This Is the Reason the S&P 500 Fell Yet Again

Going into today's Federal Reserve meeting, it was widely anticipated that we wouldn't hear anything new -- and the Fed didn't disappoint. Planning to stay the course, the Fed left the Fed Funds target rate unchanged at historically low levels and pledged to continue buying mortgage-backed securities indefinitely.

Without hearing anything new from the Fed, weak corporate earnings again took the spotlight and continued their assault on the broad-based S&P 500 (INDEX: ^GSPC  ) , sending the index down another 4.36 points (-0.31%) to end at 1,408.75.

As is common with earnings season, there was no shortage of losers or volatility, with nine companies falling 7% or more. Three of those names -- Newfield Exploration (NYSE: NFX  ) , Netflix (Nasdaq: NFLX  ) , and Corning (NYSE: GLW  ) -- were all crushed to the tune of 18%, 12%, and 9%, following dismal quarterly reports.

Oil and gas company Newfield traded precipitously lower throughout the day after reporting a profit of $0.48 for the third-quarter-$0.03 shy of estimates -- and $135 million in derivatives losses. As the Fool's energy expert Travis Hoium notes, Newfield's cautionary statement about falling international production when compounded with its derivative losses could be enough reason to avoid the company over the near term.

Online streaming and DVD company Netflix picked up right where it's left off in recent quarters: by disappointing investors. Although Netflix reported a quarterly profit of $0.13, which exceeded most estimates, that's down from a profit of $1.16 a year earlier. Netflix's DVD business continues to shrink, and it projects that higher content acquisition costs will push losses in its international operations higher in the upcoming quarter. Slowly but surely, it appears Netflix's dominance is waning with regard to streaming content.

Gorilla Glass producer Corning operates in a diverse set of businesses ranging telecom to life sciences, but none of them would be its saving grace today. Revenue for the quarter fell 2% to $2.04 billion, while EPS dipped to $0.35 from $0.51 in the previous year. Worse yet, Corning may take up to a $50 million restructuring charge to reduce its expenses, entailing a possible reduction in headcount as well. I still feel there's plenty of long-term value in Corning, but it's definitely difficult to see that beyond today's results.

If you need one ray of sunshine, look no further than Monster Beverage (Nasdaq: MNST  ) , which reversed its disastrous past two days into a 17% gain. The reason for the boost relates to its response to allegations that its Monster Energy drinks were the reason a 14-year old girl passed away in December. In a press release after the bell yesterday, Monster said that neither the science nor the facts presented would seem to indicate its drinks were the cause of anyone's death. I'm not sold on today's rally, however, and I think increased regulation could be right around the corner for the energy-drink industry.

Out of its cage?
Corning's Gorilla Glass appears to have been put back into its cage for now, but is it ripe for a rebound? Find out the answer to this question and much more by getting your copy of our latest premium research report on Corning. Packed with in-depth analysis on the opportunities and threats facing Corning -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term investing decisions. Click here to get your copy!

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Netflix and Corning. Motley Fool newsletter services have recommended buying shares of Netflix, Corning, and Monster Beverage, as well as creating a bear put ladder position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 24, 2012, at 9:10 PM, FundamentalsMan wrote:

    I'd say the presentation of NFLX here is a bit more negative than warranted. That's not to say that NFLX doesn't have it's issues or isn't highly speculative but to help balance things out, I thought I would provide a link to a more balanced presentation here:

    http://www.fool.com/reports/netflix-u.aspx

    All and all a great quick article.

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