Tech Tanks As Investors Send S&P 500 To New Record Highs

Investors were not surprised by Detroit’s filing for Chapter 9 bankruptcy. After all, many of the automobile manufacturing plants are in other states these days, so it really does not represent a decline of the American auto industry. Investors also remained thick-skinned as the tech sector sank on Friday, following a number of earnings disappointments after Thursday’s closing bell. Earnings shortfalls by a number of tech giants sent the Nasdaq into the basement on Friday.

Microsoft (MSFT) sank 11.40 percent after reporting quarterly earnings per share of 59 cents on revenue of $19.9 billion, missing estimates of 75 cents per share on revenue of $20.73 billion.

Google (GOOG) fell 1.55 percent after reporting quarterly earnings of $9.56 per share on net revenue of $11.1 billion, falling short of estimates of $10.80 per share on net revenue of $11.4 billion.

American Micro Devices (AMD) took a 13.15 percent nosedive, despite reporting a “less bad than expected” quarterly loss of 9 cents per share on revenue of $1.16 billion, beating estimates of a 12-cent-per-share loss on revenue of $1.11 billion. A downgrade to “underperform” by Credit Suisse was compounded by another downgrade to “underweight” by Morgan Stanley to bring an unexpectedly hard hit to the chip manufacturer.

The Dow Jones Industrial Average (DIA) lost 4 points to finish Friday’s trading session at 15,543 for a 0.03 percent dip. The S&P 500 (SPY) advanced 0.16 percent to a new record-high of 1,692.09.

The Nasdaq 100 (QQQ) sank 1.07 percent to finish at 3,044. The Russell 2000 (IWM) edged upward by 0.02 percent to end the day at a new record-high close of 1,050.48.

In other major markets, oil (USO) advanced 0.29 percent to close at $38.45.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil declined by 25 cents (0.23 percent) to $108.45/bbl. (BNO).

August Gold Futures advanced by $10.90 (0.85 percent) to $1,295.10 per ounce (GLD).

Transports were stuck in first gear on Friday, with the Dow Jones Transportation Average (IYT) advancing 0.03 percent.

In Japan, stocks declined ahead of Sunday’s parliamentary election as the yen strengthened to 99.81 per dollar during Friday’s trading session in Tokyo. A stronger yen causes Japanese exports to be less competitively priced in foreign markets (FXY). The Nikkei 225 Stock Average sank 1.48 percent to 14,589 (EWJ).

Stocks fell in China as a result of increasing concerns about property tax hikes while the nation’s economic growth is slowing. The Shanghai Composite Index sank 1.52 percent to close at 1,992 (FXI). Nevertheless, Hong Kong’s Hang Seng Index advanced 0.08 percent to finish the session at 21,362 (EWH).

America’s Nasdaq Exchange was not alone in experiencing disappointment from the technology sector on Friday. The European stock market had a tough day as tech giants ARM Holdings and SAP AG dampened traders’ enthusiasm heading into the penultimate weekend before the entire continent goes on “holiday” (VGK).

The Euro STOXX 50 Index finished Friday’s session with a 0.07 percent decline to 2,716 – remaining above its 50-day moving average of 2,699. Its Relative Strength Index is 57.76 (FEZ).

Technical indicators reveal that the S&P 500 remained above its 50-day moving average of 1,639 after finishing Friday’s session with a 0.16 percent advance to its latest record-high close of 1,692.09. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index rose from 67.56 to 68.24. Both the MACD and the signal line continue to rise above the zero line, suggesting a continued advance.

For Friday, all sectors were in positive territory, except for the technology sector, which took a 1.70 percent nosedive and the consumer discretionary sector, which declined 0.08 percent. The energy sector led the group, with a gain of 1.39 percent.

Consumer Discretionary (XLY): -0.08%

Technology: (XLK): -1.70%

Industrials (XLI): +1.02%

Materials: (XLB): +0.65%

Energy (XLE): +1.39%

Financials: (XLF): +0.05%

Utilities (XLU): +0.03%

Health Care: (XLV): +1.32%

Consumer Staples (XLP): +0.58%

Bottom line: Strangely enough, the S&P 500 finished the trading session at a new record high and the Russell 2000 hit another record-high close on a day when the Nasdaq 100 got crushed by earnings disappointments from a number of tech giants, such as Microsoft and Google.

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