In sum, today reversed most of yesterday’s rumor-inspired gains since, afterall the rumor proved false. S&P futures are closing near their lows of the day with traders removing positions before the weekend. S&P futures closed down 1.25%, with DJIA losing 1% as well. 

Traders moved into the typical correlations with the decline in equities: Gold down 1.5%; Crude Oil down 0.75; US$ Index up 0.8%; 30-year bonds gained 0.8%; 10-year notes up 0.3%.

Looking ahead to next week, we’ll see earnings, earnings, and earnings. Citigroup (C) reports first thing Monday morning, with analysts expecting EPS of $1.01. Also, Monday morning, Charles Schwab (SCHW), Gannett (GCI), and Mattel (MAT) report.

Tuesday is when earnings really kick into gear with Coca-Cola, (KO), Goldman (GS), Harley-Davidson (HOG), Johnson & Johnson (JNJ), State Street (STT), U.S. Bancorp (USB), IBM (IBM), Intel (INTC), and Yahoo (YHOO) among a range of others. 

Below, check out the weekly performance among equities, commodities, bonds, and currencies:

– Gold +1.6%
– 30-year Bond +1%
– 10-year Note +0.4%
– US$ flat
– EUR flat
– Crude Oil -0.4%
– DJIA futures -1.3%
– S&P futures -1.6%
– NASDAQ -2%
– Natural Gas -4.8%

This afternoon, markets will keep one ear open to Chairman Bernanke’s comments, due out at any minute. We do not expect any fireworks there – but it is certainly possible.

In markets, S&P and DJIA futures are down 1%, while the NASDAQ futures have lost 1.3%. For the first time since December, Apple (AAPL) is negative for the third consecutive day, down 2.2% and below $610. Financials are really taking a brunt of the losses. JPMorgan (JPM) and Wells Fargo (WFC) reported earnings that were better-than-expected on the headline, but markets are not taking it as good news. WFC is down 2%, JPM losing 2.6%, and BAC, which reports April 19, is off 3.7%. 

Along with the decline in equities, the CBOE Volatility Index (VIX) is up 10% after a 14% decline yesterday. The US$ is also getting a bid from earlier levels, with EUR/USD falling from highs above 1.32 to 1.3080 currently. AUD, GBP, and NZD are also seeing similar declines against US$. 

Treasury markets are seeing a bid – 30-year bond prices are up 0.8% and 10-year note futures are up 0.5%.

Chart Glance: CSTR based at a $40.58 early this year, before starting a rally. CSTR closed above the Ichimoku cloud on January 24, but did not indicate a strong buy until it broke above a downward trend line that connects highs from November 2010 with July 2011 and October 2011, on February 12.

A close above $67.56, the high from November 2010, is key to further upside movement. 

Coinstar said increased revenue guidance was driven mainly by stronger than anticipated consumer demand at Redbox throughout the quarter. The company also raised its guidance for the full year 2012. Coinstar reported that popularity of movies, such as “Moneyball,” “Puss and Boots,” and “50/50,” as well as lower-than-expected card processing fees helped Q1 earnings. 

Crude is sitting on modest losses this morning – down 0.3% – and Natural Gas is flat on the session at $1.983.

Gold futures are also lower by 0.3%. 

More News and Notes:
– March Core CPI – the measure excluding the things that we actually spend money on – gained 2.3% Y-o-Y, according to data released today. Monthly, core CPI gained 0.2%, while the general CPI rose 0.3%

– University of Michigan Consumer Confidence will be released at 9:55 a.m. ET

– GOOG’s earnings had a lot more than met the eye. The company announced a 2:1 stock split, giving shareholders a new class of non-voting shares. In doing, GOOG founders Sergey Brin and Larry Paige cemented control of the company into the long-term

–  Apple (AAPL) responded to the Department of Justice’s lawsuit by claiming that it is “simply not true.” I’d put money that it will settle pretty quickly

– PetroChina (PTR) moved to Buy from Neutral: UBS

– Canadian Pacific (CP) moved to Buy from Neutral: Bank of America

Maybe. There is just too much uncertainty between now and the market’s open tomorrow for us to be confident.

Following the bell, Google (GOOG) reported earnings. Analysts were expecting revenue in the $8.15 billion range giving EPS of $9.65. GOOG reported earnings of $10.08 and revenue of $8.1 billion. Early reports suggest that GOOG might also do a 2-for-1 stock split. Investors are digesting the report, which is near the flat line in after-hours trading.

In addition, traders hopes are high for Chinese Q1 GDP, which will be released tonight. Whispers on the Street have GDP surprising to the upside and reading 9% vs. 8.4% expected. A print below 9% will likely see equity markets in the red come tomorrow morning. 

Tomorrow morning, earnings season continues with Wells Fargo (WFC) and JPMorgan (JPM) reporting. If those disappoint, financials could lead the broader market lower. If the opposite is true, markets could be set up to test recent highs early next week.

At this point, traders can only react to the news as it happens.

Peter Lynch Revisited
In one of the best investment books written of all time “One Up on Wall Street”, Peter Lynch discussed the problems that a lot of growth companies encounter as they begin to mature – Deworsification. Deworsification occurs when growth companies start to mature and they turn into cash flow companies. What the company chooses to do with this cash flow is extremely important. In Google’s case they have around $100 per share in cash.So far, in my opinion, Google hasn’t been good stewards of this cash. They make tons of small acquisitions but recently agreed to acquire Motorola Mobility. I’m puzzled as to where this acquisition fits into the core business of Google which is advertising.

The Winds Are a Blowin’
The biggest red flag for me as far as Google spending their cash wisely is the investments they are making in wind farms. They’ve made investments in wind farms in California and even more puzzling is the funding for an underwater ocean grid.
This isn’t a core business for Google…at all. With Motorola Mobility you can at least argue it may help them with mobile advertising but wind farms not so much.
Maybe the wind farm investments are of an altruistic nature but return the cash to the shareholders and let them invest in wind farms should they choose to do so.

Management Issues
Early on in the life cycle of a business it is good to have people at the helm who are visionaries and lead the company towards a future of growth. But once the company starts to mature a more disciplined approach is needed. For awhile Google had this with Eric Schmidt for 10 years. Schmidt helped build the corporate structure needed to see Google along its way. However with Schmidt gone and the founders back running the company it seems as if they are trying to get the innovative entrepreneurial spirit back.
While this is good for a small growing company, it seems to me as if it is causing Google to lose its way a little bit with some of these investments they are making.

The Future of Google
Google is the dominant search engine. They make a lot of money with their pay per click advertising system. This was a great growth engine while the internet was growing and people still had desktop PC’s. But Google hasn’t quite figured out how to monetize the mobile search and make it as profitable and dominate as they are accustomed to.
Facebook is also presenting a challenge for Google. While not a lot of people click on the ads in Facebook, it is eating at the margins of what Google is good at. Facebook has hundreds of millions of “eyeballs” every day and still counting. At some point Facebook will figure out how to monetize ads within its site and could really take a bite out of Google’s dominance.

Investment Conclusion
For me, I’ll just stay away from Google right now until I’m more comfortable with their business strategy and they become more shareholder friendly with their cash allocation decisions.
I don’t think the stock has a huge downside risk (other than market risk) but I don’t see a huge upside either.
Sometimes it’s best just to stay away.