US stocks retreat from record highs after earnings disappoint

Share prices have fallen broadly on Wall Street today, as last night’s after-hours earnings from Google and Microsoft fell well short of expectations.

While the Dow and S&P 500 were setting fresh all-time highs yesterday, the NASDAQ was struggling, finishing down on the day. Today has been even worse for the tech-oriented index, with several leading technology stocks having reported earnings yesterday that disappointed the market in one way or another.

Software leader Microsoft has fallen close to 12% after missing estimates on both the earnings and revenue front, while Google dropped 1.8% after also failing to deliver earnings or revenue as high as analysts had forecast. The changing trends of online usage has impacted on Google’s revenue, with mobile ads yielding less when measured by cost per click, but double-digit percentage growth is still fairly impressive, and perhaps this is more a case of expectations having got a little over-blown.

Microsoft was a long way off meeting earnings expectations, but is itself facing the hurdle of a worldwide slowdown in pc sales. Despite this it managed to grow revenue substantially from a year ago. The company has a long way to go if it is to turn around its Surface tablet, which at the moment looks like a misstep.

The NASDAQ 100 was down 1.2% by mid-afternoon in New York. Microsoft is a component of the Dow and the S&P 500 as well as the NASDAQ and its dire performance today contributed to the drag on those indices, overshadowing a decent set of results from General Electric. The Dow lost 0.16% and the S&P 500 fell just 0.03%.

Just a day after hitting those record highs we now appear to be a critical juncture, with the first few big names companies this earnings season to post big misses. With Ben Bernanke moving out of the spotlight for the moment, it means that the focus of the market is now turned on individual company results. The pressure will be on to deliver, therefore, and next week is going to be just as busy on the earnings front as this one, with McDonald’s, Apple, AT&T, Facebook, Boeing, DuPont, Caterpillar and Amazon all due to report.

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