Stocks: Earnings Disappointment Ends Market’s Winning Streak

All good things must come to an end. And so it is with the S&P 500′s six-day winning streak, as AT&T (T), Intuitive Surgical (ISRG), International Game Technology (IGT), Amgen (AMGN) and Netflix (NFLX) helped lead the market lower.

Francesco Lastrucci for The Wall Street Journal

The S&P 500 fell 0.2% to 1,875.39 today, while the Dow Jones Industrial Average dropped 0.1% to 16,501.65. The Nasdaq Composite suffered the most damage, as it declined 0.8% to 4,126.97.

AT&T fell 3.8% to $34.92 today despite beating earnings forecasts and raising 2014 revenue guidance.

Intuitive Surgical slid 11% to $373.93 after it predicted disappointing sales for its robotic-surgery machines.

International Game Technology tumbled 10% to $12.62 after its profits fell by two-thirds and it lowered its full-year earnings guidance.

Amgen declined 5% to $113.32 after the biotech-giant missed earnings forecasts.

Netflix dropped 5.2% to $353.50 after Amazon.com (AMZN) struck a deal with HBO to show old episodes of the network’s shows.

Rhino Trading Partners’ Michael Block blamed the disappointing earnings from Amgen, AT&T and others, for the market weakness today:

From overnight we are seeing some significant growth names in tech and biotech…act poorly after guidance. This may hamper the relative and absolute bounce back in growth that we have seen over the past few days – at least for today. How that plays out going forward has everything to do with how the rest of the calendar goes this week.

Today’s housing data certainly didn’t do the market any favors either. Sales of new single-family homes fell 15% in March from February to an annual pace of 384,000, well below economist forecasts for 450,000. Much hand wringing ensued. Societe Generale’s Aneta Markowska, however, says not to worry:

Resale activity in the housing market has slowed noticeably since peaking in July 2013. Based on the data, it is easy to conclude that housing demand is rolling over, perhaps due to higher mortgage rates. Yet, this conclusion is out of synch with home prices which continue to appreciate rapidly and indeed show no sign of slowing. We believe that the answer to these seemingly diverging trends lies on the supply side. Measured as a percentage of the housing stock, total housing inventory – including shadow or pending supply – stands at the lowest level since 2005, when the housing boom was in full swing. While inventory shortages may be curtailing sales, they are unambiguously positive for residential construction and for the broader economy going forward.

Ned Davis Research’s Lance Stonecypher and Kathy Hartley are feeling better about the energy sector, which they upgraded to marketweight from underweight. They offer five reasons why:

„„Energy's relative performance has broken out above its 200-day moving average. „„ ETF flows positive in 8 of past 9 weeks. „Value-oriented sector with positive earnings surprises. „„Historically, has outperformed during market declines (83% of the time). „„Gains tailwinds in rising interest-rate environment (should rates start to back-up).