(RTTNews) - With traders reacting to disappointing quarterly results from computer giant Dell (DELL) as well as some disappointing economic news, stocks saw considerable weakness on Friday after posting strong gains in each of the two previous sessions.

The weakness in the markets came after Dell reported second quarter earnings of $0.31 per share down from $0.33 per share in the previous year. Even excluding $0.02 per share in charges, the earnings still came in below analyst estimates of $0.36 per share.

At the same time, Dell warned that the slowdown in IT spending has extended into Western Europe and several countries in Asia.

Some negative sentiment was also generated by a report from the Commerce Department showing that personal income fell by 0.7 percent in July, far exceeding economist estimates of a decrease of about 0.2 percent.

A reduction in the amount of rebate checks sent out by the government as part of the economic stimulus plan contributed to the notable decrease in personal income in July.

While a sharp rise in the price of oil also contributed to some early weakness in the markets, the price of oil pulled back well off its highs and into the red, helping some stocks to move off their worst levels of the day.

Going into the close of trading, the major averages moved to the downside, with the Dow and the S&P 500 closing near their worst levels of the day. The Dow closed down 171.22 points or 1.5 percent at 11,543.96, the Nasdaq closed down 44.12 points or 1.8 percent at 2,367.52 and the S&P 500 closed down 17.85 points or 1.4 percent at 1,282.83.

The major averages subsequently turned in a mixed performance for the week, although they all closed higher for the month of August. The Dow ended the month up 1.5 percent, while the Nasdaq and the S&P 500 posted monthly gains of 1.8 percent and 1.2 percent, respectively.

Sector News

With Dell leading the way lower, notable weakness was visible in the computer hardware sector, as reflected by the 2.9 percent loss posted by the Amex Computer Hardware Index. Shares of Dell closed down 13.8 percent, at a nearly two-month closing low.

Most other technology stocks also came under pressure on the news out of Dell, with some disk drive stocks posting notable losses. The Amex Disk Drive Index closed down 2.7 percent, reflecting steep losses by Adaptec (ADPT) and SanDisk (SNDK).

Within the technology sector, some semiconductor, wireless, and software stocks also saw considerable weakness.

Utilities stocks turned in some of the market’s worst performances outside of the tech sector, resulting in a 1.8 percent loss by the Dow Jones Utilities Average. Duke Energy (DUK) and FirstEnergy (FE) turned in two of the sector’s worst performances.

While considerable weakness was also visible in the oil service, gold, and chemical sectors, selling pressure was somewhat subdued ahead of the Labor Day weekend.

On the other hand, some airline and railroad stocks bucked the downtrend, with the oil-sensitive airline sector benefiting from the pullback by the price of oil.

Dow Components

All of the Dow components ended Friday’s trading in negative territory, contributing to the steep loss by the blue chip index.

General Motors (GM) turned in one of the Dow’s worst performances, with the auto giant closing down 3.3 percent. Shares of GM have been more or less rangebound for the past month, lingering near a multi-decade low.

Shares of Coca-Cola (KO) also saw considerable weakness, ending the day down 2 percent at their worst closing level in almost a month. Merck (MRK), American Express (AXP), and General Electric (GE) were among the Dow’s other worst performers.

Reflecting the weakness in the tech sector, Intel (INTC) and IBM (IBM) also posted notable losses, ending the session down 3.1 percent and 2.3 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed higher on Friday, benefiting from the strength seen on Wall Street overnight. Japan’s benchmark Nikkei 225 index closed up 304.62 points or 2.4 percent at 13,073.

The major European markets also ended the day higher, although the German DAX index closed only slightly above the unchanged line. The French CAC 40 Index closed up 0.5 percent, while the U.K.’s FTSE 100 Index posted a 0.6 percent gain.

Meanwhile, treasuries ended an abbreviated trading day modestly lower after seeing some strength at the start of trading. The yield on the benchmark ten-year note subsequently closed up 1.8 basis points at 3.83 percent.

Looking Ahead

While the markets are closed on Monday, there are a number of key reports packed into the holiday-shortened week. Traders are likely to keep a particularly close eye on the Labor Department’s monthly employment report due to be released next Friday.

The employment report is expected to show that the economy lost jobs for the eighth consecutive month in August, with economists predicting a decrease of about 70,000 jobs. At the same time, the unemployment rate is expected to remain unchanged at 5.7 percent.

The Institute for Supply Management’s reports on activity in the manufacturing and service sectors are also likely to be in focus, along with reports on construction spending, factory orders, and labor productivity.

On the earnings front, Staples (SPLS), H&R Block (HRB), Ciena (CIEN), and National Semiconductor (NSM) are among the companies that are scheduled to release their quarterly results next week.

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Posted in Categories: Economy, Eurozone, Japan, Releases, USA.

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