The usual store of worries -- election uncertainty, COVID's resurgence and stalled stimulus -- no doubt weighed large on investors during a broadly brutal Friday for U.S. equities.
But Big Tech gets a special nod for its role in dragging down the wider market.
Apple (AAPL) slightly topped earnings expectations, but shares slumped 5.6% amid a 20% decline in quarterly sales and a lack of forward-looking guidance.
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It wasn't all bad. "The bang-bang launches of iPad Air, Watch series 6, the service bundles, and the new 5G iPhones in autumn show that Apple is firing on all cylinders," writes Argus Research's Jim Kelleher (Buy, $150 price target), who adds that "the September iPad and Watch launch and the October iPhone launch should drive momentum for Apple products heading into the holiday season."
Facebook's (FB) top and bottom lines easily exceeded estimates, but a decline of 2 million users across North America triggered a 6.3% exodus from shares. And Amazon.com (AMZN)? A Street-beating 37% jump in revenues, and profits that were 67% better than estimates … but the stock sank 5.5% thanks to disappointing Q4 earnings estimates amid high COVID-related costs.
"None of Thursday's tech earnings results were bad, and some were spectacular," says David Bahnsen, chief investment officer of wealth management firm The Bahnsen Group, "but the market is reacting negatively because when something is priced for better-than-perfection, it becomes pretty hard to live up to those expectations."
Those reports and others helped drag the tech-heavy Nasdaq Composite 2.5% lower to 10,911. The Dow Jones Industrial Average enjoyed a late-afternoon rally that limited its losses, falling just 0.6% to 26,501.
The Pros' Picks: 9 Stocks to Sell Now
Other action in the stock market today:
- The S&P 500 declined 1.2% to 3,269.
- The small-cap Russell 2000 finished 1.5% lower to 1,590.
- Google parent Alphabet (GOOGL, +3.8%) was an exception from the pain in mega-cap tech and communications, as strong advertising growth helped it exceed Wall Street expectations. Earnings of $16.40 per share easily cleared Wall Street estimates for $11.29.
- Exxon Mobil (XOM, -1.1%) reported a nearly 30% decline in revenues and an 18-cent-per-share quarterly loss for Q3, though both the top and bottom lines were better than expected. The company's dividend, which some analysts believe is in danger of being cut, was maintained at 87 cents per share for the fourth quarter.
For Those Who Buy Dips ...
And thus ends the worst week for the markets since March, in what has been a downright dreadful lead-up to next week's elections.
The Nasdaq and Dow are both off 8.1% since Oct. 12, and the S&P 500 has dropped 7.5%. The latter's current level of 3,269 should be watched carefully -- if the index finishes near there or lower, that would bode poor things for the incumbent, at least based on one highly accurate market indicator.
But the low prices are becoming an increasingly sweet incentive for those investors who heeded warnings about high volatility around the election and kept some dry powder for the right opportunity. You could take a stab at growth via these seven small-cap tech plays, or seek out a balance of growth and stability via these 15 prime mid-cap opportunities.
Or you can really use lower prices to your advantage and squeeze higher yields out of the market's most aggressive dividend growth stocks. Analysts have recently highlighted a number of payout-hiking companies that have sweetened the pot by an average of 10% annually over the past half-decade -- and that level of dividend growth, over time, can give these stocks an advantage over more sluggish stocks with high current yields.
Kyle Woodley was long AAPL, AMZN and FB as of this writing.
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