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Stock Markets Sunk by Weak Earnings Reports

By Travis Hoium - Apr 17, 2013 at 3:33PM

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Misses by Intel and Bank of America didn't have investors in a buying mood today.

We're in the midst of a busy earnings week, and announcements between yesterday's close and today's open weren't particularly impressive to investors. That caused a broad sell-off, and the Dow Jones Industrial Average (^DJI -3.57%) is down 0.83% near the end of trading, while the S&P 500 (^GSPC -4.04%) is off 1.35%.

Intel (INTC -4.62%) reported a slightly disappointing quarter, with revenue falling 2% to $12.6 billion and earnings per share of $0.40 falling a penny below expectations. The PC business fell 6%, but that's not so bad, given the 14% decline in PC sales reported by IDC earlier this month. Growth in cloud computing helped push data center sales 7.5% higher on a big pickup in server demand. These weren't really impressive numbers, but the stock is up 0.6% today because they could have been much worse. There's still concern about the decline in the PC, but management kept its full-year guidance intact, which indicates a bullish outlook on growth markets like servers and mobile. 

All but four of the 30 Dow components are down today, and banking stocks are the hardest-hit. Bank of America (BAC -3.08%) has fallen 4.7% after first-quarter earnings missed estimates. The company reported $0.20 per share in net income -- $0.02 below estimates -- and revenue fell slightly. This sent shockwaves across the big banks, and Dow component JPMorgan Chase (JPM -1.71%) has dropped 3.3% in response. JPMorgan reported earnings last Friday that beat expectations, but the miss by Bank of America reminded investors that JPMorgan missed revenue estimates, and fear snuck back into the market.

Both banks are trading at forward P/E ratios of less than nine, so I think investors are looking a little too hard for flaws in the numbers today. Let's keep in mind that Bank of America is up 30.5% over the past year, even after today's drop, so long-term B of A investors are still reaping rewards.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,490.07 (-3.57%) $-1,164.52
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$3,923.68 (-4.04%) $-165.17
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$34.88 (-3.08%) $-1.11
Intel Corporation Stock Quote
Intel Corporation
INTC
$42.35 (-4.62%) $-2.05
JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
JPM
$120.09 (-1.71%) $-2.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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