Today: Apple (AAPL) and Google (GOOG) end the week on a downslope ahead of their earnings reports next week. Also: The Standard & Poor's 500 and Dow Jones close at five-year highs, but tech stocks can't keep up.
Apple falls after report of cut in iPad components, Google down after blog post
Apple stock declined to exactly $500 Friday after another report of declining
Apple's closing price of $500 was fitting considering the news this week: Shares dipped below $500 for the first time since February on Monday, then closed lower than that level Tuesday. That dip was attributed to reports from the Wall Street Journal and Japan's Nikkei that the company had cut component orders for the iPhone due to weakening demand.
Apple rebounded Wednesday, but a new report Friday sent it back down to the $500 level: Reuters reported
The Reuters report was much more balanced than those early in the week, admitting that the decline could be from many factors that do not relate to consumer demand for the product, including seasonality: With the holiday shopping season complete, Apple will need fewer devices as sales slow down.
"The March quarter is almost always weaker than the December quarter," Sterne Agee analyst Shaw Wu told Reuters in explaining the most likely reason for the change.
However, Reuters also mentioned the possibility that the new iPad Mini cannibalized full-sized iPad sales in the fourth quarter, forcing Apple to pull back production of the larger model.
Google's losses arrived after the Mountain View search giant issued a blog post that informed investors and analysts that estimates of its quarterly earnings were incorrect due to a move made in December. In a blog post Friday, Treasurer and Chief Accountant Brent Callinicos said that the sale of Motorola Home in December means the company cannot count revenues and profits from that unit in its quarterly earnings report.
"As of this writing, a majority of Wall Street analysts who cover Google have not reflected the Home business as discontinued operations in their estimates," Callinicos wrote.
In its most recent earnings report, for the July-September quarter, Google reported that the Motorola Home business produced profits of $25 million on revenues of $797 million. That earnings report was disappointing to investors and analysts, as Google came in below their expectations; it was also embarrassing for the company, as contractor RR Donnelley accidentally filed the report hours early, releasing the information during the trading session instead of after the bell and sparking a sharp drop in Google's share price.
Google dropped 1 percent to $704.51 despite an upgrade by Nomura, a starker percentage decline than Apple's 0.5 percent fall. Both companies will have their response next week, when they release quarterly earnings: Google on Tuesday, Apple on Wednesday. For live coverage of those reports and other important earnings releases from Silicon Valley tech companies next week, go to www.siliconvalley.com at 1 p.m. Pacific time.
S&P, Dow hit five-year highs as investors cheer possible debt-ceiling deal
The drops in Apple and Google stock stood out because of gains in the rest of the market, as the Standard & Poor's 500 and Dow Jones indexes established new five-year highs Friday as non-tech companies such as Morgan Stanley and General Electric released strong earnings reports from banks and a Congress showed movement in debt ceiling talks.
The debt ceiling debate, which began in earnest after the long drama involving the fiscal cliff, seemed to ease Friday, as House Republicans offered a three-month extension that would allow the federal government to continue paying its bills during that time, in exchange for a budget from the Senate. The lower chamber of Congress is expected to vote on the deal next week.
"Anything that gets Congress to think about things and come up with a solution ahead of time provides some reassurance" to investors, Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp, told Bloomberg News.
"Don't forget that we still have substantial debt problems, the economy is still sluggish and companies are beating lowballed estimates. It's pretty early to be exuberant," he went on to caution.
Intel and other chip companies fall, Netflix rises after upgrade
The falls from Apple and Google were enough to keep tech stocks down overall, as the tech-heavy Nasdaq was the only one of the three major U.S. indexes to decline on the day, and the SV150 index of Silicon Valley's largest technology companies declined 0.5 percent.
One reason for that was the decline of semiconductor companies in the wake of Intel's (INTC) Thursday earnings report. Intel declined 6.3 percent and Sunnyvale rival Advanced Micro Devices plummeted 10.2 percent as investors punished chipmakers after they said Intel's plan to boost capital expenditures was unwise.
"We just do not see why Intel needs to spend massive amounts on capacity," Raymond James analyst Hans Mosesmann said.
The one outlier in the chip sector: Applied Material, which makes the equipment Intel will likely be buying, increased 2 percent.
Friday's positive movers included Netflix (NFLX), which gained 1.5 percent after Janney Capital analyst Tony Wible increased his rating of the company. The stock stayed below the $100 mark it topped at the end of last week, however, as Rich Tullo, director of research at Albert Fried & Co., said the Los Gatos company will face competition from Apple in the near future. Palo Alto Networks gained 1.6 percent after a Goldman Sachs analyst touted the Santa Clara company, and fellow market newcomer Splunk continued to gain amid reports that Oracle (ORCL) and IBM are bidding for it; Oracle gained 1.4 percent.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 1.29, or 0.04 percent, to 3,134.71 -%)
The blue chip Dow Jones industrial average: Up 53.68, or 0.39 percent, to 13,649.7
And the widely watched Standard & Poor's 500 index: Up 5.04, or 0.34 percent, to 1,485.98
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.