Dow: 13,344, -205 (-1.52%) S&P 500: 1,433, -24 (-1.66%)
25 years ago the Dow had its biggest single day drop ever - aka Black Monday – and maybe it’s too many Paranormal Activity commercials on the airwaves these days, but investors were spooked by this ghost of trading sessions past. Instead of a creepy boy standing in the doorway pointing his finger at nothing in particular, investors saw a white collared financier clad in Gordon Gekko suspenders crying from the 22% drop in stock index on October 19th, 1987. It sure felt like some sort of “black” day today, as blue chips were releasing negative earnings reports from Microsoft to McDonalds. Although analysts bearish predictions for the 3rd quarter earnings season were finally true today, the Dow‘s 205 point drop today still means we’re in the green by a slim 0.11% this week. Hey, take what you can get and enjoy the homecoming kegs and eggs being served at college campuses across the U. S. & A. this weekend.
Microsoft Office sales fall, GE earnings miss estimates…
Microsoft (MSFT) led tech stocks down today after it fell 2.9% on missed earnings today. Their earnings felt the assault of Google as last quarter’s sales of Windows Office products dropped. Google has word processing, powerpoint, and excel for free on Google Drive (formerly Google Docs) as they continue to move Googlers all over the world into the “cloud.” While there are no drug addicts on the MarketSnacks team, we would rather spend our lives in Google’s cloud than drop $200 on Microsoft office. General Electric (GE), the American conglomerate of conglomerates, which makes microwaves, airplane engines and everything in between, fell 3.4% after it missed revenues estimates, even though profits were slightly up.
…And McDonalds earnings disappoint
McDondalds (MCD), a rock of the Dow that rarely has large price declines due to the world’s inelastic craving for BIG burgers (the “Modest Mac” didn’t go over well with most demographics) dropped a whopping 4.5% today as same store sales slowed in the home US market. During good economic times, MCD kills it cause people live large, and partying leads to late night food runs. During bad times, your boyfriend brings you to MCD for Valentines Day (hence McDonalds stock’s “defensive,” or “recession-proof” nature). MCD also suffered in international sales, which make up 2/3 of MCD’s income and the culprit is the strong US Dollar. When McDonalds sells a Große Mac in Germany, the euros it received this year were not worth as many dollars as last year cause the value of the Euro is way down and the dollar is way up. Today’s big drop was the largest in 3 years and Ronald McDonald is officially frowning, red lipstick and all.
European 2-day Summit ends, still no clarity on Spanish Bailout
What? A two-day European
vacation summit ended today? The MarketSnacks team has put Euro-news on the back burner the past few weeks as Spain continues to stubbornly wonder whether it needs a bailout (it clearly does). The uncertainty has caused European markets to suffer for weeks and today the sentiment crossed into American markets. The Spanish prime minister knows that he can ask the ECB to purchase its bonds, relieve it of the high interest rates it’s paying (i.e. high bond yields), and secure funding to continue paying the bills. But a request for bailout comes with austerity conditions that Spain’s poor and unemployed populace hardly needs right now. Despite pressure from European leaders, Spain and Spain alone must make a bailout request and the uncertainty is killing everyone.
- Chipotle (CMG), the American ambassador of burritos & guac, fell 15% today after downright awful earnings, validating star stock picker David Einhorn’s October 2nd “Sell” suggestion of the stock. Bold action is needed by Chipotle management or Taco Bell will be the only faux-mexican restaurant offering in these United States…
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