U.S equities are mostly moving lower on Friday amid a marked increase in volatility.
The iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) has climbed higher for the last four consecutive sessions, which is an extremely rare event last seen in March.
Investors are growing concerned about the specter of “quantitative tightening” from the Federal Reserve in September, evidence of overheated sentiment and technical warnings signals such as narrowing breath and a reliance on upside momentum in a few key stocks.
As activity in downside issues increases, I’m seeing more and more large-cap stocks succumb to selling pressure. Here are three on the slide:
Large-Cap Stocks Breaking Down: Starbucks (SBUX)
Starbucks Corporation (NASDAQ:SBUX) shares are cratering more than 9% in trading on Friday, testing its January/February low and threatening to return to levels not seen since November. This drop comes after the company reported in-line quarterly results that were eclipsed by the fallout from the announcement of Teavana store closings. Earnings of 55 cents per share matched estimates, but revenues were light at $5.66 billion vs. the $5.76 billion expected.
On the post-earnings call, SBUX management announced it would be closing all 379 of its Teavana mall stores, an embarrassing M&A failure. Analysts at Stifel issued a downgrade in the wake of all this, citing disappointing forward guidance and a deceleration in comp-store sales growth suggesting a loss of market share.
Large-Cap Stocks Breaking Down: Exxon Mobil (XOM)
Exxon Mobil Corporation (NYSE:XOM) shares are dropping out of a tight six-month consolidation range with a break of support near $80 after reporting quarterly results on Friday morning. At the day’s low, XOM shares returned to levels not seen since early 2016. That’s bolstering the Exxon August $80 puts recommended to Edge Pro subscribers to a gain of nearly 50% since recommended earlier this week.
XOM reported earnings of 78 cents per share, 8 cents below estimates on a 9% increase in revenues. Cowen analysts highlighted the earnings miss as being caused by downtime and lower international production.
Large-Cap Stocks Breaking Down: General Electric (GE)
General Electric Company (NYSE:GE) shares look ready for another stair step lower, continuing a downtrend pattern since December that has taken prices down 19%. The company reported better-than-expected earnings of 28 cents per share on July 21, 3 cents ahead of estimates. But revenues fell nearly 12% from last year. And management failed to provide extended forward guidance.
Stifel analysts downgraded shares on Tuesday citing headwinds on the oil and gas and power generation businesses. They expect incoming CEO Flannery to lower forward earnings guidance, something outgoing CEO Immelt is probably avoiding to protect his legacy.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
