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Disappointing Earnings Drag Market Down07/25 16:35

   Investors got some bad news about the American shopper on Friday, driving 
down stocks and sending the Dow Jones industrial average to a loss for the week.

   NEW YORK (AP) --- Investors got some bad news about the American shopper on 
Friday, driving down stocks and sending the Dow Jones industrial average to a 
loss for the week.

   Two major U.S. companies --- the retail giant Amazon and the credit card 
processor Visa --- both said that the second half of the year was looking more 
troubled than originally expected. The cautious outlook from two companies so 
heavily exposed to consumer spending spooked investors, causing the stock 
market to fall at the open and remain lower throughout the day.

   "Visa put a lot of caution into the market this morning," said Quincy 
Krosby, a market strategist at Prudential Financial.

   The Dow dropped 123.23 points, or 0.7 percent, to 16,960.57. It's the first 
time the Dow has closed below the psychologically notable 17,000-point mark 
since July 9.

   The Standard & Poor's 500 fell 9.64 points, or 0.5 percent, to 1,978.34 and 
the Nasdaq composite fell 22.54 points, or 0.5 percent, to 4,449.56.

   With Friday's selling, the Dow fell 0.8 percent this week. The S&P 500 
closed basically unchanged and the Nasdaq rose 0.4 percent this week.

   Visa was the biggest decliner among the blue chips, falling $7.97, or 3.6 
percent, to $214.77. The credit card processor reported an 11 percent rise in 
quarterly profit but cut its full-year forecast on concerns about growth 
overseas.

   Because the Dow is a price-weighted index, and Visa is the most expensive 
stock in the Dow, Visa was having an outsized impact on it. Roughly 60 points 
of the Dow's decline can be attributed to Visa.

   Investors have closely watched Visa ever since the company went public in 
2008. Credit cards that use Visa's payment system are in nearly person's 
pocket, and each time a consumer buys a product with a Visa card the company 
takes a small percentage.

   To see Visa give a cautious outlook is worrisome, Krosby said.

   "Visa represents the consumer and the consumer is one of the most important 
pieces for the future of this economic recovery," she said.

   Amazon's quarterly results didn't help boost investor sentiment either.

   Amazon's stock slumped 10 percent after the online retail giant late 
Thursday posted a much wider loss than analysts had forecast, hit by expenses. 
The Seattle-based company is focused on spending the money it makes to expand 
into new areas and products, including a smartphone, the Fire, which starts 
selling Friday.

   Amazon fell $36.60 to close at $324.01, the biggest decliner in the S&P 500 
index.

   Investors retreated from riskier stocks and moved into traditional havens at 
times of uncertainty: bonds and gold. The yield on the 10-year Treasury note 
eased to 2.47 percent from 2.50 percent late Thursday as demand for the 
government bond rose. Gold climbed $12.50, or 1 percent, to $1,303.30 an ounce

   Despite the disappointing news from those consumer-focused companies, 
corporate earnings from the latest quarter have been solid. Of the 230 
companies that have reported so far, 76 percent have beaten profit expectations 
and 67 percent have beaten sales expectations, according to FactSet. So far the 
S&P 500 is averaging a 6.7 percent earnings growth this quarter compared to a 
year ago. Investors had expected earnings to be up 4.9 percent when the results 
started to roll in at the beginning of July.

   Even with Friday's declines, the stock market remains near all-time highs, 
and the S&P 500 closed at a record Thursday..

   That made some investors cautious.

   "I continue to see the level of complacency in the (stock) market to be 
unnerving," Scott Clemons, chief investment strategist at Brown Brothers 
Harriman, which manages $25 billion in assets for private investors. "All of 
this geopolitical tension, the market trading near all-time highs, I think the 
market is at a critical state right now."

   Clemons said he doesn't believe the market is poised for a major sell-off, 
but instead thinks investors should brace for more volatility and more 
heavy-handed reaction to disappointing earnings or data, like Friday's Amazon 
and Visa results.

   In other company news:

   --- Starbucks fell $1.71, or 2 percent, to $78.74, despite the company 
reporting a profit that came in above analysts' expectations. The company also 
raised its full-year profit forecast.

   --- El Pollo Loco surged $9.03, or 60 percent, to $24.03 on its first day of 
trading in the public market. The grilled chicken restaurant chain priced its 
shares at $15 per share late Thursday.


(KA)


 
 
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