Latest Earnings Cause Wall Street To Pause

Gerry Shih – Stocks were mixed Friday as broad market indexes finished slightly higher and the Nasdaq fell for the first time in 12 sessions, weighed down by disappointing results from Microsoft and Amazon.

The Dow Jones industrial average rose 23.95 points, or 0.26 percent, to 9,093.24. The broader Standard & Poor’s 500-stock index was 2.97 points, or 0.30 percent, higher at 979.26, while the Nasdaq was down 7.64 points, or 0.39 percent, at 1,965.96.

Shares of Microsoft, which announced a 29 percent decline in second-quarter profit on Thursday night, fell by 8.26 percent. The software giant blamed low business demand for its poor sales and said that Windows Vista, the operating system that the company had hoped would carry revenue, continued to struggle to gain customers.

Shares of Amazon fell by 8 percent after the company said that declines in video game sales and rising shipping costs pinched the bottom line.

The news from Microsoft and others was released after trading closed on Thursday and cast questions over whether the earlier string of better-than-expected reports might have led the markets a bit too much.

“Most of the profit surprises have come from cost-cutting or productivity enhancement, but the underlying comments the companies are giving are very cautious,” said Nick Kalivas of MF Global Research.

But Friday was bound to be an uneasy session, analysts said, as investors looked to sell shares and lock in profits from a two-week rally.

In the period from July 13 to Thursday, when the Dow closed above 9,000 for the first time since January, the index gained 10 percent.

“This has been a very powerful move,” Mr. Kalivas said, “so I think the market is ripe to consolidate itself.”

The market received no help from economic data Friday. Consumer confidence in the United States fell in late July to its lowest level since April on growing pessimism about the long-term economic outlook, especially about income and jobs, a survey showed.

The Reuters/University of Michigan Surveys of Consumers said its final July consumer sentiment reading fell to 66.0, from June’s 70.8, though it was slightly higher than economists’ median expectation for a reading of 65.0, according to a Reuters poll.

“People are a little more worried about the economy, especially over the labor market and what’s happening in Washington. It’s still consistent with the picture that the economy is bottoming out, but you are not going to get a big bounce in consumer spending,” said David Wyss, chief economist with Standard & Poor’s Ratings Services.

In the financial sector, two credit card issuers, American Express and Capital One, reported quarterly profit declines of about 50 percent on Thursday night. But shares of both companies shrugged off the reports and ended in positive territory, with Capital One gaining more than 8 percent.

Interest rates were steady. The Treasury’s benchmark 10-year note was unchanged at 95 20/32 and the yield held at 3.66 percent.

But concerns over the flood of supply in next week’s record $115 billion auction of government Treasury notes have been compounded by doubts about the timing of the sale when many bond dealers are away on holiday.

“Right now it’s dubious about who’s going to show up,” said Tom di Galoma, the head of fixed income rates trading at Guggenheim Partners.

But by far the biggest factor behind the bond market’s recent struggles has been the energized stock market. As investors continue to pull out of bonds to pursue higher equities returns, Mr. di Galoma said, yields will continue to rise.

Oil prices continued a three-week rally on Friday, rising to $68.05 a barrel on the New York Mercantile Exchange.