Declines in technology companies’ stocks all but wipe out monthly gains for major indexes
By CORRIE DRIEBUSCH and RIVA GOLD
The Wall Street Journal
Updated April 29, 2016 2:40 p.m. ET
U.S. stocks fell Friday, as deepening technology-sector declines threatened to wipe out monthly gains for major indexes.
The selloff in tech drove stocks toward their worst weekly loss since early February, leading some analysts and traders to question whether sentiment for the overall market could be shifting.
The tech sector, which has the largest sector weighting in the S&P 500, is on track for its second consecutive week of sharp losses. A string of disappointing quarterly results from high-profile tech companies—including Microsoft and Apple—has led to persistent selling in the group in recent sessions, making it the worst-performing sector year to date.
The tech-led declines have all but wiped out monthly gains for major indexes. As recently as April 20, the S&P 500 was up 2.1% for the month and the Nasdaq Composite was up 1.6%. The S&P 500 is now on track for a flat finish, while the Nasdaq Composite is on pace for a 2.4% decline.
“Tech is such a vibrant area everyone looks to,” said Dan Morgan, senior portfolio manager at Synovus Trust Co. whose fund owns shares of multiple tech companies including Apple. “The fact that earnings weren’t as good as everyone hoped, I wonder if that changes the sentiment in the market.”
He said he was pleased that the week ended with encouraging earnings from Facebook and Amazon.com. However, he said he’s not sure if it will be enough to stem the bleeding in either the tech sector or the overall market.
“Overall, tech was a tough cycle this quarter,” he said. “We started off this week getting a bloody nose with Apple and Twitter and last week was a tough slide.”
On Friday, the Dow Jones Industrial Average fell 152 points, or 0.9%, to 17679. The tech-heavy Nasdaq Composite lost 1.1%.
The S&P 500 slumped 1.1%, weighed down by tech companies. Friday’s decline put the tech sector on pace for a weekly loss of 3.9%.
Biotechnology stocks also posted big declines. The Nasdaq Biotechnology Index fell 3%, putting its yearly drop at 19%. Gilead Sciences, one of the index’s worst performers, fell 8.8% after the company said late Thursday that revenue from its hepatitis C drugs fell in the first quarter.
Amazon.com was a rare bright spot Friday, as shares gained 8.8% after it reported its most profitable quarter ever late Thursday.
The Stoxx Europe 600 declined 2.1%, following a weak session in Asia.
Haven assets extended gains Friday. Gold rose 1.9% to $1,289.20 an ounce.
U.S.-traded crude oil fell 1.5% at $45.38 a barrel, after settling at a fresh high for the year on Thursday.
The personal-consumption expenditures price index, the Federal Reserve’s preferred inflation measure, rose 0.1% in March from the prior month, data showed Friday, after Thursday’s GDP report missed expectations.
In currencies, the dollar continued to fall against its developed and emerging-market peers Friday as soft economic data eroded expectations for a U.S. interest-rate increase in June.
The yen hit an 18-month high against the dollar, weighed down by disappointment over the Bank of Japan’s decision to leave its monetary policy unchanged on Thursday.
Shares of Gilead Sciences declined after the company said that revenue from its hepatitis C drugs fell in the first quarter. Above, the company’s headquarters in Foster City, Calif. PHOTO: ASSOCIATED PRESS
The euro rose 0.8% to $1.1444, following four consecutive sessions of gains. The euro was bolstered Friday after data showed growth in the eurozone picked up in the first quarter.
The Chinese yuan was more than half a percent higher against the dollar, its biggest daily increase since it was de-pegged from the U.S. currency in 2005.
Stocks in Europe are up solidly for the month, while stocks in the U.S. are on track to eke out slight monthly gains. Still, markets have struggled to keep the momentum going in recent sessions, as economic and corporate readings have painted a mixed picture.
“The fundamental question dividing the market now is whether we’re rallying off the bottom, or if we are two-thirds of the way down with more losses to come,” said Neil Passmore, CEO of Hannam and Partners.
Stock markets in Hong Kong and Shanghai also fell Friday, while markets in Japan were closed for a holiday. For the month, the Hang Seng Index rose 1.4% while the Shanghai Composite fell 2.2%.
Shares in Australia, however, eked out small gains Fridays, buoyed by rising commodity prices.
Write to Corrie Driebusch at firstname.lastname@example.org and Riva Gold at email@example.com
APRIL 29, 2016
NEW YORK — U.S. stocks are skidding Friday as technology companies absorb big losses for the second day in a row. Health care companies are falling after weak first-quarter reports from drug and health insurance companies. Markets in Europe also took hefty losses.
