Stocks end mixed; GOOGL, MSFT pounded
U.S. stocks finished mixed Friday as earnings misses last night from Microsoft and Google parent Alphabet doused optimism on Wall Street.
The Dow got a boost from a strong earnings report before the opening bell from fast-food play McDonald's while the Nasdaq was dragged down by underwhelming profit results from the two high-profile tech names.
The Dow Jones industrial average ended up 21 points, or 0.1%, while the Nasdaq composite slid 0.8%. The S&P was flat, ending up a trace.
Another big-name stock took a big drop, with Starbucks (SBUX) losing 4.9% as investors weren't happy with sales growth in the first three months of the year.
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Prior to the recent market hiccup, U.S. stocks had been in major rally mode, with the Dow and S&P 500 climbing within a percentage point of record highs notched last May. In addition to the tech earnings weakness, U.S. stocks have been hurt by a rise in the value of the U.S. dollar the past two trading sessions, as a higher dollar hurts sales and profits of U.S. companies that do a lot of business abroad.
The stumble on Wall Street to end the week has some Wall Street pros wondering if the market's strong run off of the lows on Feb. 11 has run its course.
"That was the question I fielded all day Thursday," Jeffrey Saut, a market strategist at Raymond James, admitted in a research note titled, "Was that it?"
His answer: "I am inclined to give the upside the benefit of the doubt." What would worrry him? Not two down days in a row, but four straight days of losses, he told clients.
Shares of McDonald's (MCD) ended down 0.2% to $125.50, as the maker of burgers, fries and breakfast meals posted an earnings beat and rise in same-store sales of 5.4% versus a year ago, boosted by the success of its all-day breakfast initiative.
Microsoft shares (MSFT) lost 7.2% after posting disappointing earnings Thursday night. Alphabet's (GOOGL) stock skidded 5.5% after the search engine's earnings miss.
"Given their size, (misses from Microsoft and Alphabet) is weighing heavily ... and will place more scrutiny on the earnings season," Jonathan Golub, chief U.S. market strategist at RBC Capital Markets, told clients in a note. The S&P 500 is on track for its third straight quarter of negative profit growth, which amounts to a so-called "earnings recession."
Despite the market's two-day relaspse, the earnings picture has improved. With 132 companies in the S&P 500 having reported earnings, the first-quarter proft contraction has been trimmed to -7.1%, which is better than a nearly 8% estimated drop a few weeks ago, according to data from earnings tracker Thomson Reuters. Nearly eight out of 10 companies (77%) in the S&P 500 have topped profit forecasts.
Also in earnings news, General Electric (GE) topped analysts' profit estimates by 2 cents, but shares fell 0.7%.
Adam Shell on Twitter: @adamshell.