Dismal earnings from tech bellwether Apple on one hand and strong results from Caterpillar and Boeing on the other kept the markets confused about a definite and uniform direction. The Nasdaq could not escape a negative finish as Apple’s rare earnings miss weighed down on the tech-laden index. Eventually, the Dow emerged as the sole gainer as its components managed to beat the Street’s estimates. The narrow loss for S&P 500 ensured its fourth-consecutive decline.
The Dow Jones Industrial Average (DJI) gained 0.5% and closed at 12,676.05. The Standard & Poor 500 (S&P 500) slipped a meager 0.03% to end at nearly the same level it started the day with at 1,337.89. The Nasdaq Composite Index dropped 0.3% and finished yesterday’s trading session at 2,854.24. The fear-gauge CBOE Volatility Index (VIX) dropped 5.5% to settle at 19.34. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 6.43 billion shares, lower than the year-to-date daily average of 6.74 billion shares. Advancing stocks edged past the decliners on the NYSE; as for 52% stocks that gained, 45% stocks ended in the red zone.
The S&P 500 was nearly unchanged, thanks the gains by the telecom sector that almost offset weakness from the tech counter. However, the tech-heavy Nasdaq could not limit its losses, as its biggest component and tech-bellwether Apple Inc. (NASDAQ:AAPL) fell short of the Street’s estimates. During most of the past few quarters, the iPhone and iPad maker has stormed past estimates. An earnings miss from the largest company in terms of market value was therefore a major headline, and unfortunately a dismal one.
Lower-than-expected iPhone sales primarily affected the company’s quarterly results. Units of iPhone sold during the quarter were up 28% year on year (y/y), lower than estimates. The 26.02 million units of iPhone sold also reflected a 26% sequential decline, which dragged the segment’s revenue down 28%. Analysts at Zacks noted that ‘consumers deferred their purchases based on the rumors surrounding the release of iPhone 5’.
Apple’s shares dropped a sharp 4.3%. The decline subsequently affected the Nasdaq, as Apple accounts for 12.7% of the benchmark. The dismal results also weighed on the broader markets and the Technology Select Sector SPDR (XLK) dropped 0.4%. Among other technology stocks, Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL), Hewlett-Packard Company (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL) dropped 1.1%, 0.2%, 1.1% and 0.7%, respectively.
While the negative sentiment arising out of Apple’s earnings miss weighed on the markets, investors received another set of contrasting earnings reports. Market heavy-weight Caterpillar Inc. (NYSE:CAT) posted a stellar performance, not only storming past the Street’s estimates, but also raising its EPS estimates. Reported earnings soared 67% y/y, while revenues increased 22% from the year-ago quarter. Caterpillar also noted that the world economy is expected to grow by roughly 2.5% in 2012. Shares of Caterpillar gained 1.4%.
Also helping to improve the mood was the earnings beat by The Boeing Company (NYSE:BA). Earnings were well ahead of the Street estimates and also increased from the prior-year quarter. The largest aircraft manufacturer in the world in terms of revenues also upped its fiscal 2012 earnings per share guidance to within $4.40–$4.60. Further, the company expects revenues for 2012 in the range of $79.5 billion – $81.5 billion, up from its previous forecast of $78.0 billion–$80.0 billion. Boeing’s shares jumped 2.8%. Separately, PepsiCo, Inc. (NYSE:PEP) also came out with encouraging second quarter numbers and the shares gained 2.2%.
While investor sentiment tried to balance dismal and encouraging earnings numbers, the U.S. Department of Housing and Urban Development released disappointing housing data. According to the report, sales of new single-family houses dropped 8.4% from May to a seasonally adjusted annual rate of 350,000 in June 2012. Consensus estimates were expecting a figure of 369, 000. The report was a drag on the homebuilding segment and the SPDR S&P Homebuilders (XHB) dropped 1.0%. Among homebuilding stocks, Lennar Corporation (NYSE:LEN), KB Home (NYSE:KBH), M.D.C. Holdings, Inc. (NYSE:MDC), Beazer Homes USA, Inc. (NYSE:BZH) and PulteGroup, Inc. (NYSE:PHM) slumped 4.0%, 3.3%, 3.3%, 5.2% and 4.4%, respectively.