Stocks drop on Apple's earnings miss, economic fears

The Dow ends down 72 as an early rally stalls after a Fed report shows a struggling economy. Europe's debt solution may not come quickly. Tech shares mostly slide after Apple's iPhone sales are less than expected. Housing starts jump.

By Charley Blaine Oct 19, 2011 1:34PM
Charley BlaineUpdated: 6 p.m. ET

Stocks fell back today as Apple (AAPL) shares dropped after an earnings miss and worries expanded on Europe's debt-and-banking crisis.

At the same time, the Federal Reserve's Beige Book report showed the economy is growing -- but only slightly at best.

Apple was off 5.6% to $398.62 after earnings for its fiscal fourth quarter missed Street estimates late Tuesday. Much of the shortfall appeared to be related to slower iPhone sales. Company officials said during Tuesday's conference call the fall-off was probably due to buyers waiting for a new iPhone model to hit the market.

Apple's woes were the biggest cause for a 48-point decline in the Nasdaq-100 Index ($NDX) to 2,317 and more than offset share-price gains for Intel (INTC) and Yahoo (YHOO). Both reported better-than-expected third-quarter results on Tuesday.

The Dow Jones industrials ($INDU) closed down 72 points, or 0.6%, to 11,505; the blue chips had been up 57 points at 1 p.m. ET. The Standard & Poor's 500 Index ($INX) was down 16 points, or 1.3%, to 1,210. The Nasdaq Composite Index ($COMPX) was off 53 points, or 2%, to 2,604.

Article continues below.
The European concerns picked up after The Wall Street Journal reported that lawyers watching the talk about expanding a bailout fund to contain the problem say there are big legal impediments in the way of the idea. The biggest issue: The plan would violate the eurozone's no-bailout pledge.

The Journal's report came after stocks in Germany, France and Britain were largely higher.

There was a second report that the German Bundestag wants to approve any bailout plan.

Leaders of the eurozone nations will meet Sunday in Brussels, Belgium, to discuss the crisis. Traders and investors are hoping that a concrete agreement on a plan to resolve the crisis will be the result.

The Beige Book, the Fed's narrative look at the economy, not only cited slight or modest growth, but it also said many business contacts offered weak or uncertain business outlooks.

There was some strength in consumer spending; auto sales were a bright spot in the report. But real estate was weak, and the report cited little gains in hiring or wages.

A day ahead on Thursday
Thursday brings a very large list of key earnings reports from companies that include AT&T (T), Capital One Financial (COF), Eli Lilly (LLY), Union Pacific (UNP), Southwest Airlines (LUV) and Microsoft (MSFT), the publisher of MSN Money.

In addition, the Labor Department will report on weekly jobless claims. The National Association of Realtors will release its report on existing-home sales in September, and the Philadelphia Federal Reserve Bank will release its October manufacturing report.

Futures trading suggests a modestly higher open.

Earnings from American Express, Wynn and eBay don't impress
After the close, shares of American Express (AXP) were down slightly to $45.80 after earnings of $1.03 a share, up from 90 cents a year ago, beat the consensus estimate of 96 cents. Revenue rose 9% to $7.57 billion. Loan-loss provisions fell from $373 million a year ago to $249 million.

Wynn Resorts (WYNN) shares were down 5% to $123.80 as earnings of $1.05 after one-time charges missed the Street estimates of $1.18 a share. The profit was actually up 169% from a year ago. Revenue was up 33.3% to $1.02 billion, driven primarily by a 47% revenue gain from its operations in Macau. Las Vegas revenue was up 3.7% to $346.9 million.

Shares had fallen 5.4% to $130.27 in regular trading.

Meanwhile, eBay (EBAY) shares were down 3.8% to $31.92 after falling 2% to $33.18 in regular trading. Third-quarter earnings and revenue beat Street estimates, but its guidance -- 58 cents a share in earnings and revenue of $3.2 billion to $3.35 billion -- was less than expected.

Commodities fall back
Crude oil (-CL) in New York was off $2.10 to $86.24 a barrel. Brent crude was down $2.53 to $108.62 a barrel. While Brent is currently how gasoline is priced, it was lower because of worries about how economies in Europe will fare in the coming months.

Energy shares were mixed. Exxon Mobil (XOM) was off 0.6% to $78.43, while Chevron (CVX) was up 0.7% to $102.24. Halliburton (HAL) was off 4% to $33.88, while Schlumberger (SLB) dropped 2.9% to $67.90.

Gold (-GC) settled down $5.80 to $1,647 an ounce in New York. Silver (-SI) was down 55.4 cents to $31.277 an ounce. Copper (-HG) was down 10.2 cents to $3.258 a pound.

