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Stocks Wilt on Earnings and Oil Decay

Stocks have stalled out this week as investors brace for a surge of earnings reports.

So far, the results have been a bit disappointing. On Monday night, International Business Machines Corp. (NYSE:IBM) cut its forward guidance and saw shares drop 5.8% on Tuesday. After the close today, Yahoo! Inc. (NASDAQ:YHOO) and Chipotle Mexican Grill (NYSE:CMG) both disappointed.

Sentiment has also been dragged down by some dribbling weakness in crude oil, which has hit energy stocks pretty hard.

In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 too a 0.1% shave, the Nasdaq Composite fell 0.5% and the Russell 2000 ended the day 0.1% lower. Treasury bonds weakened, the dollar was mixed, gold gained 0.4% and crude oil lost 0.1% to close at $45.84 a barrel.


Defensive telecom stocks led the way with a 0.8% gain while healthcare dropped 1.5% as biotech stocks dropped hard. The iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) lost 3.2%, the worst drop since early last week.

Elsewhere, political pressure against high drug prices keeps rising, with GOP presidential contender and U.S. Senator (R-FL) Marco Rubio characterizing some prescription pricing practices as “pure profiteering” that threaten to “bankrupt our system.”


Industrial stocks, on account of depressed expectations, have been a bright spot. United Technologies Corporation (NYSE:UTX) reported better-than-expected earnings, but missed on revenue. That last bit didn’t seem to bother investors, who pushed shares 3.9% higher on better segment profit margins and a $12 billion share repurchase program. UTX was recommended to Edge subscribers earlier this month.

Weight Watchers International, Inc. (NYSE:WTW) gained another 31%, a top-notch showing following yesterday’s 105% rise on the news that Oprah took a 10% stake in the company.

Meanwhile, memory maker SanDisk Corporation (NASDAQ:SNDK) rose 4.4% on reports that the company is in advanced talks to be acquired by Western Digital Corp. (NASDAQ:WDC) in the $80 to $90 range vs. a $72 close on Monday.

YHOO reported earnings that met consensus, while under delivering on the top line with a sizable drop in search revenue and free cash flow. It also issued below consensus fourth-quarter forward revenue guidance of $920 to $960 million vs. the $1.07 billion median estimate. In response, shares dropped 0.7% in afterhours trading.

CMG reported weaker-than-expected earnings of $4.59 per share vs. the $4.64 that was expected, but better-than-expected revenues of $1.22 billion while reaffirming prior guidance. Investors didn’t like the news, sending shares down 7.1% after hours.

On the economic front, housing starts were up sharply in September rising 6.5% to a seasonally adjusted annualized rate of 1.206 million units vs. expectations of 1.147 million units.

Much of the rise is from a 18.3% surge in multi-family units as high rental rates and strong demand boost apartments and condos.

Looking ahead, Boeing Co (NYSE:BA) will report before the bell on Wednesday along with The Coca-Cola Co (NYSE:KO) and General Motors Company (NYSE:GM). American Express Company (NYSE:AXP) will report after the close along with eBay Inc. (NASDAQ:EBAY) and Texas Instruments Incorporated (NASDAQ:TXN).

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.

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