NEW YORK (TheStreet) -- U.S. stock markets plummeted on volatile trading Thursday as mixed earnings reports, concerns about the health of the European economy and financial sector and the wait for Friday's big nonfarm payrolls report rocked the global markets.
Amid the commotion, the bio-therapeutic drugs group was sparkling as Amarin (AMRN) flew 13.21%. The late-stage biopharmaceutical firm garnered a bullish report from TheStreet's Adam Feuerstein, who says that Amarin is expected to hear soon on an appeal to a top official at the FDA requesting a reversal of the agency's revocation of the Special Protocol Assessment (SPA) covering the phase III "ANCHOR" study of its prescription fish-oil pill Vascepa.
All the benchmark indices were down more than 1%, with the Dow Jones Industrial Average (DIA) sinking 1.88% to 16,563.30, the S&P 500 (^GSPC) tumbling 2% to 1,930.67, and the Nasdaq (QQQ) surrendering 2.09% to 4,369.77. The VIX "fear gauge" was spiking more than 27% to 16.98.
All the indices finished negative for the month, with the Dow in the red for the year.
Former Fed Chairman Alan Greenspan says that a big, much-awaited pullback is coming after numerous false starts. Greenspan told Bloomberg Television's Betty Liu on Wednesday that equity markets will see a decline at some point, after surging for the past several years.
"The stock market has recovered so sharply for so long, you have to assume somewhere along the line we will get a significant correction," said Greenspan.
Birinyi & Associates' founder and president Laszlo Birinyi says not to get too excited about bearish warnings on days such as these, demonstrating in this chart that there have been too many cases where gloomy bottom-line forecasts have been usurped by strong stock market performance:
Oil major ExxonMobil (XOM - Get Report) gave up 4.17% to $98.94 after its better-than-expected second-quarter earnings were tainted by a 5.7% drop in oil-equivalent production. Whole Foods (WFM) was another loser, with shares falling 2.25% to $38.23 after the Austin, Texas-based grocer reported disappointing quarterly same-store sales numbers and lowered its sales outlook yet again. Time Warner Cable (TWC) shed 4.17% to $145.10 after falling short of Wall Street targets with earnings of $1.89 a share on revenue of $5.73 billion. BorgWarner (BWA - Get Report) shares were down 3.49% to $62.25 after the automotive systems and components supplier announced a full year earnings forecast between $3.25 to $3.35 per share that fell short of analysts' expectations of $3.36 per diluted share.
Yum! Brands (YUM) was losing 5.21% to $69.20 after the restaurant operator said the scare over improper food handling practices by supplier Shanghai Husi resulted in a "significant, negative impact" to both KFC and Pizza Hut's same-store sales in China.
Samsung (SSNLF) and Sony (SNE) both suffered from a shrinking smartphone market. Sony's mobile devices unit said demand is expected to shrink by 14%, meaning that this year the company won't make money on smartphones. Samsung saw its share of the world smartphone market drop to 25.2%, a decline of 7 percentage points.
European stock indices fell on Thursday amid a plethora of earnings reports, as eurozone consumer price figures suggested aggressive central bank tactics haven't shaken off the specter of deflation. In Lisbon, Banco Espirito Santo BKESY shares plunged more than 40% as trading resumed. The company reported a bigger-than-expected loss of €3.6 billion ($4.8 billion) and fired the starting gun on an emergency capital raising after a key measure of the bank's financial strength fell below the regulatory minimum. Banco Espirito Santo said it might sell its international businesses. BNP Paribas BNPQY investors revealed a record €4.32 billion ($5.8 billion) quarterly loss because of the French bank's mammoth $9 billion fine for breaking U.S. sanctions.
U.S. stocks were mixed on Wednesday -- the Dow Jones Industrial Average down, the S&P 500 flat, and the Nasdaq up -- as the Federal Reserve maintained its federal funds rate and cut monthly bond buying by $10 billion to $25 billion, both moves largely anticipated by Wall Street.
Earlier upbeat sentiment regarding above-consensus rebound GDP figures quickly turned sour as it spurred anxiety that this would encourage the Fed to expedite its rate-tightening schedule. This cautiousness was dissipated by the subsequent FOMC statement, which implied that even though the Fed acknowledges the improvement in the economy and job market, rate hikes will remain a ways off and are not likely begin before the second quarter of 2015, noted Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ.
Before the opening bell, the Labor Department reported that initial jobless claims rose by 23,000 to 302,000 in the week of July 26. But the broader indicator of joblessness trends, the four-week claims average, fell to 297,250, the lowest level for this average since April 15, 2006. In addition, the prior weekly data point was revised lower to 279,000, the lowest reading since 2000.
-- Written by Andrea Tse in New York
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TheStreet Ratings team rates EXXON MOBIL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation: "We rate EXXON MOBIL CORP (XOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its attractive valuation levels, good cash flow from operations, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $15,103.00 million or 11.11% when compared to the same quarter last year. Despite an increase in cash flow, EXXON MOBIL CORP's average is still marginally south of the industry average growth rate of 16.72%.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- XOM's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that XOM's debt-to-equity ratio is low, the quick ratio, which is currently 0.55, displays a potential problem in covering short-term cash needs.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.5%. Since the same quarter one year prior, revenues slightly dropped by 2.1%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: XOM Ratings Report
TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation: "We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- This stock has managed to rise its share value by 83.68% over the past twelve months. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- TSLA's revenue growth trails the industry average of 21.5%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TESLA MOTORS INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TESLA MOTORS INC continued to lose money by earning -$0.71 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus -$0.71).
- Net operating cash flow has declined marginally to $60.64 million or 5.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 542.7% when compared to the same quarter one year ago, falling from $11.25 million to -$49.80 million.
You can view the full analysis from the report here: TSLA Ratings Report