Metals stocks were mostly lower. Gold producer Newmont Mining (NEM) was down 4.9% to $62.32. Silver producer Coeur d'Alene Mines (CDE) fell 5% to $21.71.

Freeport-McMoran Copper & Gold (FCX) saw a small gain erased after third-quarter results were lower than expected. The shares finished down 2.8% to $34.38. Freeport earned $1.1 billion, or $1.10 a share, down from $1.2 billion, or $1.24 a share, a year ago. Revenue was little changed at $5.2 billion. The company warned that a strike at its giant Grasberg mine in Indonesia would cut output of copper and gold for the year.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$86.11

$88.34

8.72%

-5.77%
(per barrel)











Heating oil (-HO)

$2.9812

$3.0277

7.26%

17.20%
(per gallon)











Natural gas (-NG)

$3.5860

$3.5530

-2.18%

-18.59%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6715

$2.7469

5.26%

8.90%
(per gallon)











Brent crude 

$108.39

$111.15

5.48%

14.40%
(per barrel)











Retail gasoline

$3.4740

$3.4690

0.84%

13.09%
(per gallon; AAA)












Apple weighs on the market
Apple's earnings shortfall was a shock to the market, which has basically bought into the idea the company is infallible. Apple

Much of the shortfall appeared to be related to slower-than-expected sales of iPhones. Apple sold 17.1 million iPhones, up 55% from a year ago; analysts had expected sales to hit 20 million units.

Company officials said during Tuesday's conference call -- the first since Steve Jobs' death -- that the fall-off was probably due to buyers waiting for a new iPhone model to hit the markets.

Apple earned $6.62 billion, or $7.05 a share. That's up from profit of $4.31 billion, or $4.64 a share, a year earlier. Analysts were expecting $7.28 a share.

There were also concerns that sales of iPad devices weren't as strong as expected. But CEO Tim Cook said that appeared to be a matter of supply and demand evening out. Apple sold 11.1 million iPads, up from 4.2 million a year ago.

For the record, Apple shares are up 25.6% this year. The S&P 500 is down 2.5%.

Travelers, Morgan Stanley see gains melt away
Travelers Companies
(TRV), the big insurance company, was the top performer of the 30 Dow stocks, up 5.7% to $54.39. While earnings fell short of Wall Street’s profit expectations because of Hurricane Irene and Tropical Storm Lee, the severe weather is providing a reason to allow for higher rates.

Meanwhile, investment bank Morgan Stanley (MS) shares, up as much as 6.6% right after the open, closed up a penny to $16.64. The company reported third-quarter earnings of $3.6 billion, or $1.14 a share, helped by an accounting gain of $3.3 billion. Revenue rose 46% to $9.89 billion. The results topped Wall Street's expectations for earnings of 30 cents a share on revenue of $7.42 billion.

Like Morgan Stanley, Citigroup (C) shares shot higher at the open and were up as much as 4.9%, but the shares pulled back, finishing down 1.6% to $29.39.

The company agreed to pay $285 million to settle civil fraud charges that it misled buyers of complex mortgage investments just as the housing market was starting to collapse. The Securities and Exchange Commission said today that Citigroup had bet against the deal in 2007 and made $160 million in fees and profits. Investors lost millions. Citigroup neither admitted nor denied the SEC's allegations.

Shares of Dow component United Technologies (UTX) were down 1.2% to $73.26. The maker of helicopters, jet engines, building elevators and other products reported third-quarter earnings of $1.47 a share, topping expectations by 2 cents. Revenue rose 8.7% to $14.8 billion. The Street had been looking for revenue of $14.55 billion. The company also boosted its full-year earnings outlook to $5.47 a share from a prior range of $5.35 to $5.45 a share.

Shares were lower in part because CFO Greg Hayes suggested 2012 will be a tougher year than 2011.

Energy costs push consumer prices higher
Inflation pressure remained muted in September, the Bureau of Labor Statistics said. The Consumer Price Index rose 0.3% in September, meeting expectations, after growth of 0.4% in August.

The core rate, which excludes food and energy and is considered the most accurate gauge of inflation, inched 0.1% higher after rising 0.2% in August. Wall Street had expected core CPI to tick 0.2% higher.

Multifamily housing starts gain
Housing starts jumped 15% in September, the Commerce Department said. Starts hit an annual rate of 658,000, up from from 572,000.

Building permits slipped by 0.5% to 594,000 from 625,000 in August. Economists had only expected housing starts to rise to 595,000, from August’s previously reported level of 571,000. Building permits were expected to decline to 610,000, from 620,000 previously.