KEEPING SCORE: The Dow Jones industrial average dropped 148 points, or 0.8 percent, to 17,682 as of 2:12 p.m. Eastern time. The Standard & Poor’s 500 index fell 22 points, or 1.1 percent, to 2,053. The Nasdaq composite index lost 52 points, or 1.1 percent, to 4,753. Losses over the last two days have wiped out the Dow and S&P 500’s gains from earlier this month. The Nasdaq is set to fall for the seventh day in a row.
TAKEN ILL: Health care companies fell after a bout of weak earnings reports. Biotech drugmaker Gilead Sciences said its results were hurt by big discounts and rebates on its costly hepatitis C medicines, and its stock lost $8.52, or 8.8 percent, to $88.48. Rival biotech giant Amgen reported relatively solid results, but fell $3.05, or 1.9 percent, to $157.51.
Health insurer Molina Healthcare slashed its full-year guidance because of higher medical care costs in Ohio and Texas, expenses related to recent acquisitions, and pharmacy costs, especially in Puerto Rico. It plunged $12.87, or 20 percent, to $51.35.
Molecular diagnostics company Cepheid shed $7, or 19.8 percent, to $28.40 as analysts were disappointed with its revenue projections for the second quarter.
TECH TURMOIL: Tech stocks continued to slide. Electronic storage company Seagate Technology lost $5.04, or 18.7 percent, to $21.86 after its profit fell short of estimates. Hard drive maker Western Digital dropped $6.20, or 13.5 percent, to $39.86. Apple, which is in a deep two-week slide, fell another $1.60, or 1.7 percent, to $93.23. The world’s most valuable public company is close to its lowest price of 2016.
THE QUOTE: Tech stocks are now the worst-performing group of stocks on the market this year. Dan Suzuki, senior U.S. equities strategist at Bank of America, said investors don’t like what they’re seeing in tech company results.
“A lot of investors have been disappointed by results from tech this earnings season,” he said. So they are turning to bond-like stocks such as phone and utility companies, as well as small- and mid-cap stocks, which struggled in 2015.
“Everything that was working through last year has been an underperformer this year, and vice versa,” he said.
AMAZON STRONG: E-commerce giant Amazon rose $52.83, or 8.8 percent, to $654.83. The company said revenue jumped 28 percent in the first quarter, and the company turned a far bigger profit than analysts expected. Cloud-based Amazon Web Services performed well.
Despite the broad losses, consumer stocks were trading a bit higher on the strength of Amazon stock.
BOOKED: Online travel company Expedia reported a bigger adjusted profit and greater sales than expected. Its stock added $8.24, or 7.7 percent, to $115.23.
CHANNEL CHANGER: Digital TV listing company Rovi will buy digital video recording company TiVo for about $1.1 billion in cash and stock. TiVo stock gained 54 cents, or 5.7 percent, to $9.96 and Rovi was unchanged at $17.35.
OVERSEAS: Stocks in Europe took big losses. Official data showed the eurozone economy rose by a surprising 0.6 percent in the first quarter, but investors were concerned that inflation slipped in April. France’s CAC 40 fell 2.8 percent and Germany’s DAX lost 2.7 percent. Britain’s FTSE 100 shed 1.3 percent.
Japanese markets were closed for a holiday. They plunged Thursday after the Bank of Japan held off on implementing any new economic stimulus measures. The yen strengthened, and that trend continued on Friday as the dollar fell to 106.76 yen from 108.09 yen. Hong Kong’s Hang Seng index fell 1.5 percent and Seoul’s Kospi gave up 0.3 percent.
CONSUMERS CAREFUL: Consumer spending edged 0.1 percent higher in March. Consumers spent more on clothing and less on long-lasting items like cars. Consumer spending has been weak this year, but employers keep hiring.
NO DEAL: Groupon sank 62 cents, or 14.1 percent, to $3.81. The daily deals site reported strong results but left its guidance unchanged.
DRINK UP: Monster Beverage gained $15.94, or 12.5 percent, to $143.79. The energy drink company’s results surpassed analyst estimates. Monster Beverage also said it will buy back $2 billion of its own stock.
METALS: Metals prices continued to rise. Gold advanced $24.10, or 1.9 percent, to $1,290.50 an ounce and silver rose 23 cents, or 1.3 percent, to $17.82 an ounce. Gold is trading at 15-month highs. Copper picked up 5 cents, or 2.3 percent, to $2.28 a pound.
ENERGY: Benchmark U.S. crude lost 63 cents, or 1.4 percent, to $45.40 per barrel in New York. Brent crude, used to price international oils, slid 81 cents, or 1.7 percent, to $46.96 a barrel in London.
BONDS, CURRENCY: Bond prices barely budged. The yield on the 10-year U.S. Treasury note held steady at 1.83 percent. The euro rose to $1.1445 from $1.1351.
AP Markets Writer Marley Jay can be reached athttp://twitter.com/MarleyJayAP His work can be found athttp://bigstory.ap.org/journalist/marley-jay
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