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Energy Wins, Stocks Lose

Lighter-than-expected earnings and surging crude pummel the major equity averages.
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Updated from 3:23 p.m. EST

One way to positively spin Friday's selloff is that energy wins again.

But for investors in other areas of the market, the mood wasn't nearly as cheerful. Another disappointing batch of high-profile earnings and another surge in the price of crude oil, which shot above $68 a barrel, combined to thrash the broad equity averages on the last trading day of the week.

Strong earnings from oil services firm


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should bode well for next week, when the integrated oil companies post their profits. The Philadelphia Oil Service Sector index rose 1.9%, and the Amex Oil index tacked on 0.1%.

Pretty much every other sector was in the red, and especially on the

Nasdaq Composite

, which plunged 54 points, or 2.4%, to 2248.

After the close Thursday,



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The disappointments weren't confined to the tech arena, though. Weaker-than-expected results at


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General Electric

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helped sink the

Dow Jones Industrial Average

213 points, or nearly 2%. Both are components of the 30-member Dow.

The damage to the

S&P 500

was mitigated somewhat thanks to the heavy representation of energy shares in the index, but the measure was still down 24 points, or 1.8%, to 1261.

Given the strong gains in the first two weeks of January, the dominating trend until this week was "people afraid of missing this rally and eager to jump in," says Phil Dow, director of equity strategy at RBC Dain Rauscher. "Now all these disappointments could weigh us down going forward," he says.

The strategist, however, says he plans to reserve judgment until after the close of trading to see if the market closes deep in negative territory or manages to display some of the resilience it did in the face of selling pressure earlier this week.

Weaker earnings and rising oil prices weren't the only factors behind the selling, as options expiration created volatility and technical issues came into play. The Dow, for instance, fell below its 10-week moving average of 10,828, according to Marc Pado, market strategist at Cantor Fitzgerald.

The Dow had held its ground Wednesday, rebounding somewhat in the afternoon after touching a low of 10,817 intraday. But "after we fell below that level convincingly (Friday morning), which is key for all the short-term traders, all those dominos started falling," Pado says.

The Nasdaq slipped below its 10-week moving average of 2250, while the S&P remained on the number at 1261.

Last week,


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set a dour tone for the manufacturing sector, and this week the more service-oriented side of the business universe failed to live up to its lofty expectations.

RBC's Dow believes the market's hopes are still resting on suppositions that earnings will show double-digit growth for the past quarter. Most of that growth though, will come once again from the energy sector. The good news, if buyers haven't been scared out of their wits yet, is that the sector reports next week.

In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

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