Two quick notes: First, most of the gains for starts came in multifamily housing, which rose 53% to an annualized 227,000 units.  That's a reflection of the reluctance of many buyers to commit to a new home purchase when prices are falling. In fact, single-family starts in September were down 4.9% from a year ago.

Second: While the gain was welcome, starts are still 71% below their January 2006 peak of 2,273.

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0300%

0.020%

50.00%

-75.00%
5-year Treasury note 

1.041%

1.037%

7.88%

-48.36%
10-year Treasury note

2.159%

2.151%

12.21%

-34.67%
30-year Treasury bond

3.169%

3.157%

8.49%

-27.35%
Currencies











U.S. Dollar Index

77.416

77.412

-2.10%

-2.36%
British pound

1.5773

1.5708

1.25%

1.07%
(in U.S. $)











U.S. $ in pounds

£0.634

£0.637

-1.23%

-1.06%
Euro in dollars

$1.38

$1.37

3.05%

2.78%
(in U.S. $)











U.S. $ in euros

€ 0.727

€ 0.728

-2.96%

-2.70%
U.S. $ in yen 

76.92

76.79

-0.27%

-5.46%
U.S. $ in Chinese

6.40

6.38

0.35%

-3.24%
yuan











Canada dollar

$0.980

$0.986

2.64%

-2.32%
(in U.S. $)











U.S. dollar 

$1.021

$1.015

-2.50%

2.38%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,647.00

$1,652.80

1.52%

15.87%
(per troy ounce)











Copper (-HG)

$3.258

$3.360

3.36%

-26.74%
(per pound)











Silver (-SI)

$31.2770

$31.8310

3.97%

1.10%
(per troy ounce)











Wheat (-ZW)

$6.1950

$6.2525

1.68%

-22.00%
(per bushel)











Corn (-ZC)

$6.3850

$6.44

7.76%

2.57%
(per bushel)











Cotton 

$0.9972

1.0018

-0.47%

-31.14%
(per pound)











Coffee

$2.3910

2.3465

4.46%

-0.58%
(per pound)











Crude oil (-CL)

$86.11

$88.34

8.72%

-5.77%
(per barrel)










 

60Comments
Oct 19, 2011 3:32PM
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I find it interesting the Bank of America JP Morgan and other banks all of a sudden show a profit due to "accounting rule" changes.  This is nothing more than smoke and mirrors as these banks are not any more profitable than the day before they pulled this fast trick.  Shame on our regulatory and governing bodies for allowing this to happen.  I guess when the crooks and cheats are overseeing the banking system in our country they will play by their own rules or implement ones that will benefit themselves and the rest of their "partners" they are in bed with.  These practices are corrupt and need to stop IMMEDIATELY!!
Oct 19, 2011 4:36PM
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Interesting that MSNBC and CNBC did not think it newsworthy today that Bank of America Corp. (BAC),  apparently plans to move (with Uncle Ben's blessing) as much of the 51 trillion in bad derivaties it holds as possible to a subsidiary flush with insured deposits. That way, if BAC fails, the taxpayers would pick up the derivatives tab via the FDIC. This move reflects either criminal incompetence or abject corruption by the Fed and the FDIC should refuse. I will bet anyone that:

1. Congress will hold no hearings on this robbery.

2. Uncle Benjie will clear the way for it to happen.

3. The FDIC will get it's chain pulled by the current administration and step aside.

 

Time will tell. 

Oct 19, 2011 3:23PM
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Breaking News!  Wow!  This must feel so unexpected!  The economy is weak, and help in Europe might take some time?  I'm sure no one saw that one coming....

Oct 19, 2011 3:03PM
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So one bad Apple does spoil the whole bunch!
avatar
At the same time, the Federal Reserve's Beige Book report showed the economy is growing but only slightly at best.

ROFL, the economy is in a recession they just don't want to panic us as if we could do anything about it.
Oct 19, 2011 3:27PM
avatar

"The European concerns picked up after The Wall Street Journal reported that lawyers watching the talk about expanding a bailout fund to contain the problem say there are big legal impediment in the way of the idea. The biggest issue: The plan would violate the eurozone's no bailout pledge."

 

The misinformation and lies continue.  Just the other day the market "surged" and investors "cheered" the fact Europe leaders were going to meet and develop a plan to bailout the troubled countries and stabilize the Euro.  Guess what folks...it's all bullsh*t because all they want to do is not have the European banking system collapse so they are taking a page out the USA playbook by putting a positive spin on the negative reality to keep the average investor from panicking and pulling out their money from banks, stocks etc. which would collapse the system.  MSN and their journalist/reporters​ need to start confirming the truth rather than just publishing a bunch of lies...it is totally irresponsible on their part.



Oct 19, 2011 3:46PM
avatar

NASA could select almost any middle class citizen for a flight to Mars.  We already know what it's like to live in suspended animation for years.  

avatar
Hey Wall Street bankers I guess the 99 percenters were right you guys are going the wrong way the DOW is suppose to be at 73,000 now instead of 11,499 heck the DOW was at 11,747 way way way back in DEC 1999 when you promised it would grow at least 8 percent above inflation. With the fall of the dollar added in the DOW needs to hit 73,000 for that to happen.

Seem like the Death Spiral of baby boomers retiring and taking $50,000 a year out of the market instead of putting $5,000 a year into the market is already killing the market. By this time in ten years I quess the DOW will be about 1,000 reflecting the total withdrawal of all the baby boomer's money.

Add in the dual destructive force of the Death Spiral of lost jobs and an ever weaker and weaker economy and no body being hired unless it's to replace 2 fired workers making more than minimum wage and replacing them with one worker making minimum wage. And those new hires can not pump any money into the stock market.

The stock market ponzi scheme is dead folks.

avatar

The markets have dumped yesterdays gain already today!!We are closng in on 2008 level. The Dow will have to surpass 13200 to even show a gain in 2011.

ROFL we are not even closing in on 12 year old levels in DEC 1999 the DOW was 11,747.

To break even with inflation and the drop in dollar the DOW needs to be about 25,000 today and to give us the promised 8 percent gains above inflation the Wall Street bankers promised us back in 1999 the DOW will have to be 73,000 today.

WE HAVE A LONG LONG LONG WAY TO GO TO BREAK EVEN.

push the DOW up to 25,000 folks then we will be break even with 1999.
Oct 19, 2011 3:48PM
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left? right? what? vote for the "Beer Party" stay drunk, stay oblivious, so when the bottom falls out you won't give a sh*t
Oct 19, 2011 3:56PM
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I dont know why you need to check or search stocks out before buying them because all you really need is a subscription to the National Enquire and find a rumor for the day and invest wisely!! 
Oct 19, 2011 4:43PM
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Europe is in the same boat as the USA in terms of a debt crisis and a banking fiasco both of which are doing nothing to address the issues, corruption etc.  In both cases the "crooks" will get off and the taxpayers will get stuck holding the bag....
Oct 19, 2011 3:08PM
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FED REPORT SHOWS A STRUGGLING ECONOMY ? GO FIGURE ?  HELICOPTER BEN AND THE BOY'S  WANNA BE CLOWNS OR GENIUSES ?
Oct 19, 2011 5:39PM
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Oil is below 90.00 a barrel, gas is still around 3.50 a gallon----I am sure glad there are protesters that are voicing the outrage for this as well as other ridiculous fees and corporate scamming. Banks 2.50 charge for a debit withdraw !!! from your own money...ECT..ECT...
Oct 19, 2011 7:00PM
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BANK OF AMERICA WILL MOVE 51 TRILLION IN TOXIC DERIVATES TO THE FDC?  SO THAT WE THE TAX PAYER CAN PICK UP THE TAB WITH THE BLESSING OF OUR REGULATORY AGENCIES ?  BAC IS A CRIMINAL ENTERPRISE WHOSE MAIN OBJECTIVE IS TO RAPE, PILLAGE AND PLUNDER THE AMERICAN MIDDLE CLASS  !     DIE BANK OF AMERICA DIE !
Oct 19, 2011 3:50PM
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Same 'ol crapola time after time.  Charts?  Who cares as they mean nada, now.  I am just going to grow a 'rose garden'...think. 
Oct 19, 2011 6:06PM
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The eurozone has a no-bailout pledge.  If this is so then why has there been talk for the past several months about a bailout so countries won't default.

I suppose only the LAST pledge is the one that counts.  Like originally (to get elected) congress pledged to represent American citizens, but then they pledged to support other agendas.  Look who won and who lost.

The expression 'Man cannot serve two masters' seems appropriate, and it's easy to see which master is being served.
Oct 19, 2011 3:12PM
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We've seen and heard enough bull!  Where's the beef?!?!?
Oct 19, 2011 3:03PM
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Apple's stock declined yesterday, yet the market went up then.

Logic is so flawed in these daily reports.
Oct 19, 2011 4:45PM
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The European concerns picked up after The Wall Street Journal reported that lawyers watching the talk about expanding a bailout fund to contain the problem say there are big legal impediments in the way of the idea. The biggest issue: The plan would violate the eurozone's no-bailout pledge.

So why wasn't the public notified about the eurozone's "no-bailout pledge" before?  When the plan was announced the market "soared" on the good news but in reality there is a slight hitch to the plan...typical bullsh*t propaganda. 

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