Profit taking takes hold Friday despite strong results from the tech sector. The Dow (^DJI) lost 109.13 points, or 1.08 percent, to a level of 9,972.18. The S&P 500 (^SPX) fell 13.31 points, or 1.22 percent, to 1,079.60. The Nasdaq (^IXIC) gave up 10.82 points, or 0.50 percent, to 2,154.47. Volume was moderate on the session with the NYSE trading 1.26 billion shares and the Naz turning over 2.50 billion shares. Market breadth was negative on the session by a 7-to-23 and 6-to-21 margin on the Big Board and Naz respectively.

Amazon.com (AMZN) and Microsoft (MSFT) provided the bulls incentive to buy, but the bears ultimately controlled Friday's session. Even a better than expected existing home sales report did little to fend off profit taking heading into the weekend. For the week, the major market indices lost ground thanks to Friday's sell off, though losses were small.

AMZN was one of the best performers Friday as the online retailer saw its stock soar 26.8 percent to $118.49. AMZN blew past earnings estimates and raised its outlook for the fourth quarter. This was important; especially considering that eBay (EBAY) provided a disappointing outlook when it reported earlier in the week. In the past year, AMZN shares have gained 137 percent, hitting a new 52-week high today.

MSFT also reported strong fiscal first quarter results with earnings 8-cents better than expected at 40-cents a share. Revenues did fall 14.2 percent, but also exceeded estimates, helping push MSFZ shares higher by 5.38 percent to $28.02. This is a new 52-week high for the stock with shares up 30 percent this past year.

American Express (AXP) put downward pressure on the Dow with the stock down 4.97 percent to $34.63 Friday. The credit card company beat expectations in the third quarter, but traders were not in the mood to buy AXP shares. Part of this might have to do with the huge gains the stock has seen since the March lows when AXP was trading near $10.

Though AXP struggled, credit card company Capital One (COF) rose sharply following its results. COF shares gained 7.3 percent to a price of $41.13 after the company beat earnings estimates by 80-cents a share. Revenues rose 11.7 percent and also easily surpassed expectations. Back in March, COF shares hit a low of $7.80, so they too have seen huge gains in the past 7 months.

Existing home sales rose 9.4 percent in September to an annualized rate of 5.57 million units. Supply of existing homes fell to 7.8 months, down from 9.3 months in August. However, home prices continue to fall with the median price of an existing home off 1.4 percent to $174,900. The other concern is that distressed homes made up 29 percent of sales and unless the tax credit for first time buyers is extended, sales could plummet the last quarter of 2009.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

Visit Jody's Forum