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Tech drop snaps US stock winning streak

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(Globalpost/GlobalPost)

The latest easy-money pledges by the Federal Reserve have carried many stocks higher, but this week's performance by equities was not a comprehensive victory.

While two of the three main indices again closed the week higher, the tech-rich Nasdaq Composite Index came into focus following disappointing earnings results from Intel, Microsoft and other tech companies.

The Nasdaq closed at 3,587.61, down 12.47 (0.35 percent) from a week ago.

By contrast, the Dow Jones Industrial Average rose 79.44 (0.51 percent) to 15,543.74 over the course of the week.

The broad-based S&P 500 did better, advancing 11.90 (0.70 percent) to 1,692.09.

The Nasdaq losses capped a week that gave investors plenty to cheer.

While the news was heavy with economic indicators and corporate earnings, Fed Chairman Ben Bernanke took center stage with dual midweek appearances before congressional panels.

Bernanke's testimony followed recent remarks that had cast a long shadow over global markets: a June 19 press conference in which Bernanke seemed to suggest an end of the Fed's aggressive bond-buying program was imminent, and comments earlier this month that stressed the Fed would only scale back the program if the economy continues to improve.

Equities markets swooned and bond yields surged on the first appearance, while stocks soared on the latter.

This time, the markets did neither. The Fed chairman hewed close to the script of continued monetary accommodation, promising that there was "no preset" course on tapering the bond purchases and that the Fed would condition any shifts on economic data.

The message is "much clearer," said Art Hogan, a managing director at Lazard Capital Markets.

"Neutral is good," Hogan said of the market's muted reaction. "To have him come out and be benign to the market is I think a big positive."

Hogan rated the stream of economic data, which included a bullish reading on Philadelphia manufacturing activity, as "more good than bad."

Although retail sales and housing starts were weaker than forecast, the reports appeared to be one-off disappointments and not indicative of a trend, he said.

Markets were also cheered by the bulk of the earnings reports last week. Many banking stocks surged after financial giants like Bank of America, Morgan Stanley and Citigroup reported large profit increases.

While consumer loans continued to show weakness, some of the bank results showed a pick-up in corporate loans. That was a sign of an improving economy, said Chris Low, chief economist for FTN Financial.

"What it shows is that credit is gradually healing," Low said.

"I don't expect that the economy is going to gallop back to a sustainable level of growth until consumers are comfortable spending, just because consumers are the bulk of the economy. But it's nonetheless encouraging to see some corporations are doing a little better."

Reports from industrial companies, including Dow member General Electric, also gave the market a reason to smile. GE shares surged 4.6 percent Friday after chief executive Jeff Immelt described "strong growth" in the US and said Europe is "stabilizing but still challenged."

But disappointing results from some leading technology companies pushed the Nasdaq into negative territory Friday and generated concerns about companies exposed to the declining personal computer market.

The market hammered Microsoft, which fell 11.4 percent after the company missed earnings forecasts and announced a $900 million charge on its Surface tablet computer, where sales missed expectations.

Advanced Micro Devices also sank 13.2 percent after the chip maker reported a loss of 10 cents per share instead of the 2 cent-loss projected by Wall Street.

With a comparatively light schedule of economic reports next week, investors will key in on earnings. Several major companies report next week, including Apple, McDonald's, Boeing, General Motors and Caterpillar.

Markets will also look to the European Central Bank and other central banks now that the US Fed story has played out for now, said Michael Gayed, co-portfolio manager at ATAC Inflation Rotation Fund at Pension Partners.

"We're in this world where every investor is focused purely on the words of money printers. So if you're not going to have Bernanke talk anymore, time to focus the attention on other bankers that may print."

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http://www.globalpost.com/dispatch/news/afp/130719/tech-drop-snaps-us-stock-winning-streak