Major Averages Close Lower as Tech Giants Drag

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Tech heavyweights weighed on sentiment, and commodities felt a deeper crunch as oil and gold continued their steep declines Wednesday.

The Dow Jones Industrial Average was 68 points lower, or 0.38% to 17851. The S&P 500 shed 5 points, or 0.24% to 2114, while the Nasdaq Composite shed 36 points, or 0.70 % to 5171.

Today’s Markets

Tech juggernauts Apple (NASDAQ:APPL) and Microsoft (NASDAQ:MSFT) were among the main laggards on the Dow Wednesday after the companies revealed quarterly earnings that disappointed investors.

After the bell Tuesday, Apple unveiled headline results that beat forecasts, but it was the current-quarter outlook and a miss on some iPhone sales targets in the fiscal third quarter that had investors worried, and the stock plunging.

Apple said it sold 47.5 million iPhones during the quarter, but analysts had hoped for sales around 49 million. The iPhone sales figure was a 35% increase from the year-ago period, but a 22% drop from the company’s fiscal second quarter. No details were given on the company’s watch sales. As for its upcoming fiscal fourth quarter, the tech behemoth said it expects revenue to come in below estimates.

Apple shares closed the session 3% lower.

While investors shed their shares in the company, analysts at Cantor said despite the weak numbers they still considers Apple a buy.

“Apple is still in the midst of a transformational super cycle with the first new product category in five years with the Apple Watch, a multi-year iPhone cycle given the larger form factor, big momentum in China, potential new areas of innovation and a rapidly expanding digital matrix,” analysts wrote in a note.

Meanwhile, like its rival, despite a beat on the headline numbers, Microsoft booked a $3.2 billion net loss as it was hit with charges related to its Nokia phone business, job cuts and slowing demand for Windows.  The technology company’s shares ended down 3%.

Elsewhere on the corporate earnings front, Boeing (NYSE:BA) and Coca-Cola (NYSE:KO) were out with their latest results ahead of the bell Wednesday.

The aerospace giant handily beat Wall Street expectations with earnings per share of $1.62 on sales of $24.5 billion topping forecasts for $1.37 cents a share on revenue of $24.22 billion.

Coca-Cola also revealed a beat on both lines for the second quarter. Profits of 63 cents topped views by three cents, while revenue of $12.16 billion beat forecasts for $12.06 billion.

Boeing and Coca-Cola shares also climbed higher in recent action.

After the closing bell, investors were set for a peek at results from Qualcomm (NASDAQ:QCOM), Texas Instruments (NASDAQ:TXN), and American Express (NYSE:AXP).

Baker Hughes (NYSE:BHI) and Halliburton (NYSE:HAL) shares came under pressure late in the session Wednesday as concerns mounted over whether the merger between the two oilfield services companies would be approved by regulators. Regulators are reportedly concerned about antitrust issues, and that the industry would become too concentrated after the merger, Bloomberg News reported citing people familiar with the situation.

Both of the company’s shares tumbled during the session, but closed well off session lows.

The economic calendar remained light on Wednesday with existing home sales data that showed robust improvement in the housing market. Sales of existing single-family homes rose to an 8-1/2 year high, up 3.2% in June to an annualized rate of 5.49 million units, according to the National Association of Realtors. The reading was higher than the increase to 5.40 million units for the month Wall Street expected.

IHS U.S. economists Stephanie Karol and Kristin Reynolds called it a “solid report” in a note following the data’s release.

“The share of first-time buyers ticked down, but the level of first-time purchasing advanced 17.4% year-on-year – nothing to sneeze at…we expect headline existing home sales to surpass 5.5 million by the end of the year,” they noted.

In commodities, gold remained under pressure, extending its longest losing streak in more than 15 years as investors worry about when the Fed will begin to raise short-term interest rates and the impact of a stronger dollar. Investors are also leaving the safe-haven after intense worries surrounding Greece and its debt have subsided as the nation’s future in the eurozone looks to be in tact for now.

The precious metal continued to lose its luster, and settled at a new 52-week low. Gold fell 0.98% to $1,092 a troy ounce in recent action, on track for a tenth-consecutive day of declines.

U.S. crude oil prices, meanwhile, dropped 1.70%  to $49.15 a barrel. Brent, the international benchmark, also fell by 1.03% to $56.01 a barrel.

Larry Shover, chief investment officer at Solutions Funds Group, said volatility has tended to gravitate toward currencies and commodities as of late.

“The contrast and influence of a stronger U.S. economy and a Fed that is on the cusp of hiking rates while many other central banks are biased to ease further has promoted the ongoing themes of a strong dollar and weak commodities,” he said.

He added that the sharp move lower is also due to the darker side of mediocre economic growth, pointing to 2Q GDP expectations that have been revised lower in recent weeks and a global growth pace stuck near 2%.

“Low growth has been a boost to asset prices for the past five years as it lowered volatility and kept money easy. The benefit is becoming exhausted. Instead, I am becoming worried about low productivity growth and remaining pockets of leverage,” he said.

In currencies, the euro fell 0.27% against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note fell 0.019 of a percentage point to 2.324%. Bond yields move in the opposite direction of prices.

Elsewhere in the world, Asia markets were mixed. China’s Shanghai Composite index added 0.21%. Hong Kong’s Hang Seng lost 0.99%. Japan’s Nikkei slumped 1.19%.

The Euro Stoxx 50, which tracks large-cap companies in the eurozone fell 0.29%. Meanwhile, the German Dax declined 0.70%, the French CAC 40 was 0.46% lower, while the UK’s FTSE 100 shed 1.49%.