Stocks Follow Alphabet, Amazon Lower; These 2 Chip Stocks Surge
Stocks fell hard at the starting bell Friday, as earnings news cut deep into tech leadership and a positive initial third-quarter GDP estimate failed to bolster investor confidence.
FANG stocks Amazon.com (AMZN) and Alphabet (GOOGL) led nosediving tech stocks after filing earnings reports late Thursday. Western Digital (WDC) crashed on its first-quarter report, dragging down arch rival Seagate Technology (STX). Cannabis stocks Tilray (TLRY), Cronos Group (CGC) and Canopy (CGC) were headed for steep weekly losses. And Mellanox Technologies (MLNX) stood out against chipmakers, spiking 14% on reports of possible takeover interest.
The Nasdaq Composite skidded 2.7% lower, dipping to near its low mark established on Wednesday. Western Digital and Seagate led the declines.
The S&P 500 futures dropped 1.6%. The Dow Jones industrial average was off 0.9%, bolstered somewhat by Intel's (INTC) 3% advance. Microsoft (MSFT) led the Dow's downside. Carpet maker Mohawk (MHK) and Western Digital fell hardest on the S&P 500 list.
GDP Growth Tops Views, Europe Trims Losses
Third-quarter gross domestic product increased 3.5%, according to the Commerce Department's initial estimate. That was down from a 4.2% gain in the second quarter, but above analyst forecasts for a 3.3% advance. The GDP Price Index inflation gauge climbed 1.7%, below the 2% target. Consumer spending surged 4%, above the second quarter's 3.8% jump and topping expectations for a slowdown to 3.3% growth.
Markets across Asia traded lower on Friday, but losses were generally mild. Hong Kong's Hang Seng fell furthest, down 1.1%. Markets in Europe took hard hits, but rose off their lows in afternoon trade. The CAC-40 in Paris eased to a 1.7% decline. Frankfurt's DAX pared its loss to 1.3%. London's FTSE 100 was down 1.2%.
Week's Action: Small Caps, 200-Day Lines In Focus
A week of wild trade sends the Dow going into Friday's session down 1.8% and trading 1% below its 200-day moving average. The S&P 500 shows a 2.5% loss and is 2% below its 200-day line as well as almost 9% below its Oct. 3 high.
Like the Dow, the Nasdaq is also down 1.8%. But it is 3% below its 200-day level, and nearly 12% below its Aug. 30 peak.
Small caps continue to be the market's weak spot, with the S&P Smallcap 600 starting Friday off 2.2% for the week, 6% below the 200-day line, and more than 14% off its August high. Another leading small-cap gauge, the Russell 2000, shows a 2.7% loss for the week. It is also down about 14% since August, and 7% below its 200-day moving average. Both the Russell and the S&P 600 have fallen in seven of the past eight weeks.
Amazon Stock Breaks Support
Amazon stock trimmed its early 9% loss to 7.7%. The company's third-quarter revenue came in narrowly below analyst targets and fourth-quarter revenue guidance was short of forecasts. But investors ignored third-quarter earnings growth of 1,006% — vs. estimates for a 504% gain.
Amazon stock gained 7.1% Thursday. Friday's premarket action suggested the stock was set to dive below its 40-week moving average for the first time since March 2016. Premarket moves often change dramatically at the start of regular trade.
Among other FANG stocks, Alphabet swooned 4.5%, also on a revenue miss, Netflix (NFLX) fell 3.8% and Facebook (FB) sagged 3.2%.
Friday's early reports also triggered early action,with Colgate-Palmolive (CL) tumbling 4.7%, Charter Communications (CHTR) down 5.3% and Goodyear Tire (GT) sliding 6.6% on quarterly results. Refiner Phillips 66 (PSX) was among the few early risers, up 3% after its third-quarter earnings easily topped analyst forecasts.
Intel Rises, Mellanox Leads Chip Stocks
Chip stocks were generally weak in early trade, despite a strong third-quarter report and outlook from Intel (INTC), after Thursday's close. Intel jumped 1.8% in premarket trading. Meanwhile, Nvidia (NVDA), Advanced Micro Devices (AMD) and Micron Technology (MU) all traded down more than 3%.
Data center tools developer Mellanox was the lonely standout. It spiked 13% after CNBC reported the Israel-based company had received takeover interest from at least two potential suitors. The company also reportedly had hired an adviser to explore sales options. Mellanox stock had spiked 10.3% Thursday after its third-quarter report and an analyst upgrade.
Western Digital Hurt By Flash Pricing
Data storage leader Western Digital careened 14% lower as two analysts downgraded the stock following its fiscal first-quarter report, delivered late Thursday. Earnings topped analyst estimates, but came in near the low-end of company guidance. Revenue fell more than expected, hurt by ongoing declines in flash memory pricing.
The early sentiment carried over the Western peer Seagate, which dived 8.8% in premarket trading. Western stock is down 49% from a March high.
Cannabis Stocks Extend Losses
Pot stocks were poised for a weak finish to an already tough week. Tilray slumped 2.8% in premarket action, after ending Thursday down 26.5% for the week. Cronos Group and Canopy Growth dimmed 2.6% and 3.2%, respectively. Both stocks ended Thursday down about 16% for the week. Aurora Cannabis (ACB) dived 5.2%, after racking up a 25% loss for the week through Thursday.
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