NEW YORK (Reuters) - U.S. stocks closed lower on Friday in a broad consumer discretionary-led selloff after Visa and Amazon, a pair of closely watched bellwether names, reported disappointing results.
While the S&P 500 found support at its 14-day moving average, suggesting a recent positive trend in equities remains intact, the day's decline was enough to erase the benchmark index's gain for the week.
Earnings have largely been better than expected this season in terms of both profit and revenue. However, there have been high-profile disappointments, including Boeing Co and Caterpillar Inc earlier this week.
Amazon.com Inc tumbled 9.6 percent to $324.01 as the biggest drag on the S&P 500 after reporting an unexpectedly big second-quarter loss due to greater expenses on investments. About 17.8 million shares changed hands, nearly five times its 50-day average of 3.6 million.
The online retailer weighed down the consumer discretionary sector, which lost 1.2 percent.
Visa Inc was the Dow's largest decliner, down 3.6 percent to $214.77 after the world's largest credit and debit card company cut its revenue forecast for the year. As the costliest stock in the price-weighted index, Visa accounted for about half the Dow's drop.
"The earnings season overall has been in line (with analysts' estimates), but when companies with rich valuations disappoint, you're going to get crucified," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
"Amazon and Visa are significant components of the overall market and bellwethers of their respective industries. That gives you pause."
Only two of the 10 primary S&P 500 industry sectors were positive on the day. About 64 percent of stocks traded on both the New York Stock Exchange and Nasdaq ended the day lower.
The Dow Jones industrial average fell 123.23 points, or 0.72 percent, to 16,960.57, the S&P 500 lost 9.64 points, or 0.48 percent, to 1,978.34 and the Nasdaq Composite dropped 22.54 points, or 0.5 percent, to 4,449.56.
For the week, the Dow is down 0.8 percent, the S&P is flat and the Nasdaq is up 0.4 percent in its second straight weekly rise.
About 4.95 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 5.56 billion.
Starbucks fell 2.1 percent to $78.74 even as quarterly sales at established stores in its Americas region grew a stronger-than-expected 6 percent.
Pandora Media dropped 10 percent to $25.75 after it forecast adjusted profit below analysts' estimates for the current quarter.
On the upside, Baidu was up 11 percent to $226.50. China’s biggest Internet search company blew past Wall Street's targets with a 34.1 percent jump in quarterly net profit, helped by a surge in mobile revenue.
El Pollo Loco Holdings Inc shares surged 60 percent to $24.03 in their trading debut after the company's initial public offering was priced at the high end of an expected range. The stock was the biggest percentage gainer among Nasdaq stocks.
The market did not react to data showing orders for long-lasting U.S. manufactured goods rose more than expected in June, supporting hopes for a strong economic rebound in the second quarter.
Goldman Sachs downgraded its global allocation to equities to neutral on a short-term basis on Friday, even though the brokerage remained overweight stocks for the longer term, it said in a research note.
The firm said it was worried that a rise in rates would drive stocks lower over the next three months, adding: "We also expect the general pace of returns to slow compared to what we have seen in the last couple of years."
Goldman said the global acceleration in economic growth is "largely behind us and geopolitical risks are elevated." Still, it said equities were the most attractive class on a 12-month horizon "by a wide margin."
Equity markets worldwide have rallied steadily through the year. The MSCI All-World Index hit a record in early July, and has gained more than 5 percent in 2014.
Goldman noted that the gap between dividend yields and government bond yields remained high, which suggests more outperformance by the equity market.
Dividing the world up by regions, Goldman was overweight in Europe and Japan and underweight in the United States. When looking at specific sectors, the firm was high on growth industries - it has overweight ratings for technology stocks in the United States, Europe, Japan and Asia.