Evening Dow Report: Why Today's Drop Could Get Worse Tomorrow

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The Dow Jones Industrials (DJINDICES: ^DJI  ) proved unable to sustain positive momentum from two strong sessions earlier in the week, as concerns about earnings reports led to a pullback of almost 65 points for the average. Yet, looking at the prospects for Friday, reports after the bell from Intel (NASDAQ: INTC  ) and American Express (NYSE: AXP  ) could lead investors to become even more nervous about the young earnings season's progress so far.

Source: Intel.

Intel fell 0.5% during Thursday's regular session, but the stock plunged another 3% in the first hour of after-hours trading after the chipmaker posted mixed performance in its fourth-quarter report. Intel's revenue growth of 3% was slightly above the middle of the range that it had previously provided as guidance, with sales declines in the contracting PC client group division staying relatively subdued at just 4%. Yet, earnings came in $0.01 per share short of expectations, and even what CEO Brian Krzanich called "signs of stabilization in the PC segment" proved insufficient to give investors confidence in Intel's immediate future. The stock's response is another example of how shareholders have been disappointed by anything short of substantial outperformance so far this quarter.

American Express also dropped half a percent in the regular session, but its response to earnings was more positive, as shares rose 0.25% in the first hour of after-hours trading. The card company said that earnings more than doubled, with diluted earnings per share coming in at $1.21 per share. Even though that figure was $0.04 below expectations, the shortfall was largely due to legal costs related to its settlement of merchant litigation last month. AmEx saw cardmember spending levels gain 8% in a strong holiday season for the company and, in the long run, how its customers spend will be the biggest indicator of whether AmEx can grow as fast as its card-network rivals.

Finally, Johnson & Johnson (NYSE: JNJ  ) was little changed Thursday, falling 0.2% after announcing that Carlyle Group (NASDAQ: CG  ) had made a firm offer to buy its Ortho diagnostics unit for $4.15 billion. J&J had been looking at strategic options for the diagnostics business for some time, and while the company has until the end of March to accept the offer, J&J seems likely to accept the deal based on a statement from CEO Alex Gorsky. The move solves a problem for J&J, with Ortho having provided slower growth than J&J has seen in some better-performing segments. It makes it even more important for J&J's pharmaceutical division to provide the growth engine for the overall company going forward.

The No. 1 way to LOSE your wealth without ever even knowing it...
You've fought hard to build wealth for you and your family. Yet, one all-too-common pitfall could completely derail your dreams before you even know it. That's why a company The Economist hails as "an ethical oasis" has isolated five simple questions you must answer to ensure that your financial future is really secure.

Can you answer YES to all five of these eye-opening questions?
Click here to find out -- before it's too late!

 


Read/Post Comments (1) | Recommend This Article (2)

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.

  • Report this Comment On January 16, 2014, at 11:43 PM, SSchlesinger wrote:

    Intel is about to face a very aggressive pump and dump scheme. The stock went up 4% earlier this week in just one day with all sorts of glorious articles written about it.

    The problem is that the dump isn't going to be as grand as many are hoping with support at $25. I estimate the low will be (after a very nice downgrade early next week) of $24.50. Not $23.50 like what was common in the past. Unfortunately there is too much support for this stock now and the range play isn't as lucrative.

Add your comment.

DocumentId: 2798533, ~/Articles/ArticleHandler.aspx, 4/20/2014 12:39:33 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