Dow falls 121 on European worries, Chipotle's slump
Investors dump stocks after Spain says its recession won't end until at least 2013. Chipotle Mexican Grill shares fall more than 20% on slower sales growth; restaurant shares are slammed. General Electric and Google earnings cheer.
Stocks fell back today in large part because of what appears to be a worsening Spanish economy. The Spanish government projected its recession will extend into 2013, with unemployment topping 20% throughout 2013.
The Dow Jones industrials ($INDU) dropped more than 120 points on the day and have turned negative for the month. The dollar rose against major currencies, with interest rates falling. Crude oil (-CL) fell in response.
Also weighing on stocks was a nasty sell-off of restaurant shares after Chipotle Mexican Grill (CMG) reported slower sales growth at the burrito chain as well as stepped-up competition from rivals.
Chipotle said late Thursday that comparable restaurant sales rose 8% during the quarter ended June 30, its slowest rate since early 2010. Shares were off $86.88 to $316.98.
Shares of other restaurant chains took big hits as well. Olive Garden parent Darden Restaurants (DRI) fell 99 cents to $51.10. Brinker International (EAT), parent of the Chili's Grill & Bar and Maggiano’s Little Italy chains, fell $1.03 to $32.79.
The Dow closed down 121 points to 12,823 after falling as many as 133 points. The Standard & Poor's 500 Index ($INX) fell 14 points to 1,363, and the Nasdaq Composite Index ($COMPX) dropped 41 points to 2,925.
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The Nasdaq-100 Index ($NDX) was down 38 points to 2,618.
Apple (AAPL), the Nasdaq's most influential component, was off $10.02 to $604.30. One reason for the decline was that analyst Scott Thompson of FBR Capital Markets cut his estimate for fiscal-third-quarter earnings to $10.03, Barron's reported. The Street consensus estimate is $10.37.
This was a market slammed by three groups. Financials were whacked by the Spanish problem. European banks were hit the hardest as result, but Bank of America (BAC) was off 19 cents to $7.07.
Next were the restaurants, pulled lower by Chipotle and raising the specter that U.S. consumers don't want to spend. Chipotle also hit a number of discretionary stocks. Whole Foods Market (WFM), which reports results next week, fell $6.51 to $84.03.
Lastly were the multinationals exposed to Europe: United Technologies (UTX), Boeing (BA), Caterpillar (CAT) and Cisco Systems (CSCO). Because the euro is falling, their European profits lose value.
The market was led by energy and utility shares.
The Dow finished the week with a 0.4% gain, but it's off 0.4% for the month. The S&P 500 was up 0.4% for the week and basically unchanged for the month. The Nasdaq gained 0.6% for the week and is off 3% for July.
So far this earnings season, 72% of companies are beating earnings estimates. But only 45% are beating revenue estimates, according to Factset, the lowest percentage since the first quarter of 2009.
Some of that may be that business is slowing. But a number of companies this week said the dollar's rise against the euro and other currencies has depressed reported revenue and profits. For IBM (IBM), the strengthening dollar cut reported revenue by $1 billion.
You'll see the phenomenon again next week with Apple, Boeing, Caterpillar, DuPont (DD), glass-container-maker Owens-Illinois (OI) and Alexion Pharmaceuticals (ALXN).
|Markets for the week|
|7/20/2012||7/13/2012||% chg.||YTD chg.|
|U.S. Dollar Index||83.57||83.47||0.12%||3.79%|
Oil prices move lower; gasoline at the pump rises
Light sweet crude in New York settled down $1.22 to $91.44 a barrel. For the week, crude was up 5%. Brent crude was off $1.16 to $106.84. Brent is up more than 5% for the week, largely because of speculation that civil war in Syria could expand to something worse.
The national average price for gasoline was up 1 cent to $3.447 a gallon, according to AAA's Daily Fuel Gauge report. The price is up 12.1 cents, or 3.6%, since bottoming on July 3 at $3.326 a gallon.
