Just as the markets were portraying a brighter economic picture with benchmarks touching psychological highs, indices suffered their sharpest one-day loss in six months on Friday. Investors’ jitteriness was fuelled by political turmoil in Egypt and slower-than expected US growth in the fourth quarter. Also among the reasons for the drag were weak earnings reports from Chevron (NYSE:CVX), Ford (NYSE:F), Microsoft (NYSE:MSFT) and Amazon (NYSE:AMZN).
Turmoil in the Middle-east due to the anti-government rioting in Egypt propelled the VIX to its highest level since December 2010. President Hosni Mubarak had to resort to sending troops and armored cars to control mass protests and street fighting. But even before stability could return to the region as a result of these actions, the event had already cast its adverse effects on the markets.
On the domestic front, the US gross domestic product rose lesser than expected in the fourth quarter. The GDP rose to a 3.2% annualized rate, which is otherwise a positive outcome, but fell short of the expected mark of 3.5%. However, some positives from the same report helped investors shrug off greater worries as sales numbers rose by 7.1% and consumer spending increased 4.1% at an annualized rate.
The Dow Jones Industrial Average declined 1.39% and closed at 11,823.70. The S&P 500 fell 1.79% and closed at 1,276.34. The Nasdaq slipped 2.48% and ended the day at 2,686.89. The CBOE Volatility Index (VIX) shot up 24.1% due to increased instability in the Middle East. On the New York Stock Exchange, volumes were higher than average with declining stocks outnumbering the advancing ones.
Some key stocks that swayed on earnings news included Microsoft (NASDAQ:MSFT) which fell 3.9% a day after the software company reported a marginal drop in quarterly profits. Ford Motor (NYSE:F) slumped 13.4% after the company reported an unexpected decline in its fourth quarter earnings due to rising costs in North America and losses in Europe along with special charges due to debt-reduction measures. Amazon.com (NASDAQ:AMZN) slipped 7.2%, despite the company reporting a 36% jump in fourth quarter sales, as it failed to meet the Street’s estimates on sales and operating margin. Monster Worldwide (NYSE:MWW) plummeted 25.4% after the company’s fourth-quarter revenues came in below the Street estimate while the first quarter outlook missed expectations.
Some key stocks that swayed on earnings news included Microsoft (NASDAQ:MSFT) which fell 3.9% a day after the software company reported a marginal drop in quarterly profits. Ford Motor (NYSE:F) slumped 13.4% after the company reported an unexpected decline in its fourth quarter earnings due to rising costs in North America and losses in Europe along with special charges due to debt-reduction measures. Amazon.com (NASDAQ:AMZN) slipped 7.2%, despite the company reporting a 36% jump in fourth quarter sales, as it failed to meet the Street’s estimates on sales and operating margin. Monster Worldwide (NYSE:MWW) plummeted 25.4% after the company’s fourth-quarter revenues came in below the Street estimate while the first quarter outlook missed expectations.
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