Wall Street lower on earnings; Amazon weighs on Nasdaq

April 25, 2014

By Ryan Vlastelica

NEW YORK (Reuters) – U.S. stocks fell on Friday, with consumer discretionary stocks leading the way lower as a number of bellwether names, including Amazon and Ford, fell following their quarterly results.

Despite the decline on the day, the S&P 500 is on track for its second straight week of gains and is 1.6 percent below its all-time high.

Investors also continued to pay attention to intensifying geopolitical strife over Ukraine. U.S. President Barack Obama and four European allies agreed Friday Russia failed to live up to terms of the Ukraine peace accord, and would coordinate on a response to “impose costs” on Russia, the White House said.

Armed separatists seized a bus carrying international observers on Friday, the interior ministry said.

While the situation has taken a backseat to corporate earnings recently, investors remain on edge over what the potential fallout could be. Visa Inc late Thursday said U.S. sanctions on Russia were hurting its card transaction volumes. Shares fell 3.8 percent to $201.50 and weighed on the Dow.

“Ukraine is starting to weigh on the market after being ignored for so long. I don’t think it will be a long-lasting issue, and it creates opportunities in the oil and gas space, but we were overbought yesterday, so it is another reason for investors to take profits,” said Chris Bertelsen, chief investment officer of Global Financial Private Capital in Sarasota, Florida.

Amazon fell 9 percent to $306.80 after posting a jump in revenue, offset by sharp increases in spending. Ford Motor Co fell 3.3 percent to $15.78 after first-quarter earnings missed expectations, hurt by higher warranty costs in North America. The two weighed on consumer discretionary stocks, which lost 1.5 percent as the worst-performing S&P sector on the day.

On the upside, Microsoft Corp’s earnings topped analyst forecasts, while investors were cheered by the software giant’s new emphasis on mobile and cloud computing. Shares rose 0.3 percent to $39.98.

“I appreciate the growth side of Amazon, but this is a reaction to the fact that you can only go so long without growing profits,” said Bertelsen, who helps oversee $3.5 billion in assets. “Still, older tech like Microsoft still looks cheap.”

The Dow Jones industrial average was down 128.88 points, or 0.78 percent, at 16,372.77. The Standard & Poor’s 500 Index was down 12.42 points, or 0.66 percent, at 1,866.19. The Nasdaq Composite Index was down 56.94 points, or 1.37 percent, at 4,091.40. While companies are clearing a lowered bar for earnings, estimates have been improving. Profits are now seen rising 3.3 percent this quarter, down from the 6.5 percent growth rate estimated at the start of the year, but above the low of 0.6 percent seen last week, according to Thomson Reuters data.

Healthcare names were among the day’s biggest gainers after LifePoint Hospitals Inc reported results. The stock rose 5.3 percent to $56.36 while Tenet Healthcare was up 5.3 percent at $44.48 and Community Health was up 5.1 percent at $39.37.

In the latest economic data, U.S. consumer sentiment rose more than expected in April, moving to a nine-month high, according to the Thomson Reuters/University of Michigan index. But the U.S. services sector expanded at a slower rate as job creation decelerated.

(Editing by Chizu Nomiyama and Nick Zieminski)

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