Google results disappoint investors

Updated: 11:41 p.m. ET

Shares of Google (GOOG) were off more than 5% after hours as first-quarter earnings disappointed investors.

Earnings were $8.08 a share after one-time adjustments; Wall Street was looking for $8.10. In addition, expenses were higher than expected. Shares were at $546.60 after hours, down 5.5% from a regular close of $578.51. Revenue after payments to partners was up 27% to $6.44 billion.

The Google results came after the stock market finished basically flat on the day following a sell-off in the morning that saw the Dow Jones industrials ($INDU) fall as many as 107 points. The blue chips closed up 14 points at 12,285. The Standard & Poor's 500 Index ($INX) was up slightly to 1,315.

The Nasdaq Composite Index ($COMPX) was off 1 point to 2,760. The index was held back by weakness in Apple (AAPL), Qualcomm (QCOM), Microsoft (MSFT) and Research In Motion (RIMM). (Microsoft publishes MSN Money.)

The market struggled after a government report showed a surprising gain in jobless claims and new worries erupted about European debt woes. The dollar hit levels not seen since December 2009, and oil prices were higher.

Financial stocks dropped after a Senate report lambasted the role of financial giants in the 2008 real-estate crash. Goldman Sachs (GS)came under heavy criticism. Tech stocks were generally lower. Futures trading suggests a modestly lower open on Friday.

Article continues below.

How much to invest in the company
Google's results reignited a debate between the company over how much to reinvest in the company. The company believes its future depends on new investments, and it spent $1.2 billion on research and development in the quarter. It also added 1,916 employees during the quarter, bringing its full-time ranks to 26,316.

Investors are skeptical that all that investment will pay off in accelerated growth.

U.S. paid clicks, which measures how frequently consumers click on its ads, were up 18% from a year ago. The 4% gain for clicks from the fourth quarter was slower than the 11% sequential gain in the fourth quarter. The average cost that advertisers paid Google per click was up 8% from a year earlier but down 1% from the fourth quarter.

About 97% of revenue comes from advertising. The company, however, doesn't break out revenue for its various businesses, including revenue from search, YouTube or Android mobile devices. The company said the March 11 Japanese earthquake affected its revenue, although it did quantify the impact. About 63% of revenue comes from the United States and the United Kingdom.

A day for defensive stocks
The Dow was led by three defensive stocks: Kraft Foods (KFT), Merck (MRK) and Coca-Cola (KO). Eighteen of the 30 Dow stocks were higher.

The S&P 500 was led by staples and utility stocks, including supermarket operator Supervalu (SVU), up 16.9% to $10.61. Excluding one-time items, Supervalu earned 44 cents a share in its fiscal fourth quarter, easily beating the consensus estimate of 33 cents. Same-store sales declined less than expected, and the grocer's holding the line on its gross margin, at 23.3%.

Fifty-one Nasdaq-100 ($NDX.X) stocks were higher, but Apple, down 1.1% to $332.42, subtracted nearly 5 points from the index.

Many analysts believe stocks are headed higher, with the S&P 500 reaching perhaps to 1,400 -- which would translate into an 11.3% gain on the year. The market, however, has become stuck. The Dow is off 0.8% from its Feb. 18 peak, with the S&P 500 off 2.1% and the Nasdaq down 2.6%. The S&P 500 chart suggests a double-top formation, which frankly looks bearish.

Crude jumps over $108; gold tops $1,470
Crude oil settled up $1 to $108.11 a barrel, and energy stocks moved with it. Brent crude was off 48 cents to $122.40.

Gold settled up $16.80 to $1,472.40 an ounce, with silver jumping $1.427 to $41.66 an ounce. Copper fell 1 penny to $4.284 a pound.

Interest rates were up slightly, with the 10-year Treasury yield rising to 3.483% from Wednesday's 3.466%. The yield had hit as high as 3.488% but fell after a decent auction of 30-year Treasury bonds.

The dollar was lower against major currencies. The U.S. Dollar Index, which measures the greenback against a basket of currencies, fell 0.4% to 74.888. The close was the lowest for the index since Dec. 3, 2009.

The index's lowest level since 1999 occurred on March 17, 2008, when it finished at 71.304, just as investment house Bear Stearns collapsed and was taken over by JPMorgan Chase (JPM).

European stocks were down after German Finance Minister Wolfgang Schaeuble said Greece might have to restructure its debt. The finance minister’s comments renewed concerns about the eurozone’s debt crisis and pushed yields on Greek and Portuguese 10-year bonds to the highest levels in recent years.  

Energy prices -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Crude oil			$108.11			$107.11			1.30%			18.31%
(per barrel)
Heating oil			$3.1890			$3.2028			3.21%			25.37%
(per gallon)
Natural gas			$4.2120			$4.1410			-4.03%			-4.38%
(per mil. BTU)
Unleaded gasoline			$3.2347			$3.2424			-4.03%			-4.38%
(per gallon)
Brent crude			$122.36			$122.88			4.43%			29.14%
(per barrel)
Retail gasoline			$3.8120			$3.8080			5.71%			24.09%

Two IPOs have a big day

Car-sharing operator Zipcar (ZIP)soared well past its initial offering price of $18 in its first trading session.

Investors pushed its stock price to $30 when the market opened. It closed at $28 -- up 56% and still a nice haul for Goldman Sachs and JPMorgan, which managed the offering.

