Tech slump leads US stocks back from records

NEW YORK (AP) It was a bad day for technology stocks Friday.

Major stock indexes, which are still at or close to record highs, were held back by a slump in the technology sector after Microsoft and Google reported disappointing earnings. Outside of the weakness in tech, the broader market was mixed.

Microsoft fell the most in more than four years after the company wrote off $900 million for expected losses on its Surface tablet and reported declining revenue for its Windows operating system. Google dropped after its revenue fell below analysts' forecasts, partly because the Internet search leader's ad prices took an unexpected turn lower.

Chipmaker Advanced Micro Devices also released results that worried investors. The company's stock plunged 69 cents, or 14.8 percent, to $3.95 after announcing a second-quarter loss on lower revenue stemming from a worldwide slump in PC demand.

Technology "has definitely been a sector that people have been expecting big things from and it has not delivered," said Randy Frederick, Managing Director of Active Trading & Derivatives at the Schwab Center for Financial Research.

The Dow Jones industrial average was down 13 points, or 0.1 percent, to 15,534 as of 2:24 p.m. (1824 GMT). If not for the declines in Microsoft and IBM, the Dow would be up 50 points.

The Standard & Poor's 500 index was up a point at 1,690.

The technology-heavy Nasdaq composite fell 28 points, or 0.8 percent, to 3,580. The index is the only one among the major stock market benchmarks set to end the week lower.

The disappointing earnings from Microsoft and Google were preceded Thursday by poor results from Intel and eBay. Technology stocks in the S&P 500 have lagged the S&P 500 this year, gaining only 8.8 percent, while the broader index is up 18.4 percent.

Microsoft dropped $4.11, or 11.5 percent, to $31.34 after reporting its earnings late Thursday, matching its biggest one-day decline since the stock slumped 11 percent in January 2009. Google fell $13.10, or 1.5 percent, $897.30. It also posted earnings late Thursday.

So far, 104 companies from the S&P 500 have reported earnings. Two-thirds of them have beaten analysts' expectations, according to S&P Capital IQ data. Just under half have exceeded analysts' forecast for revenue, suggesting a muted picture for demand.

The stock market is still up sharply in July after the Federal Reserve reassured investors that it won't pull back on its economic stimulus before the economy is strong enough. The U.S. central bank is currently buying $85 billion in bonds every month to keep long-term interest rates low and encourage borrowing and hiring.

The S&P 500 has gained 5.1 percent this month and is track to log its best month since October 2011, when it surged 10.7 percent.

In government bond trading, the yield on the 10-year Treasury note fell to 2.49 percent from 2.53 percent late Thursday. Ten-year Treasurys have risen, pushing their yield lower, since July 5 when the government reported strong hiring in June. The yield rose as high as 2.74 percent on that day.

The pullback in bond yields should help stocks sustain their rally because it makes them look more attractive compared to bonds, said Paul Zemsky, head of multi-asset strategies for ING U.S. Investment Management. Lower interest rates should also support the housing market and boost the economy.

"A lot of the fears that had come from these higher rates are abating," Zemsky said. "Rates have come back down and that's good."

The price of crude oil rose keeping it at its highest in 16 months. Oil rose $1.56 cents, or 1.5 percent, to $108.04 a barrel. The price of gold climbed $9.10, or 0.7 percent, to $1,293.50 an ounce.

Among other stocks making big moves:

General Electric rose $1.12, or 4.8 percent, to $24.75 after posting a slight gain in net income in the second quarter. GE also said its U.S. operations are picking up steam. The results were better than analysts had forecast.

Chipotle Mexican Grill climbed $30.53.15, or 8.1 percent, to $407.20 after the Mexican fast-food chain reported results that beat analysts' expectations.

Whirlpool surged $128.24, or 7.6 percent, $128.40 after its second-quarter net income soared 75 percent as demand improved for its appliances. Whirlpool also benefited from some tax credits.