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Wild week in US

Uneven earnings produce mixed stock results

Traders reacting after the opening of Puma Biotechnology on the floor of the New York Stock Exchange. The company’s shares soared 264 per cent to $214.95 last Wednesday, a day after it said its experimental breast cancer drug met its main goal in a late-stage trial. — Reuters

Mixed corporate earnings produced varied results on Wall Street last week, resulting in gains for the Nasdaq, losses for the Dow and a nearly flat S&P 500.

The tech-rich Nasdaq Composite Index, buoyed by strong results from Apple and Facebook, advanced 17.41 points (0.39 per cent) on the week to 4,449.56.

But the Dow Jones Industrial Average, weighed down by some disappointing results from blue-chip companies, dropped 139.61 (0.82 per cent) to 16,960.57.

Splitting the difference was the S&P 500, the most broad-based of the three leading indices, which finished essentially flat at 1,978.34, up 0.12 of a point.

Earnings took centrestage given a relatively light week of US economic data that will pick up considerably this week.

Market observers were positive on earnings season after the initial wave of reports. But there was greater hesitancy by week’s end as more companies disappointed.

“It’s been an okay, but not a great earnings season, and not enough to get some momentum behind the market to make higher levels,” Michael James, managing director of equity trading at Wedbush Securities, said on Friday.

Some of the biggest disappointments came from the 30-member Dow. Aviation giant Boeing, down one per cent for the week, boosted its 2014 profit forecast on better-than-expected earnings, but rattled the market by disclosing a $272 million after-tax charge to reflect additional work on the huge KC-46A Tanker programme for the US Air Force.

McDonald’s, down 3.3 per cent, found itself facing tough questioning from analysts after reporting another set of lackluster profits on fairly flat global sales that resulted in a 0.7 per cent drop in earnings compared with a year ago.

The fastfood giant also contended with a food safety scandal in Asia after Shanghai officials shuttered a food supplier for mixing out-of-date meat with fresh product following an investigative report by a local television station.

On Friday, McDonald’s said its restaurants in Japan had stopped selling products made with chicken from China.

Other blue-chip companies to disappoint included Coca-Cola and Visa, down 3.4 per cent and 2.5 per cent, respectively.

But not all of the underperformers came in the Dow.

Online retailing giant Amazon, a Nasdaq stock, plummeted nearly 10 per cent on Friday after reporting a net loss of $126 million for the second quarter, much bigger than the $7 million loss a year ago. Analysts said the market is losing patience with the online retailer despite strong revenue growth.

But the weak Amazon report was more than offset by positive news from Apple, up 3.4 per cent, which notched an 11.6 per cent rise in quarterly profits to $7.7 billion behind strong iPhone sales; and Facebook, leaping 9.9 per cent, which saw quarterly profits more than double to $791 million, thanks to strong ad revenues.

Of the 229 companies in the S&P 500 to report earnings so far, 155 have beaten analyst expectations, 41 have missed and 33 have met, according to S&P Capital IQ.

This week’s earnings calendar is also heavy and includes Dow members ExxonMobil, Pfizer and Procter & Gamble, as well as microblogging site Twitter and UPS.

The week will also feature a busy schedule of economic data, including the July labour market report, the S&P Case-Shiller index of home prices for May, the Conference Board’s report on consumer confidence for July and the first assessment of second-quarter gross domestic product.

Analysts are also looking ahead to a two-day monetary policy meeting of the US Federal Reserve concluding on Wednesday.

International crises in Ukraine and parts of the Middle East also have the potential to rattle investors. While analysts say the market has generally been more focused on economic news compared with the problems in Ukraine and Gaza, unexpected negative developments in these regions could spark selling.