U.S. Stocks Drop for Week as Technology Selloff Resumes

U.S. stocks declined for the week, with benchmark indexes erasing gains in the final session, as disappointing results from Amazon.com Inc. triggered a selloff in technology shares and tensions over Ukraine climbed.

Amazon dropped 6.5 percent after predicting an operating loss in the current quarter, contributing to a 0.5 percent slide in the Nasdaq Composite Index. Visa Inc. lost 4.3 percent as revenue fell short of targets. Phone stocks sank on concerns that price competition will hurt future profits. Apple Inc. jumped 9 percent for its best week since August as the company sold more iPhones than forecast. Allergan Inc. surged 26 percent after Valeant Pharmaceuticals International Inc. offered to merge with the maker of the Botox wrinkle treatment.

The Standard & Poor’s 500 Index (SPX) slipped 0.1 percent to 1,863.40 in the week, following its best rally since July. The Dow Jones Industrial Average lost 47.08 points, or 0.3 percent, to 16,361.46. The Russell 200 Index of small companies sank 1.3 percent.

“There’s uncertainty in the market right now over whether valuations are realistic in a lot of the technology companies,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a phone interview April 25. “The geopolitical risk, particularly in the Ukraine, is a headwind, and if the markets are weak, it’s easy to take profits in stocks that have had a big run.”

Busiest Week

The period marked the busiest week of the first-quarter reporting season, as one-third of S&P 500 members, including 11 Dow components, disclosed results. Of the 239 companies in the S&P 500 to post earnings so far, 75 percent have topped profit estimates while 53 percent have surpassed sales targets.

The benchmark for U.S. equities rose the first two sessions of the week, capping a six-day rally that added 3.5 percent to the index as earnings beat estimates and Federal Reserve Chair Janet Yellen reiterated the bank’s commitment to supporting the economy. Fed officials begin a two-day policy meeting on April 29.

While the S&P 500 advanced during the week to within six points of its record of 1,890.9 from April 2, U.S. stocks have repeatedly failed to climb from current levels. The gauge trades at 17 times reported earnings, near its highest valuation in four years. That’s about half the level for components in the Nasdaq Composite.

While the Nasdaq Composite jumped 2.4 percent in the previous week, the gauge has dropped 6.5 percent since reaching a 14-year high on March 5.

Losses in the week were heaviest in Internet and technology companies that have posted the biggest gains of the five-year bull market. Yahoo! Inc., which doubled in 2013, and TripAdvisor Inc., which jumped 98 percent, slid more than 5 percent.

Geopolitical Tension

Geopolitical tensions contributed to the final-day selloff, after U.S. Secretary of State John Kerry warned Russian President Vladimir Putin he’s running out of time to ease tension in Ukraine as Russia began new military exercises on the country’s border. Kerry said it will be “an expensive mistake” if Putin does not meet commitments made at a meeting in Geneva.

Data during the week showed U.S. orders for durable goods rose more than forecast in March, while more Americans than estimated filed applications for unemployment benefits. Sales of new homes unexpectedly declined in March to the lowest level in eight months, and existing-home sales dropped for a third month.

The Chicago Board Options Exchange Volatility Index climbed 5.2 percent to 14.06, with most of the advance coming during the final session. The measure of volatility known as the VIX fell the most since January in the prior week.

Wireless Plans

Six of the 10 main industries in the S&P 500 retreated in the latest week. Phone stocks sank 3.6 percent to lead losses, as Verizon Communications Inc. and AT&T Inc. dropped on concern that a surge of customers opting to pay for smartphones on installment plans threatens to shrink monthly bills and lower future profit.

Verizon plunged 3.5 percent to $45.94, its worst week in almost a year, and AT&T sank 4.3 percent to $34.49. The looming shift in revenue cast a shadow on both carriers’ better-than-forecast results.

Visa, the Dow’s largest component, slid 4.3 percent to $198.93. The world’s biggest bank-card network posted revenue below estimates and said sanctions against Russia could crimp profit this year.

Pouring Cash

Amazon dropped 6.5 percent to $303.83, the lowest since October. The world’s largest online retailer is pouring cash into warehouses to speed shipments, while adding new services like a grocery-delivery program and a TV set-top box for streaming movies and shows to compete with Netflix Inc. and Apple. (AAPL)

Netflix sank 6.8 percent to $322.08. The company behind the drama “House of Cards” plunged after Amazon reached a deal with Time Warner Inc.’s HBO network to stream select TV shows online -- exclusive programs that Netflix doesn’t have. Netflix rallied 7 percent on April 22 after reporting profit and subscriber growth that beat analysts’ forecasts.

Apple surged 9 percent to $571.94, the highest level since 2012. Apple reported surging sales of iPhones after the handset became available through China Mobile Ltd. The world’s most valuable company also said it will increase its share repurchase authorization by $30 billion, boost its dividend and split its stock seven for one.

Allergan jumped 26 percent to $168.15. Valeant proposed to buy it for about $48 billion in the Canadian company’s plan to become one of the world’s largest drugmakers. Valeant’s U.S.- listed shares climbed 9.6 percent to $133.73.

Mylan Inc. rallied 11 percent to $52.10. The biggest U.S. maker of generic medicines raised its offer for Swedish drugmaker Meda AB to about 43.8 billion Swedish kronor ($6.7 billion), people with knowledge of the matter said.

Zimmer Holdings Inc. surged 11 percent to $100.54. The maker of artificial joints agreed to buy rival orthopedic-device maker Biomet Inc. in a cash-and-stock deal valued at $13.4 billion.

To contact the reporters on this story: Callie Bost in New York at cbost2@bloomberg.net; Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Jeff Sutherland

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