CLOSING WRAP-UP, Jan. 25
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January 25, 2007
Dow sees its worst loss of 2007, experiencing a triple digit decline. The Dow ($INDU) ended the session with a loss of 119.21 points to 12,502.56. The S&P 500 ($SPX) gave up 16.23 points to 1,423.90. The NASDAQ ($COMPQ) declined 32.04 points to close at 2,434.24. Volume was strong with the NYSE trading 1.75 billion shares and the Naz turning over 2.23 billion shares. Market breadth was very negative by a 8-to-25 and 9-to-21 ratio on the Big Board and Naz respectively.
The session boiled down to two issues: Earnings and existing home sales. The former was mixed with eBay (EBAY) and Nokia (NOK) announcing strong quarters. However, home builders saw sharply lower prices not only because of the home sales release, but due to a disappointing earnings release and outlook from Beazer Homes (BZH).
EBAY shares were able to tack on 8.2 percent despite a rough day for the overall market. The online auctioneer announced earnings that were above their prior internal forecast. Sales were strong at 29 percent growth with earnings up 24 percent.
BZH shares took a hit Thursday, with the home builder falling 5.6 percent. Not only did the company announce a loss in the quarter, but BZH executives stated that they see little proof that a recovery is in the works for the housing sector. This news took a toll on the housing stocks throughout the sector and the existing home sales data didn’t help either.
Existing home sales fell 0.8 percent in December to a level of 6.22 million annualized units. This was below estimates for a reading near 6.25 million units, although the decline was mild and the report actually used the words that there is a “bottoming out” in sales. For the year, existing home sales were down 8.4 percent from 2005 figures.
After the bell Thursday, software giant Microsoft (MSFT) announce earnings. Ahead of its report, MSFT shares fell 2.06 percent to close at $30.45. After the bell, the stock is up nearly two percent after exceeding analyst expectations for earnings and raising its full year profit outlook. MSFT did see a 28 percent drop in profits during the quarter due to the delays in its launch of its new Vista operating system and its Office 2007 software due out next week.
Earnings will continue to be a focus on Friday, but so will economic data in the form of the new homes sales release and durable goods orders. Traders will be looking for strength in new home sales to help offset the mild decline in existing home sales.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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