Stock Market News for October 13, 2014 - Market News

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
 
The Dow Jones Industrial Average (DJI) declined 0.7%, or 115.15 points, to close at 16,544.10. The Standard & Poor 500 (S&P 500) decreased 1.2% to close at 1,906.13. The tech-laden Nasdaq Composite Index closed at 4,276.24; declining more than 2%. The fear-gauge CBOE Volatility Index (VIX) jumped 13.2% to settle at 21.24. A total of 9.2 billion shares were traded on Friday, higher than last five-day average of 7.4 billion. Decliners outpaced advancing stocks on the NYSE. For 77% stocks that declined, 21% advanced.
 
Technology sector was hit hard after Microchip Technology Inc. (MCHP) reduced its sales projection for the September quarter. Microchip also believes the sector had entered “another industry correction.”
 
Microchip forecasted its second quarter revenue for fiscal 2015 to be $546.2 million. Earlier, management provided net sales guidance for the second quarter between $560.0 million and $575.9 million. The drop in revenue expectations is mostly attributable to dismal sales figures in China. Shares of the semi-conductor maker plunged 12.3%.
 
Shares of rival chipmakers also took a beating. Shares of Avago Technologies Limited (AVGO), Intel Corporation (INTC) and Texas Instruments Inc. (TXN) plummeted 11.5%, 5.1% and 7.1%, respectively. The PHLX Semiconductor index decreased 6.9%, its biggest one-day percentage decline since January 2009.
 
Internet stocks also declined on Friday. Stocks such as Twitter, Inc. (TWTR), Facebook, Inc. (FB), Google Inc. (GOOGL), Groupon, Inc. (GRPN), Yelp, Inc. (YELP), LinkedIn Corporation (LNKD), Yahoo! Inc. (YHOO) and FireEye, Inc. (FEYE) decreased 8.8%, 3.9%, 2.7%, 6.9%, 5.1%, 3.8%, 3.7% and 4.1%, respectively. Overall, the Technology Select Sector SPDR (XLK) declined 2.6%, the highest among the S&P 500 sectors.
 
The SPDR S&P Homebuilders ETF (XHB) dropped 1.8%, the second highest among the S&P 500 sectors. Housing stocks such as Lennar Corp. (LEN), DR Horton Inc. (DHI), Toll Brothers Inc. (TOL), Beazer Homes USA Inc. (BZH) and PulteGroup, Inc. (PHM) decreased 3.4%, 3.9%, 2%, 3.5% and 4.8%, respectively. Overall, 8 out of 10 sectors of the S&P 500 ended in the red.
 
Separately, Tesla Motors, Inc. (TSLA) also saw heavy selling. Shares of the electric car maker tanked 7.8% after its latest Model S car failed to boost investor sentiment.
 
For the week, the S&P 500, the Dow and the Nasdaq decreased 3.1%, 2.7% and 4.4%, respectively.
 
Benchmarks ended in the red zone for the week as concerns about global growth particularly that of the Eurozone’s, dented investor sentiment. On Thursday, the Federal Statistics Office reported that exports in Germany plunged 5.8% in August, registering its biggest drop since early 2009. This disappointing report increased fears about recession in Europe’s biggest economy.
 
Germany’s industrial production and factory orders data, released earlier this week, were also disappointing. Germany’s economic ministry reported the country’s industrial production suffered 4% drop in August, its biggest fall in five and a half years. Additionally, factory orders dropped 5.7% in August, its biggest decline since 2009.
 
Investors also remained concerned about dismal economic data from China and Spain. A report released by HSBC/Markit showed that China’s services Purchasing Managers’ Index (PMI) declined from 54.1 in August to 53.5 in September. Separately, Spain’s statistics institute INE reported industrial output rose 0.6% in August on a year-over-year basis, less than the revised growth rate of 0.9% in July.
 
Worries about third quarter earnings results too dented investor sentiment. The overall trend in estimates has been on the lower side for third quarter earnings. The current 1.5% earnings growth expected for the S&P 500 index is down from close to 6% at the start of the quarter.
 
Separately, decline in oil prices dragged down energy stocks on Thursday. The WTI crude oil price dropped 1.8% to $85.77 per barrel, reaching its lowest level since Dec 2012.

Among the positives was assurance provided by Fed Minutes to investors that the central bank will be patient before hiking rates. This helped benchmarks end in the green zone on Wednesday.