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Stocks End Week with Slight Gain; Microsoft Climbs on Ballmer Announcement

Dan Berman
Hot Stock Minute

Stocks ended the week modestly higher. But the big story of the day was not about direction. Instead investors remained fixated on yesterday's trading freeze on the Nasdaq. Officials with the exchange say the three-hour shutdown was caused by a connectivity issue with an exchange participant. An investigation is under way to make sure a repeat event doesn't occur.

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Microsoft (MSFT) closed up almost 8% on the announcement that CEO Steve Ballmer will be retiring within a year. "There is never a perfect time for this type of transition, but now is the right time," Ballmer said in a statement released by the company. Ballmer has served as Microsoft's CEO since 2000, when he replaced founder Bill Gates. So far no replacement has been named. Under Ballmer's helm, the company has lost considerable influence to other tech companies like Apple and Google. Two months ago it announced a restructuring plan. In his statement Ballmer said the company is moving in a new direction and needs a CEO that will be there for the longer term.

Gap (GPS) fell slighly despite an impressive quarterly earnings report. The clothing chain says profits were up 25% from a year ago. Earnings were 64-cents a share, exactly what was expected. Revenue came in at $3.87 billion, which was just a hair above the consensus. Same-store sales rose 5% from a year ago, plus the company raised its full-year earnings guidance and upped its dividend. All of this good news stems from a strategy to carry more brightly-colored clothing and make stores look livelier. Gap stock has been up 34% year-to-date which may explain why this impressive report didn't send the stock higher.

Teen retailer Aeropostale (ARO) tanked 20% on its earnings. That adds to a prior decline of 23% over the past month. The company reported an adjusted earnings loss of 34-cents a share, even worse than the expected loss of 24-cents a share. Revenue did manage to slightly exceed expectations at $454 million compared to $453.97 million, but the company's outlook is weak. In fact the only thing rising is the number of stores it plans to close. Aeropostale has been trying to offer trendier clothes, but so far the higher price tags seem to be turning people away. By the way, Aeropostale's larger competitor Abercrombie & Fitch (ANF) was down a whopping 17% yesterday on its own dismal report.

Footlocker (FL) stumbled 2% after the company reported profits of 46 cents a share excluding items, which was a penny below expectations. Revenue climbed to $1.45 billion; right in line with estimates. Same-store sales were up, but by only 1.8% which was weaker than expected. Still the company is maintaining its full-year forecast.

It's not just retailers feeling the pain after earnings. Internet radio service Pandora (P) beat the street posting adjusted earnings of 4-cents a share, twice the consensus on revenue that beat expectations. The service also claims is now has over 70 million active users. Still, shares closed down 12%. No stockholder likes to these kinds of declines, but keep in mind, before today shares were up 129% year-to-date. The reason for the drop is a weaker-than expected outlook for the coming quarter. There's also concern that the radio industry is changing too fast to know where it's actually going.