Gold (-GC) settled up $2.40 to $1,582.80 an ounce. Gold fell 0.5% for the week and is up 1.1% this year. The euro tumbled to a two-year low against the dollar. The yield on the 10-year Treasury note fell to 1.457% from 1.515% on Thursday.
|Energy prices -- New York close|
|Fri.||Thur.||Month chg.||YTD chg.|
|Crude oil (-CL)||$91.44||$92.66||7.63%||-7.48%|
|Heating oil (-HO)||$2.9243||$2.9470||7.91%||0.35%|
|Natural gas (-NG)||$3.0810||$2.9990||9.10%||3.08%|
|(per mil. BTU)|
|Unleaded gasoline (-RB)||$2.9430||$2.9389||11.82%||10.75%|
|(per gallon; AAA)|
Corn and wheat surge higher
The Midwest drought continued to push grain prices higher.
Corn for December delivery settled up 17.25 cents to $7.9575 a bushel. The spot price was up 16.75 cents to a record $8.245 a bushel. Wheat jumped to $9.4325, up 8.25 cents.
Corn and wheat are up 25% just this month.
Two IPOs do well; Fender cancels its IPO
The stocks of technology companies Kayak Software (KYAK) and Palo Alto Networks (PANW) surged in their debuts today, a promising sign for an IPO market that seized up in the wake of Facebook's (FB) disappointing May offering.
Network security firm Palo Alto Networks, which builds hardware and software to protect the security of computer networks, soared $11.13 to $53.13. It went public at $42 late Thursday. Trading began today.
Kayak was up $7.18 to $33.18. Its IPO was sold for $26 a share late Thursday.
But guitar maker Fender Musical Instruments, which has supplied guitars to rock artists from Buddy Holly to Kurt Cobain and John Mayer, withdrew its IPO. Fender had filed in March for an estimated IPO of up to $200 million.
Spain's recession will continue into 2013
Spain's gross domestic product will fall 0.5% in 2013 instead of rising 0.2%, as the government predicted April 27, Budget Minister Cristobal Montoro said after the Cabinet met today in Madrid.
The Valencia region is reportedly seeking a bailout from the national government.
The economy returned to recession last year and unemployment is surging after the collapse of the real-estate boom. The economic outlook is worsening as the government implements 110 billion euros of measures over three years to cut budgets, raise taxes, shrink public wages and charge more for education and health care.
Unemployment will be 24.6% in 2012 instead of 24.3%, the government’s forecasts showed today, and 24.3% in 2013 instead of 24.2%.
Investors were not happy. The yield on the Spanish 10-year bond hit as high as 7.284% before closing at 7.267%. The IBEX 35 Index ($ES:IB), Spain's benchmark stock index, was off 386 points to 6,246.
Stocks across Europe were generally off 1% or more.
GE earnings win some cheers
The market pullback came despite decent earnings from General Electric (GE) that helped boost its stock price 7 cents to $19.87.
The world's biggest maker of electric turbines and jet engines posted profit of 38 cents per share, excluding one-time items, a penny above analysts' average estimate, according to Thomson Reuters. It excludes 5 cents per share in charges from its former U.S. subprime mortgage unit and Japanese consumer finance business.
Sales rose 2.5% to $36.5 billion from $35.62 billion -- shy of Wall Street's consensus estimate of $36.8 billion. The company noted that the strengthening dollar reduced revenue by $900 million in the quarter.
Also putting up strong results: oil-services companies Baker Hughes (BHI), up $3.84 to $45.49, and Schlumberger (SLB), up 69 cents to $69.33.
Baker Hughes earned $439 million, or $1 per share; analysts had expected 77 cents a share.
Schlumberger earned $1.4 billion, or $1.03 a share, up from $1.1 billion, or 81 cents, a year earlier. Excluding a $21 million after-tax charge related to merger costs, the company beat by 5 cents the average of 29 analysts’ estimates compiled by Bloomberg. Sales rose 16% to $10.4 billion.
Google shares rise, Microsoft slips
Google (GOOG) shares were up $17.76 to $610.82 after second-quarter results beat Street estimates. The one downside to the report: CEO Larry Page was noticeably absent from the conference call with analysts. He has been struggling with a throat ailment.
