The week started off on a mixed note – with a range of global situations influencing the value of indices and stocks. Some of the struggles were the ongoing situation in the Middle East and the troublesome diplomatic dealings in the wake of Malaysian Air flight MH17 being shot down over eastern Ukraine last week. At their lows of the morning, the Dow, NASDAQ, and S&P 500 were down 126, 28, and 12 points, respectively. They would eventually rise against these losses, drawing encouragement from technical support holding at 1966 for the S&P 500 and a small sense of relief that remarks from President Obama did not include the imposition of any new sanctions against Russia. The week carried on with a range of activity in similar mixed fashion.
Then on Friday, the stock market ended the trading week with losses across the major averages. The S&P 500 fell 0.5% giving up its weekly gain, while the Dow Jones Industrial Average fell 0.7%. The two indices posted respective losses of 0.8% and 0.6% for the week. The Dow Jones Industrial Average dropped 123.23 points to close at 16,960.57, the NASDAQ fell 22.54 points to close at 4,449.56 and the S&P 500 fell 9.64 points to close at 1,978.34.
On Friday, indices were pressured from the start of the trading day after several companies disappointed the market with their earnings and/or guidance figures. After the opening slide was complete, the major averages began inching higher, but were knocked to fresh lows in short order when it was reported that European Council President Herman Van Rompuy suggested the next round of sanctions against Russia should target oil (but not gas) companies.
Dow Jones Industrial Average (July 21st – 25th, 2014)
The retreat in equities signaled the presence of underlying concerns that a new round of economic sanctions could have a larger impact on the global economy. Eight of ten sectors finished down in the U.S. with the consumer discretionary space (-1.2%) at the bottom of the pack. The sector and NASDAQ index were pressured (the NASDAQ fell by a factor of 0.5%) by shares of Amazon.com, which fell 9.7% in reaction to a bottom-line miss and cautious guidance.
Elsewhere among cyclical groups, the top-weighted S&P 500 sector-technology fell 0.2% and ended ahead of the broader market despite a 3.6% drop in Visa. The payment processor reported better than expected earnings, but its guidance was a point of concern for traders.
Even though the technology sector finished ahead of the broader market, other heavily-weighted sectors like energy (-0.8%) and financials (-0.6%) prevented the S&P 500 from experiencing an afternoon recovery. The financial sector settled just behind the S&P 500, which was fitting as both the economically-sensitive sector and the benchmark index ended the week unchanged. Participation was well below average on Friday with less than 558 million shares changing hands at the New York Stock Exchange.
On the economic front, the durable orders report for June surpassed estimates (up 0.7% versus analyst expectations of 0.3%), but shipments of goods declined 1.0%, which will be a negative for Q2 GDP.
Heading into Tuesday’s report, analysts expected Microsoft to post fiscal fourth-quarter earnings of $0.60 per share on revenue totaling $22.99 billion. On Tuesday, software giant Microsoft announced its quarterly figures noting that it missed analyst expectations with earnings of $0.55 per share on $23.38 billion in sales. This was despite posting strong fiscal third-quarter earnings back in April, which helped carry the positive sentiment we’ve seen since Satya Nadella took over as CEO. For the same quarter last year, Microsoft reported earnings of $0.59 per share on $19.89 billion in revenue.
Shares are now up about 12% over the past 12 months, having been given an extra boost when news leaked that Microsoft plans to eliminate 18,000 jobs, 12,500 of which will come from the Nokia devices and services business that Microsoft acquired recently.
The company also noted phone revenue for the first time or sales from the Nokia cell phone unit. During the fiscal fourth quarter, phone revenue came in at $1.99 billion. Also of note, Nokia’s devices business ended up lowering a few cents off of Microsoft’s fourth quarter earnings per share, while analysts expected it to add some profit. In all, the earnings don't seem to hold many big surprises — at least not compared to the massive layoffs it recently announced.
Microsoft (July 21st – 25th, 2014)
Stronger-than-expected PC demand helped Intel’s latest quarterly earnings, and it has also impacted Microsoft’s. Original Equipment Manufacturer (OEM) revenue for Windows increased by 3% this quarter, which showed that there was a decline of traditional PC sales that might be starting to slow down. Some of that increase is likely thanks to businesses refreshing their PC hardware as Windows XP entered end of support back in April.
As Microsoft battles to focus its efforts on mobile and the cloud, it is still attempting to push the Windows Phone platform. The company reported selling 5.8 million Lumia phones and 30.3 million non-Lumia phones following their acquisition.
Microsoft didn’t release details on Microsoft Surface sales. Many analysts suggest that it isn’t a major surprise as the company still refuses to provide sales figures, but Surface accounted for $409 million in revenue this quarter. Microsoft's decision not to ship its Surface Mini hit revenue for Surface overall. Elsewhere in hardware, Microsoft sold 1.1 million Xboxes during the quarter, though it did not specify how many were Xbox Ones and how many were Xbox 360s.
Microsoft continues to do well with its server and cloud offerings, both of which are increasingly important businesses for the company. Revenue has increased 11% to $13.48 billion overall. That's a mix of its Azure cloud service, Office 365 for business and enterprise, Windows volume licenses, and products like Exchange, SharePoint, and Lync.
For the week, Microsoft’s stock reached a weekly high of $45.37 on Wednesday after it started off the week at a weekly low of $44.32 on Monday.
Equities/indices: the Dow Jones Industrial Average had a bit of a rollercoaster ride of a week, as did most U.S. indices. Those that traded binary options based on the value of the Dow Jones on Monday morning through a binary call option would have been “in the money” by the afternoon of the same trading day.
EUR/USD: although it experienced some ups and downs, the euro was performing fairly well all week, until Friday came around. Those that traded binary options based on the value of this currency pair Friday morning through a binary put option would have experienced successful results by the afternoon of the same trading day.
Microsoft: after announcing its earnings results late on Tuesday, Microsoft’s stock briefly increased despite missing analyst overall expectations. Those that traded binary options based on the value of this stock first thing on Wednesday morning through a binary call option would have been “in the money” by late morning of the same trading day.
In the week ahead, a few economic announcements will be happening in the U.S. that the trading community will be keeping an eye on. On Tuesday, July 29th U.S. Consumer Confidence figures will be released. Then, on Thursday, July 31st U.S. jobless claims will be announced followed by consumer sentiment figures on Friday, August 1st. The U.S. Federal Open Market Committee will have a meeting next week as well. Many in the market will also be watching the situation in the Middle East and further sanctions being imposed on Russia in the week to come. If further sanctions are imposed by the U.S. or Europe, this could cause movement in a range of financial assets, including a rise in commodities such as oil as well as a decline in Russian stocks such as Gazprom.
A range of economic, political and corporate events happened during the course of the trading week. Economic data continues to be released across the global markets so the rest of July and August should present some interesting times for those of us in the trading community. It’s important to continue monitoring these financial news stories so you can identify binary options signals for your trades.
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