End of Day Summary: Microsoft, Financials Spur Selling

Stocks fell as much as 4.3% after opening the session with broad-based weakness, but mustered a rebound that took the stock market back to the unchanged mark. The rebound was short lived, however, as stocks turned in a 1.5% loss.

The session's negative bias stemmed from the tech sector (-2.3%), where bellwether Microsoft (MSFT 17.11, -2.27) underscored sector concerns by posting disappointing quarterly earnings and revenue results. Microsoft indicated it will not offer an outlook for the balance of this fiscal year. Though that removes a reporting hurdle for management, it limits transparency into the company... Microsoft also announced it will eliminate up to 5,000 jobs.

Meanwhile, fellow tech giant and Dow component Intel (INTC 12.82, -0.44) announced last evening restructuring plans expected to affect between 5,000 and 6,000 employees. Apple (AAPL 88.36, +5.53) reported better-than-expected top and bottom line results for the latest quarter, but issued downside guidance. The company is typically overly cautious in its outlooks so the stock still traded higher.

Apple's performance provided support to the tech sector. However, its strength shouldn't be projected across the industry, given the company's uniqueness stemming from such products as the iPod and the iPhone. With competition in the mobile handset market tight and global economic conditions waning, Nokia (NOK 12.30, -1.41) fell to a multiyear low after reporting earnings results that missed expectations.

The mobile phone giant also gave a pessimistic outlook for industry volume. The Nasdaq Composite Index traded with steeper losses than the other headline indices, despite leadership from Apple. The disproportionate weakness was partly fueled by the presence of regional banks like Fifth Third (FITB 2.85, -1.14) and Popular Inc (BPOP 2.46, -2.52). Both banks reported steep losses and had their credit ratings downgraded.

Financials, overall, remain a primary point of weakness. The sector finished 5.8% lower, though it was down 8.5% at its session low. Aflac (AFL 22.90, -13.37) was the primary laggard in the financial sector this session. It was sent to multiyear lows amid concerns regarding its investments in hybrid securities.

Bank of America (BAC 5.71, -0.97) also traded as a laggard, falling more than 14%. This was the fifth straight session shares of BAC have gained or lost at least 10%. Reports indicated former Merrill Lynch boss John Thain will be leaving Bank of America, though he was the one that initiated a deal between the two companies.

Only the health care sector (+0.2%) finished the session with a gain. Its advance was supported by UnitedHealth (UNH 27.19, +2.14) and Baxter International (BAX 56.77, +1.30). UnitedHealth reported in-line results and offered an in-line outlook. Baxter, meanwhile, posted better-than-expected earnings for the latest quarter.

Glum economic data did little to revive optimism in the broader market. Initial claims for the week ending Jan. 17 jumped 62,000 to 589,000. The consensus estimate called for 543,000 claims. Continuing claims gained 97,000 to nearly 4.61 million. The level of claims reflects persistently weak labor conditions, and suggests another decline for monthly nonfarm payrolls. December housing starts totaled 550,000.

They were expected to total 605,000. Housing starts for December were at their worst level in decades. Meanwhile, December building permits totaled 549,000. The consensus estimate called for 600,000 building permits... Dow -1.3%... Nasdaq -2.8%... S&P 500 -1.5%... Nasdaq 100 -1.5%... S&P Midcap 400 -2.3%... Russell 2000 -3.1%.

Posted: 1/22/2009 4:47:20 PM by StockMarketFunding | with 0 comments

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