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Disappointing results from Caterpillar and AT&T overshadowed positive home sales data during yesterday’s trading session, pushing the Dow Jones and the S&P 500 into the red. However, the Nasdaq, buoyed by Apple’s better-than-expected results, finished in the green. On the international front, the flash HSBC/Markit Purchasing Managers' Index for China came in below expectations. The Euro Zone region finally received encouraging news, following an increase in consumer confidence and private factory output. Of the top ten S&P 500 industry groups, the technology sector was the sole gainer.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) slipped 0.2% to close the day at 15,542.24. The S&P 500 fell 0.4% to finish yesterday’s trading session at 1,685.94. The tech-laden Nasdaq Composite Index gained 0.01% to end at 3,579.60. The fear-gauge CBOE Volatility Index (VIX) jumped 4.1% to settle at 13.18. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.2 billion shares, below 2013’s average of 6.4 billion shares. Declining stocks outnumbered the advancers. For the 23% that advanced, 74% declined.
The Dow and the S&P 500 were pulled down into negative territory following weaker-than-expected results from Caterpillar and AT&T. Shares of Caterpillar Inc. (NYSE:CAT) declined 2.4% after the company reported low earnings and revenue. Earnings of the company came in at $1.45 per share, 43% below estimates. Revenues of the company declined to $14.6 billion compared to previous year’s figure of $17.4 billion. The company said it might witness further revenue decline in the range of $1.5 billion - $2 billion during the current financial year. The company also reduced its guidance. The company expects a profit of $6.50 a share below than the Street’s estimates of $6.83 a share. This is also well below its previously estimated figure of $7 a share. In revenue terms, sales of the company are expected to be in the range of $56 billion and $58 billion.
Shares of AT&T Inc. (NYSE:T) dropped 1.1% after its revenue topped the Street’s estimates but missed out on earnings. Revenues of the company were recorded at $32.08 billion, better than the Street’s estimates of $31.81 billion. However, earnings of the company missed estimates by a cent. This quarter witnessed an increase of 550,000 in the contract customer-base. This figure is better than previous year’s figure of 320,000 and expectations of 500,000.
On the positive side, the Nasdaq managed to post gains after the technology bellwether Apple reported better-than-expected results. Shares of Apple Inc. (NASDAQ:AAPL) increased 5% after the company’s topline results came in better than the Street’s estimates. Net income of the company dropped 22% to $6.9 billion. Revenues of the company increased marginally year over year to $35.3 billion. Sales of iPhones increased 20% to 31.2 million while sales of iPads and Macs declined. Sales of iPads dropped to 14.6 million from the year-ago figure of 17 million. Sales of Macs witnessed a decline of 5% to 3.8 million. Gross margin of the company came in at 36.9%, down from 42.8% witnessed last year. Apple expects to garner revenues in the range of $34 billion and $37 billion for the last quarter.
Shares of Ford Motor Company (NYSE:F) gained 2.5% after it posted better-than-expected results and raised its guidance for the year. Revenues of the company came in at $38.1 billion, 14% higher than the year-ago period and 9% higher than the Street’s estimate. The company garnered profits of $177 million in Asia, propelled by a 47% growth in vehicle sales in China during the past six months. However, it experienced losses of $348 million in Europe. For the full year, Ford expects a loss of $1.8 billion compared to $2 billion a year ago in Europe.
On the home front, U.S. home sales data for June came in 497,000 units. This is well above the consensus estimate of 482,000 units and previous year’s figure of 360,000 units. These are the best figures recorded since May 2008. Compared to the year-ago figure, single family homes have increased 38.1%, reflecting the largest increase in past 20 years.
Disappointing economic figures from China continue to raise questions about future growth. The flash HSBC/Markit Purchasing Managers' Index came in at 47.7 in July, lower than June’s figure of 48.2. This is also the third consecutive decrease on a month over month basis. The barometer measuring employment slipped to 47.3, the weakest level in more than four years. The new orders sub-index and output came in below 50 and declined to a 11 month and a 10 month low, respectively. These figures come directly after China recorded a quarterly growth rate of 7.5%.
Meanwhile, Japan’s export figures substantiate the fact that China’s economy is slowing. Export figures till June increased 7.4%. Exports now pose a challenge for Prime Minister Shinzo Abe. Weak export figures refute the idea that a weaker yen will boost exports. Exports to Japan’s major export partners, China and the U.S. have witnessed a decline. Exports to China grew at a tepid pace at 4.8% in June, well below the annual increase of 8.3% in May. Exports to the U.S. grew 14.6%, below previous month’s figure of 16.3%. Imports of the country increased 11.8%. Due to these factors, the trade deficit of the country has increased to 180.8 billion yen compared to the median estimate of 160.6 billion yen.
Meanwhile, Euro Zone’s private factories’ output increased unexpectedly . The Markit’s flash Eurozone Composite PMI increased to 50.4 in July. This was also the first time when the PMI came in above the 50-level in the past 18 months. The flash manufacturing PMI came in at 50.1 while the output index was 52.3.The business expectations index increased to 56.9.
Of the top ten S&P 500 industry groups, technology stocks were the only gainers. The Technology SPDR (XLK) gained 0.6%. Stocks such as Microsoft Corporation (NASDAQ:MSFT), Yahoo! Inc. (NASDAQ:YHOO), International Business Machines Corp. (NYSE:IBM) and Intel Corporation (NASDAQ:INTC) gained 0.4%, 1.8%, 0.8% and 0.8%, respectively.