Poor earnings reports weigh on US stocks

The technology sector lost ground after an escalation in Yahoo’s dispute with Alibaba Group and a number of badly received earnings reports, helping to lead the wider markets into negative territory for the final session of a volatile week.

Yahoo slid 3.6 per cent to $16.55 after the group claimed that Alibaba, the Chinese e-commerce group, had sold one of its big assets without board or shareholder approval. Yahoo owns about 40 per cent of Alibaba.

These losses followed a 7.3 per cent drop in Yahoo shares on Wednesday after the original announcement that Alibaba had offloaded the fast-growing online payment unit. Alibaba Group has denied that it sold the asset without board approval.

Elsewhere in the sector, shares in Nvidia , the chipmaker, fell 10.9 per cent to $18.26 after its first-quarter results failed to impress investors. Shares in sector peer CA suffered a similar fate, dropping 8.6 per cent to $22.90 after its fourth-quarter results.

These losses left the S&P technology sector down 1.2 per cent, making it one of the worst performing sectors on Wall Street, and helped knock the S&P 500 down 0.8 per cent to 1,337.77. The benchmark index was down 0.2 per cent over the week.

Financial stocks also helped to drive the S&P 500 lower on Friday, as the sector suffered from renewed unease over the mounting debt crisis in Greece.

JPMorgan Chase was down 2.1 per cent to $43.15 while SunTrust Banks fell 2.2 per cent to $27.47. The S&P financial index, the worst performing sector on Wall Street, lost 1.5 per cent.

All this left the Dow Jones Industrial Average down 0.8 per cent to 12,595.52 and the tech-heavy Nasdaq Composite index 1.2 per cent lower at 2,828.47.

The Nasdaq was flat over the week and the Dow fell 0.3 per cent over the period.

Losses on Friday were limited by some upbeat data showing a rise in consumer confidence this month. The University of Michigan consumer sentiment index came in at 72.4 for May, a three-month high, as Americans turned more optimistic about the economy.

Separately, the consumer price index of inflation showed that prices had not risen dramatically in May, with the price of goods excluding food and energy gaining a modest 0.2 per cent.

The week on Wall Street began with strong gains as the markets recovered from 1.7 per cent losses in the previous week and sentiment continued to ride high following bumper official employment numbers on Friday.

“The jobs data on Friday were off the charts,” said Phil Orlando, chief equity strategist at Federated Investors, lifting sentiment on Wall Street for the first few days of the week.

But on Wednesday the rebound was derailed by a sharp drop in commodity prices, which dragged down the energy and material sectors. Energy and material stocks fell 3 per cent and 2.7 per cent respectively over the day, leading the benchmark S&P 500 index down 1.1 per cent to its worst one day drop in nearly two months.

This left the S&P energy index down 1.4 over the week and the materials index 1.9 per cent lower. Both indices are down 7 per cent and 5 per cent respectively so far in May.

Transportation stocks failed to rise during the week, despite a further fall in oil prices, indicating that investors were afraid that the high oil price could hurt economic growth.

The Dow Jones Transportation Average was 1.6 per cent lower over the week and the S&P airline index was 0.3 per cent lower.

“The real disappointment this week was that the fall in oil prices did not energise the markets outside the energy sector,” said Nick Kalivas, vice-president of financial research at MF Global.

Microsoft ’s $8.5bn acquisition of Skype was the big deal news of the week, and left shares in the technology group down 3.3 per cent to $25.03 over the five days.

Goldman Sachs shares fell 5.6 per cent over the week to $141.46 after Wall Street analysts said the bank could still face charges from the US Department of Justice for its conduct during the financial crisis.

Dick Bove of Rochdale Securities on Thursday dropped Goldman to “sell”, while Chris Maimone of Standard & Poor’s lowered his rating to “hold”.

Citigroup lost 8.1 per cent to $41.53 after putting into effect a one-for-10 reverse stock split on Monday.

These losses helped the S&P financial index drop 2.1 per cent over the week.

Elsewhere, Hertz made a $2.2bn offer for Dollar Thrifty, sending shares in the takeover target up 17.3 per cent to $81.83 over the week. Hertz fell 2.7 per cent to $16.39.