Microsoft (MSFT), publisher of MSN Money, was off 55 cents to $30.12. It reported its first quarterly loss as a public company late Thursday, thanks to a write-down of nearly all of its $6.3 billion purchase of online advertising company aQuantive. A larger issue, apparently, was a decline in sales of its Windows 7 operating system.
Wal-Mart Stores (WMT), GE and oil giant Chevron (CVX) were the only stocks among the 30 in the Dow to show gains today. Bank of America, Hewlett-Packard (HPQ) and United Technologies were the laggards.
Chipmaker SanDisk (SNDK) and Baker Hughes were the top S&P 500 performers; Chipotle and Advanced Micro Devices (AMD) were the laggards. Eighty-one S&P 500 stocks were higher.
SanDisk, Google and eBay (EBAY) were the Nasdaq-100 leaders, with Intuitive Surgical (ISRG), Whole Foods and F5 Networks (FFIV) the laggards. Only eight stocks in the index were higher.
|Short hits from the markets -- New York close|
|Fri.||Thur.||Month chg.||YTD chg.|
|13-week Treasury bill||0.0900%||0.080%||12.50%||800.00%|
|5-year Treasury note||0.580%||0.615%||-20.44%||-30.12%|
|10-year Treasury note||1.460%||1.515%||-12.00%||-21.97%|
|30-year Treasury bond||2.546%||2.614%||-7.85%||-11.87%|
|U.S. Dollar Index||83.573||82.980||2.23%||3.79%|
|(in U.S. $)|
|U.S. $ in pounds||£0.640||£0.636||0.52%||-0.54%|
|Euro in dollars||$1.22||$1.23||-3.61%||-6.10%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.822||€ 0.814||3.75%||6.49%|
|U.S. $ in yen||78.62||78.63||-1.42%||1.97%|
|U.S. $ in Chinese||6.39||6.37||0.36%||1.09%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$91.44||$92.66||7.63%||-7.48%|
Get off this fear factor reporting and move onto something else!
Who gives a CRAP about the Euro sh-t factor!
It should of failed a long time ago!
In the light of "Fast and Furious" and "LIBOR" I think it is safe to say Obama will eventually find himself on the wrong side of impeachment hearings. That will be hard on Obama and the country. Lets give him a decent send off by voting him out of office......
Go Romney !!
"Spain's recession will continue into 2013"
And the USA is out of one?
GE gets a whole bunch of Obama bucks to subsidize the building of those wind turbine components in China and the gets all those nice tax breaks to boot. Hell yes they should have some decent earnings
Oh nooo! There's trouble in Spain. When did that happen? Oh wait, it's been going on for a year now. Has nothing to do with today's profit taking. Nothing happened this week to justify the gains other than Bernake not saying "never" to more stimulus. This is going to be the pattern until after the election. There will be a Fed speech where stimulus is discussed, maybe hinted at, but never dismissed entirely. The big money boys will use that as a signal to run things up and then they will cash out shortly after. Pick any reason for the selling, Spain, Italy, Greece, whatever, it's just BS. I'm still predicting a big sell-off by the institutions just to lure the Fed into another QE. It's just all a big poker game right now.
I get a kick out of the press saying that housing is turning around. We have enough houses unless we start tearing them down (which is happening in some places) Why would we need to build more? The glut of housing was built with easy money and bad policies. The money has now migrated away from people that buy houses and into the pockets of the banks who buy nothing (but stocks). We still have the houses though. They are just empty!
Good earnings news, everyone!
I would gladly pay you Tuesday, for a Schlumberger today...
Europe "worry" is not behind today's movment. Today's drop was a market manipulation. Bull cycle ends. Bear cycle begins. The smarts see it coming, so they changed the colors and nudged the momentum south. I predict trouble ahead...
It is obvious that the American Economy is not a issue which has been proven time and time again. When gas prices went up and brought our economy down it was no doubt the villan.
And to turn around and let it continue to happen when you have no where near recovered means only one thing that it does not matter to the government. We are EXPENDABLE because they are UNTOUCHABLE.
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