The IPO was widely anticipated by investors. Zipcar users reserve cars by phone or computer and then pick up the cars using keyless-entry cards. The service has taken off at college campuses and in 14 major cities, and the company hopes to expand several times over.

Arcos Dorados Holdings (ARCO), the largest franchise operator for McDonald’s (MCD), ended up 24.7% to $21.20. The offering received 10 times as much interest as the amount of stock being offered, Bloomberg News said.

Supervalu was the top performer among S&P 500 stocks. Excluding one-time items, Supervalu earned 44 cents a share, easily beating the consensus estimate of 33 cents. Same-store sales declined less than expected, and the grocer's holding the line on its gross margin, at 23.3%.

Hasbro (HAS) shares were off 3% to $44.40. The toymaker's first-quarter earnings fell 71% as the company spent more on product development and saw double-digit sales declines in its games and puzzles, girls and preschool categories.

Ford Motor (F) shares were off 1.1% to $14.81 after the company expanded a recall of F-150 pickups to 1.2 million vehicles that have airbags that may deploy when not needed. The recalls apply to F-150s from the 2004 through 2006 model years. Rival General Motors (GM) was off 0.9% to $30.58.

Financial stocks weigh on the market
Financial stocks were the market's laggards after The Wall Street Journal reported that U.S. investigators are looking into whether major U.S. and European banks conspired to manipulate the rate at which banks could borrow funds before and during the financial crisis.

The Financial Select Sector SPDR (XLF) exchange-traded fund was off 0.8% to $16.15. The ETF tracks the financial sector of the S&P 500. JPMorgan Chase (JPM) was off 2.8% to $44.97, the worst performer among the 30 Dow stocks. Wells Fargo (WFC) dropped 1.7% to $30.15, and Bank of America (BAC), which reports first-quarter results on Friday, slipped 1.1% to $13.13.

Goldman Sachs shares dropped 2.7% to $155.79, seventh-worst among S&P 500 stocks.

The head of the Senate’s financial crisis panel is questioning testimony Goldman executives gave to Congress last year on whether the company steered investors toward mortgage securities it knew would likely fail. Although Goldman agreed to pay $550 million to settle civil fraud charges in July, Sen. Carl Levin, D-Mich., said the subcommittee has found new evidence that Goldman misled investors.

Weak PC sales forecast hits techs -- even Apple
Shares of personal computer makers were lower -- along with Microsoft -- after technology research firms IDC and Gartner confirmed that there was a drop in PC sales in the first quarter compared with a year ago. The cause is the growing popularity of Apple's iPad, which continues to take significant market share from the PC and notebook markets.

Gartner and IDC expected PC sales to grow 3.0% and 1.5%, respectively.

 

Hewlett-Packard (HPQ) was off 1.9% to $40.36. Dell (DELL) dropped 3.1% to $14.95, and Microsoft was off 0.8% to $25.42.

Jobless claims move higher
In a surprise, more Americans filed first-time claims for unemployment insurance last week, reflecting greater-than-normal volatility at the end of the quarter. Applications for jobless benefits rose 27,000 in the week ended April 9 to 412,000, the most in two months, the Labor Department said. Economists had expected that claims would be little changed at 380,000.

Another report showed that wholesale costs in the U.S. rose 0.7% in March, led by higher prices for energy, light trucks and passenger cars. But the increase in the producer-price index was smaller than forecast as food prices unexpectedly dropped for the first time since August, the Labor Department said. The so-called core measure, which excludes volatile food and energy costs, increased 0.3%, more than estimated.

Short hits from the markets -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.070%			0.050%			-22.22%			-41.67%
5-year Treasury note			2.205%			2.171%			-0.90%			9.37%
10-year Treasury note			3.490%			3.466%			0.84%			5.39%
30-year Treasury bond			4.542%			4.550%			0.75%			4.13%
Currencies
U.S. Dollar Index			74.888			75.19			-1.56%			-5.55%
British pound			$1.6364			$1.6273			2.05%			4.86%
(in U.S. $)
U.S. $ in pounds			£0.611			£0.615			-2.00%			-4.63%
Euro in dollars			$1.449			$1.445			2.29%			8.33%
(in U.S. $)
U.S. $ in euros			€ 0.690			€ 0.692			-2.24%			-7.69%
U.S. $ in yen			83.612			83.900			0.33%			2.76%
U.S. $ in Chinese			6.554			6.530			-0.27%			-0.93%
yuan
Canada dollar			$1.041			$1.039			0.98%			3.77%
(in U.S. $)
U.S. dollar			$0.961			$0.962			-0.96%			-3.62%
(in Canadian $)
Commodities
Gold			$1,472.40			$1,455.60			2.26%			3.59%
(per troy ounce)
Copper			$4.284			$4.295			-0.55%			-3.67%
(per pound)
Silver			$41.664			$40.237			9.97%			34.67%
(per troy ounce)
Wheat			$7.4050			$7.5275			-2.98%			-6.77%
(per bushel)
Corn			$7.5425			$7.5550			8.80%			21.16%
(per bushel)
Cotton			$1.9604			$1.9735			-2.09%			35.38%
(per pound)
Crude oil			$108.11			$107.11			1.30%			18.31%
(per barrel)