This Is the Reason the S&P 500 Couldn't Shake That Negative Feeling

The U.S. Commerce Department did its best to sugarcoat what's been a rather demure rebound in the U.S. economy since our deepest recession in seven decades. Third-quarter GDP topped economist's forecasts, and came in at a respectable 2%. However, as chief economist Davis Rosenberg noted, a good chunk of the growth came from increased government spending, which he finds unsustainable. He went on to call this the slowest growth we've seen in a thirteenth quarter since the end of World War II.

Apple (Nasdaq: AAPL  ) also stole the wind from investors' sails with a disappointing fourth-quarter report that saw the tech giant fall $0.08 short on EPS, as iPad sales dipped by 3 million from the third-quarter, and Mac sales trudged higher by a measly 0.7%. Furthermore, Apple was conservative, as usual, with its first-quarter guidance, falling well short of Wall Street's lofty expectations. Still, year-over-year iPhone sales advanced 57.6%, and Apple's cash flow is rivaled by very few. Keep your expectations realistic, and Apple will take care of long-term shareholders.

These two factors started the broad-based S&P 500 (INDEX: ^GSPC  ) higher, but wound up dragging the index down by 1.03 points (-0.07%), to end at 1,411.94.

Corporate earnings continue to be the primary reason for the increased volatility within the S&P 500, with eight companies moving in excess of 10% up or down on the day.

Leading the downside charge was registry domain company VeriSign (Nasdaq: VRSN  ) , which tumbled 15% on the day, after it noted that the Commerce Department was reviewing its registry agreement and may not conclude its review before its current agreement expires on Nov. 30. This particular contract was already approved by the Internet Corporation for Assigned Names and Numbers earlier this year. It allows VeriSign to operate databases that help in routing email and finding websites, but could become a major problem if it's not renewed in time. The company also reported a 32% increase in profits for the third quarter, but that hardly seemed relevant to investors today.

Goodyear Tire & Rubber (NYSE: GT  ) also went flat -- falling 10% -- following its third-quarter earnings results. Net income plummeted 32%, as weak spending in Europe, due to the sovereign debt crisis, more than outweighed pricing strength in its U.S. operations. Goodyear's management is still predicting $1.6 billion in operating income in 2013; however, it now says it'll rely less on Europe and more on the U.S. to get there. Personally, I feel Goodyear is an enticing value at these levels.

For today's feel-good story, we have online travel site Expedia (Nasdaq: EXPE  ) , which edged out Varian Medical Systems for best performer within the S&P 500 today by just 0.04% (+15.24% to +15.20%). Expedia has proven that hotel bookings are stronger than ever, as its revenue jumped 17% from the year-ago period, and was driven by Asia, the U.S., and Europe! Due to these strong results, research firm Benchmark upgraded Expedia to "buy" from "hold," and boosted its price target on the company to $67.

A game-changer?
Will the iPad Mini be a game-changer for Apple, or is it merely introducing a lower-margin product in an already crowded market? Find out the answer to this question, and much more, by getting your copy of our latest premium research report on Apple. Packed with in-depth analysis on the opportunities and threats facing Apple – 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.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2080058, ~/Articles/ArticleHandler.aspx, 10/21/2014 1:31:51 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement