By DONALD H. GOLD, INVESTOR’S BUSINESS DAILY
Stocks sold off Friday as the morning’s brief optimism, fueled by a better-than-expected jobs report, simply ran out of gas.
The Nasdaq tumbled 1.3%, the Dow Jones industrial average lost 1.1% and the S&P 500 fell 0.9%. Volume fell on both exchanges, according to preliminary data.
The jobs report raised hopes that the economy was on the mend. But the opening’s gains couldn’t stick, and downside reversals cropped up among the major indexes, which had gained 0.4% or 0.5% within 20 minutes of the opening bell.
Cirrus Logic (CRUS) plunged 11% in heavy volume, adding to Thursday’s 11% drop, after Feltl & Co. downgraded the stock from hold to buy due to reduced growth prospects. The designer of chips for mobile devices reported Thursday that profit for the Sept.-ended quarter jumped 139% to 79 cents a share, much better than expected. Profit for the current quarter is expected to pick up further, to 149%. Sales in the most recent quarter jumped 91%, the best in nine quarters.
The stock had been forming a possible base, but the week’s 19% drop has marred the effort.
Vertex Pharmaceuticals (VRTX) plunged 11% in heavy volume after reporting Q3 earnings fell 81% and sales dropped 49%, both worse than the consensus estimate. Declining sales from its hepatitis C drug Incivek particularly hurt results, down 40% from year-ago levels.
The stock lost support at the 10-week average Oct. 12 and had been struggling to hold above the 40-week line since Oct. 22. Friday’s gap-down left it well below that moving average.
GNC Holdings (GNC) fell 4% to its 200-day line in fast trade. The nutritional supplements retailer also lost 4% Thursday despite a better-than-expected earnings report.
The stock’s Accumulation-Distribution Rating has fallen from B to C- over the past couple weeks, indicating that institutional investors are selling the shares.
Equinix (EQIX) climbed 3% in 2-1/2 times its average volume. But the stock had surged as much as 7% in the morning before the market’s undertow dragged down that gain.
The stock regained its 50-day line briefly, but then fell back below it. The operator of data centers said late Thursday that Q3 profit tripled from a year ago to 57 cents a share, just below expectations. Sales rose 20%, topping Wall Street forecasts.
Despite the strong Q3 profit growth, Equinix’s fundamentals are mixed. Its three-year sales growth rate is a respectable 32%, but its earnings growth rate over that span is just 20%. Also, annual pretax margin and return on equity are in the single digits.
Grand Canyon Education (LOPE) shot up 14% after reporting late Thursday its third-quarter sales and earnings easily cleared views. The for-profit educator gave Q4 and full-year sales and earnings guidance above forecasts.
The stock had slipped 5% below a 21.64 buy point after clearing a cup-with-handle base in September. Friday’s move put it above its Oct. 11 high and 13% above the buy point.