THE BIG PICTURE
Growth Stocks Slump As Market Retreats
BY JUAN CARLOS ARANCIBIA INVESTOR'S BUSINESS DAILY
A strong opening deteriorated throughout the session Thursday, leaving the stock market with losses and more leaders damaged.
The Nasdaq gave up 0.8%, double the 0.4% loss of the S&P 500. Volume grew slightly across the board, indicating that sellers still lurk about.
The Dow finished flat, tracing Exxon Mobil’s downward reversal. The oil giant got an early lead after reporting a 40% rise in second-quarter earnings. But shares closed down 0.13 to 66.47.
The closer you studied the market, the worse the action looked.
The midcap S&P 400 fell 1%, while the small-cap S&P 600 slumped 1.2%.
Leading stocks were shaken up, too, with several suffering sharp declines.
Baidu.com plunged 21% on heavy trading after the Chinabased Internet search engine’s second-quarter results failed to live up to lofty expectations.
Palomar Medical Technologies gapped down, closing 12% lower after the provider of laser equipment for skin fixes reported its second-quarter earnings.
Both stocks hadn’t been advancing much, but were holding up well during the market’s correction. Their sell-offs Thursday, plus weakness in other leaders, offered fresh evidence of the market’s malaise.
It also illustrates that growth stocks don’t make for a good shelter when the market is soft. While all stocks are speculative, the growth category is more susceptible to market nervousness.
While the market corrects, some money has moved to defensive sectors such as health care.
But even this area has risks. HMOs fell 5% Thursday after Aetna plummeted 17%. In giving out its second-quarter results, the company cited increasing costs from large claims and competitive pressures.
Meanwhile, new leadership remains elusive.
Regional banks became more prominent in the IBD 100 and Your Weekly Review (today on A6) in recent weeks.
But Nara Bancorp, which had been rising past a long consolidation, turned sharply lower Thursday. Shares fell 11%, slicing through the 50-day and 200-day moving averages after the small banking firm’s earnings came up short of expectations.
Columbia Banking System tumbled 10% after its quarterly results also missed estimates. The stock broke out June 29 but had slipped below its buy point.
The session did have some successes, though.
Core Laboratories shot up 15% after beating estimates. The stock broke out of a cup-with-handle base, although it was a late-stage pattern that offers a smaller chance of a meaningful advance. |
