Street stumbles after GE earnings shock
NEW YORK » Wall Street stumbled yesterday after a disappointing first-quarter report from General Electric Co.
surprised the market and stoked concern about the health of both corporate profits and the wider economy. The major indexes fell more than 2 percent, with the Dow Jones industrials giving up more than 250 points.
A weaker-than-expected reading showing consumer confidence at a 26-year low subdued any positive sentiment.
GE, which is regarded as a bellwether of big business, said its financial-services divisions have been challenged by the slowing U.S. economy and difficult capital markets. The company, whose orbit extends into entertainment, consumer and industrial manufacturing, finance and health care, also lowered its projections for the entire year.
The conglomerate is one of the early companies to post first-quarter results and its shortfall stirred worries that others still to report will paint a similarly dreary picture. The smaller-than-expected profits from GE injected anxiety into a market that earlier this week saw disappointing results from aluminum producer Alcoa Inc. and a warning from chip maker Advanced Micro Devices Inc.
"The market really is focusing on the extent to which problems in the credit markets are spilling over into the real economy," said Brian Gendreau, investment strategist for ING Investment Management in New York.
The Dow fell 256.56, or 2.04 percent, to 12,325.42. GE was by far the steepest decliner among the 30 stocks that comprise the Dow. Its shares dropped $4.70, or 13 percent, to $32.05.
Broader stock indicators also registered sizable losses. The Standard & Poor's 500 index fell 27.72, or 2.04 percent, to 1,332.83, and the Nasdaq composite index fell 61.46, or 2.6 percent, to 2,290.24. The Russell 2000 index of smaller companies fell 19.26, or 2.72 percent, to 688.16.
Declining issues outnumbered advancers by more than 3 to 1 on the New York Stock Exchange, where consolidated volume came to 3.59 billion shares compared with 3.60 billion shares traded Thursday.
Today's pullback followed a comparatively quiet week in which the major indexes showed modest adjustments. Stocks were little changed Monday, declined Tuesday following profit warnings from names like United Parcel Service Inc. and posted moderate gains Thursday following a drop in unemployment claims.
For the week, the Dow lost 2.3 percent, the S&P 500 declined 2.7 percent and the technology-heavy Nasdaq gave up 3.4 percent.
Bond prices rose yesterday as investors fearful of a slowing economy took up defensive positions in government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.48 percent in late trading from 3.55 percent late Thursday.
Light, sweet crude rose 3 cents to settle at $110.14 per barrel on the New York Mercantile Exchange. The dollar was mixed against other major currencies, while gold prices fell.
A snapshot of a gloomy consumer added to recent reports showing Americans' confidence in the economy at new lows, dragged down by worries about mounting job losses, record-high home foreclosures and zooming energy prices.
Investors fear that nervous shoppers will be less willing to reach into their wallets -- an unwelcome prospect as consumer spending accounts for about 70 percent of U.S. economic activity.
The preliminary Reuters/ University of Michigan index of consumer sentiment fell to 63.2 for April -- its lowest point since 1982 -- from 69.5 in March, according to Dow Jones Newswires. Economists polled by Thomson/IFR had, on average, expected a reading of 68.
Linda Duessel, a market strategist at Federated Investors in Pittsburgh, noted that GE is known for its dependability in meeting Wall Street's forecasts, and the nearly 6 percent drop in its profits suggest that other first-quarter results next week could reveal weakness well beyond the financial industry.
In other corporate news, Frontier Airlines Holdings Inc. which filed for bankruptcy protection yesterday, ended down $1.09, or 69 percent, at 48 cents.