U.S. Stocks Fall, Google Drops 9% on Missed Expectations

Bikram Pandey
18 Oct, 2012
New York City

U.S. indexes declined after the rise in weekly jobless claims was offset by the improved leading indicators index and Philadelphia region manufacturing. Google dropped as much as 10% after it reported weak revenues and earnings in earnings filings that were released during the trading hours.

[R]4:15 PM New York – U.S. indexes traded lower after the rise in weekly jobless claims was offset by the improved leading economic indicators index and Philadelphia region manufacturing. Google dropped as much as 10% after it reported weak revenues and earnings in earnings filings that were released during the trading hours.[/R]

U.S. indexes traded sideways after latest weekly jobless claims increase was offset by regional manufacturing data from the Philadelphia Fed and better than expected data on leading indicators.

Tech stocks were under pressure after unexpectedly Google ((GOOG)) earnings were released. Google dropped as much as 10% before being halted and resumed trading in the last forty minutes of trading session.

Google said R.R. Donnelley & Sons Co ((RRD)) released a draft of quarterly earnings for the regulatory filing without the company permission. Donnelley dropped 5%.

Google reported third quarter net income declined to $2.18 billion or $6.53 a share from $2.73 billion or $8.33 a share a year ago quarter. Revenues adjusted for traffic acquisition costs increased to $11.33 billion from $7.51 billion a year ago and adjusted profit was $9.03 a share.

What knocked the stock down was the decline in average cost-per-click declined 15% from a year ago period compared to market expectation of the fall of 6.8%.

Google has been losing ad spending from small businesses as the cost of keyword based ads keep rising and reached all time high for the top 1,000 key words tracked by the research staff at 123jump.com in the quarter.

Google earnings reflected first full quarter of Motorola Mobility acquisition and the results included operating loss of $527 million for the division.

The jobless claims soared 46,000 to 388,000 but the gain in claims was largely driven by the seasonal adjustment at the start of the quarter and a leading economic index rose in September.

In corporate news, Wesco agreed to acquire Canada-based EECOL for C$1.14 billion. Morgan Stanley slipped to quarterly loss but reported gains in its fixed income trading division and reportedly the company is also searching to sell its commodities brokerage arm.

The European indexes traded sideways ahead of the EU summit in Brussels. Spain raised €4.61 billion in a bond auction today at lower borrowing costs and bad loans at banks surged 10.5% in August. Cyprus rating was lowered by three notches.

French leading index climbed and Italian deficit narrowed in August. Swiss watch exports declined in September.

Nokia loss widens, Akzo Nobel swung to loss and Saab net plunged to SEK 151 million in the third quarter. Nestle nine-month sales rose 11% to Sfr67.6 billion. Remy Cointreau first-half sales were €595.8 million.

The UK indexes edged higher after retail sales rebounded in September. BP plans to sell its stake in TNK-BP. Kier Group completed the sale of its 50% stake in two private finance initiative projects for £5.4 million.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond increased to 1.82% and on 30-year bond gained to 3.00%.

The U.S. dollar inched higher to $1.306 to a euro and increased against the Japanese yen to 79.28 yen.

Immediate delivery futures of Texas crude oil decreased 17 cents to $91.95 a barrel and Brent crude fell 96 cents to $112.26, futures of natural gas increased 0.12 cents to $3.57 per mbtu and gasoline traded down 2.99 cents to 275.24 cents a gallon.

In metals trading, copper decreased 1.9 cents to $3.73 per pound, gold decreased $11.60 to $1,741.40 per ounce and silver decreased 5 cents to $32.75.