Tech slump leads US stocks back from records

By STEVE ROTHWELL,AP Markets Writer Updated at 2013-07-19 17:12:12 +0000


NEW YORK (AP) — It was a bad day for technology stocks Friday.

Stocks edged back from record levels, led by a slump in the technology sector after Microsoft and Google reported disappointing earnings.

Microsoft fell the most in more than four years after the company wrote off $900 million for expected losses on its Surface tablet and reported declining revenue for its Windows operating system. Google dropped after reporting revenue that fell below analysts' forecasts, partly because the Internet search leader's ad prices took an unexpected turn for the worse.

Chipmaker Advanced Micro Devices also released results that worried investors. The company's stock plunged 66 cents, or 14 percent, to $3.98 after announcing a second-quarter loss on lower revenue stemming from a worldwide slump in PC demand.

Technology "has definitely been a sector that people have been expecting big things from and it has not delivered," said Randy Frederick, Managing Director of Active Trading & Derivatives at the Schwab Center for Financial Research.

The Dow Jones industrial average fell 28 points, or 0.2 percent, to 15,518 as of 12:09 p.m. Eastern Daylight Time. The Standard & Poor's 500 index dropped two points, or 0.1 percent, to 1,687. The technology-heavy Nasdaq composite fell 30 points, or 0.8 percent, to 3,580.

The disappointing earnings from Microsoft and Google were preceded Thursday by poor results from Intel and eBay. Technology stocks in the S&P 500 have lagged the S&P 500 this year, gaining only 8.8 percent, while the broader index is up 18.4 percent.

Microsoft dropped $3.73, or 10.5 percent, to $32.32 after reporting its earnings late Thursday. That was its biggest one-day decline since the stock slumped 11 percent in January 2009. Google fell $11.50, or 1.3 percent, $898.50. It also posted earnings late Thursday.

The stock market is still up sharply in July after the Federal Reserve reassured investors that it won't pull back on its economic stimulus before the economy is strong enough. The U.S. central bank is currently buying $85 billion in bonds every month to keep long-term interest rates low and encourage borrowing and hiring.

The S&P 500 has gained 5.1 percent this month and is track to log its best month since October 2011, when it surged 10.7 percent.

In government bond trading, the yield on the 10-year Treasury note fell to 2.49 percent from 2.53 percent late Thursday. Ten-year Treasurys have risen, pushing their yield lower, since July 5 when the government reported strong hiring in June. The yield rose as high as 2.74 percent on that day.

The pullback in bond yields should help stocks sustain their rally because they now look cheaper compared to bonds, said Paul Zemsky, head of multi-asset strategies for ING U.S. Investment Management. Lower interest rates should also support the housing market and boost the economy.

"A lot of the fears that had come from these higher rates are abating," Zemsky said. "Rates have come back down and that's good."

The price of crude oil edged lower from its highest level in 16 months. Oil fell 47 cents, or 0.5 percent, to $107.32 a barrel. The price of gold climbed $10.60, or 0.8 percent, to $1,295 an ounce.

Among other stocks making big moves:

— General Electric rose $1.10, or 4.7 percent, to $24.70 after posting a slight gain in net income in the second quarter. GE also said its U.S. operations are picking up steam. The results were better than analysts had forecast.

— Chipotle Mexican Grill climbed $28.15, or 7.9 percent, to $404.70 after the Mexican fast-food chain reported results that beat analysts' expectations.

— Whirlpool surged $10.57, or 8.8 percent, $129.80 after its second-quarter net income soared 75 percent as demand improved for its appliances. Whirlpool also benefited from some tax credits.