By Saumya Vaishampayan
Investors poured out of technology stocks Wednesday, spooked by
disappointing results from Apple Inc. and Microsoft Corp.
The retreat pushed the Nasdaq Composite Index down 36.35 points,
or 0.7%, to 5171.77 and added to a dour mood in markets as the rout
in commodities including gold and oil continued.
Investors scraping for growth amid the soft economic recovery
had driven the Nasdaq to a record as recently as Monday, encouraged
by solid results from Google Inc. and Netflix Inc. But Apple's drop
Wednesday was a reminder that expectations for technology companies
have soared to the point that any disappointment can leave shares
vulnerable.
After the bell Tuesday, Apple posted a 38% surge in profit and
said it sold 35% more iPhones in the fiscal third quarter compared
with a year earlier. Shares fell 4.2% Wednesday as iPhone sales
missed some analysts' estimates, and the company indicated its
revenue in the current quarter could come in below Wall Street
forecasts.
"Not only is it a huge company, there are a lot of companies
that depend on Apple for their businesses," said Chris Gaffney,
president of EverBank World Markets. "With future demand possibly
not as strong, we saw those shares get hurt overseas," he
added.
The S&P 500 fell 5.06 points, or 0.2%, 2114.15 and the Dow
industrials lost 68.25 points, or 0.4%, to 17851.04.
Swings in Apple's shares can spark big moves in the U.S. stock
indexes. As the largest company by market capitalization in the
S&P 500 and Nasdaq, Apple has an outsize impact on the two
market-cap-weighted indexes. Apple is among the companies with the
highest stock prices in the Dow, which gives it major sway over the
price-weighted blue-chip index.
Adding to the downbeat tone for tech shares, Microsoft Corp.
reported a $3.2 billion quarterly loss in its fiscal fourth quarter
on Tuesday afternoon, its biggest quarterly loss ever. Shares fell
3.7%.
Still, many investors noted that even with Wednesday's pullback,
stocks remain near all-time highs. The S&P 500 is 0.8% away
from its record close of 2130.82, and the Nasdaq is 0.9% below its
closing high of 5218.86.
"For most of the year, from my vantage point, we've been in a
sideways trading range," said Sahak Manuelian, a managing director
at Wedbush Securities. "The market is still bouncing up and down,"
he said.
The slump in commodities continued Wednesday. Gold futures
declined 1.1% to $1091.40 an ounce. Crude-oil futures fell 3.3% to
$49.19 a barrel, notching their 16th decline in the past 20
sessions.
The tumble in crude-oil prices, which have slumped about 50%
from a year ago, has depressed earnings for companies in the energy
sector. But that price decline, investors say, should prompt
consumers to loosen their purse strings, spurring earnings growth
in other parts of the stock market.
"This is a consumer economy," said Bill Hench, who manages about
$3 billion as a portfolio manager at Royce Funds. "What's really
encouraging...is the tremendous pullback in commodities prices. As
you get into the winter, when it starts affecting heating bills,
it's going to be a significant tailwind for the economy," he
added.
Mr. Hench mainly buys shares of small companies. Those
companies, he said, are more closely tied to the economic health of
the U.S. and are poised to see better earnings growth if the
economy picks up.
Declines in technology shares Wednesday weighed on European
markets. France's CAC-40 slipped 0.5% and Germany's DAX lost
0.7%.
In other U.S. corporate news, Boeing Co. said sales rose 11% in
the June quarter, helping its profit top analysts' expectations.
Shares rose 1%.
Baker Hughes Inc. shares fell 3.9% after a report said
Halliburton Co.'s planned acquisition of Baker Hughes could
encounter antitrust issues. Halliburton shares slipped 0.8%.
Meanwhile, Treasury prices rose as investors sought out haven
assets amid the rout in commodities and declines in stocks. The
yield on the 10-year Treasury note slipped to 2.322% from 2.342% on
Tuesday.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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