don't recall seeing that one a few years ago....

Northeastern University just released a study that 53% of new college grads are unemployed or underemployed - must be too many art history majors, couldn't possibly be the crappy economy...

Student loan debt at record levels - $26k per student, up 5% from a year ago.

Lots comments about Anne Romney's dress at the debate costing $1600.  No mention at all of Michelle's dress costing more than $3k.  Probably just an innocent oversight.

Gallup has Romney leading 51-45, but that story doesn't seem to be plastered all over the MSM.

Oh well, doesn't matter who wins next month anyway, the Fed will still be there to stuff another $40 billion into the economy and as long as stocks go up, no one cares, right?  By the way, only 55 million shares traded on the Dow in the first 4 hours of trading.  Remember the good old days, when Buffett would fart and 50 million shares would come shooting out?  Back then we'd see a billion shares trade hands just about everyday - not anymore.  Apparently the economy is so strong, no one wants to trade stocks anymore.

Oct 18, 2012 1:32PM
avatar
Stocks are up 66% with Obama.Thank Obama.
Oct 18, 2012 1:32PM
avatar
Good to see Apple lose the dumbest lawsuit I have seen in a while over in Europe.  Turns out a rectangular tablet with rounded corners was a shape not invented by Apple.  Go Samsung!  Wonder if the Microsoft tablet will be a total mess or will Apple finally have a competitor in the tablet market they won't be able to outsell 20 to 1?
Oct 18, 2012 1:31PM
avatar
Looks an awful lot like Wall Street knows something ominous and is just waiting for the shift to hit the fan. What's in your portfolio? Bet it won't be so much in a few more days.

Close the banks. End the Federal Reserve. Get rid of Wall Street. It was only ever about job recovery.

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