GE's Earnings Miss Burns Market

Updated from 4:10 p.m. EDT

Wall Street ended the week on a sour note Friday after investors were socked by poor numbers from General Electric (GE Quote) and by a new survey suggesting a fresh drop in consumer confidence.

The Dow Jones Industrial Average tanked 256.56 points to 12,325.42, and the S&P 500 gave back 27.72 points to 1332.83, for losses of 2.04% apiece. The Nasdaq Composite slid 61.46 points, or 2.61%, to 2290.24.

Primarily thanks to today's tumble, all three equity measures were down sharply for the week: Over the past five sessions, the Dow lost 2.3%, the S&P dropped 2.7%, and the Nasdaq gave up 3.4%.

Before Friday's opening bell, GE, a component of the Dow and the world's second-largest company by market capitalization, said its first-quarter continuing-operations profit sank 8% to $4.4 billion, or 44 cents a share -- 7 cents a share under Wall Street's expectations -- largely due to its suffering financial-services operations. The company is widely considered a bellwether for the state of corporate America, and it rarely misses the mark, so the news came as a shock to traders.

GE also chopped down the full-year profit outlook that CEO Jeff Immelt had promised as recently as last month. Continuing-operations growth is now pegged to range from nil to 5%, down from the prior forecast for a 10% climb. Shares plunged 12.8% to $32.05.

The news set the tone for the day, and stocks' breadth was dismal. Roughly 3.67 billion shares changed hands on the New York Stock Exchange, and some 1.9 billion on the Nasdaq, as decliners trounced advancers 4 to 1.

Peter Cardillo, chief market strategist with Avalon Partners, believes GE's downward guidance was what really surprised investors, since the market has become more forward-looking in recent weeks. Still, he doesn't think the news is bleak enough to pull the market below its January low point. "The question is: Are we headed for the lower end of the trading range as earnings gets into full gear?" he said.

For most of 2008, the broad indices have been moving within a range bookended by lows established in January and highs reached in February.

"There was a naïve attitude toward GE beforehand, obviously," said Philip Roth, chief technical market strategist with Miller Tabak. "Why should people be so shocked about this? They're a financial company."

"Still, there's maybe more to this than meets the eye," Roth continued. He remarked that GE's numbers, which revealed global revenue rising 22% -- a robust figure, but well off the company's fourth-quarter spike of 27% -- could constitute evidence of decelerating international growth. If investors absorb that potential message, Roth said, the market could break below its January base.

"There's been no willingness to be believe in a global slowdown," he said, "and if that's what this message from GE means, that would be a big change for the market. I don't think we can make a bottom until fear of a global slowdown is priced in."

In another blow for investors, the University of Michigan's consumer sentiment index slid to a 26-year low of 63.2 this month from a March reading of 69.5. Economists had expected only a slight downtick to 69. The index's vital expectations number, a measure how Americans feel the economy will perform over the next few months, dropped nearly 7 points to 53.4 -- its lowest level since November 1990, when the U.S. was in the midst of recession.

Returning to corporate disappointments, after Thursday's market close Genentech (DNA Quote) reported that its key product, Avastin, generated lower sales in the first quarter what than the Street had expected. The numbers were better than last year, and the biotech company's bottom line beat estimates, but shares still slipped 1.6%.

BlackRock (BLK Quote) sank 5.9% after getting hit with downgrades to neutral-equivalent ratings at both Goldman Sachs and Wachovia. Both firms reasserted the health of the asset manager, but said the stock doesn't have much more upside potential.

Advanced Micro Devices (AMD Quote), meanwhile, said chief technology officer Phil Hester is resigning. Shares of the chipmaker shed 4.2%.

Elsewhere, American Airlines grounded roughly 600 more flights Friday in its fourth straight day of mass cancellations amid ongoing inspections of wiring in the company's MD-80 fleet. Parent company AMR (AMR Quote) moved down 4% after some mixed trading earlier.

At the same time, Frontier Airlines (FRNT Quote) took a 69% free fall after becoming the fourth airline in recent weeks to declare bankruptcy. The stock closed at 48 cents.

Back on the economic docket, the Labor Department said prices of imports, excluding oil, rose 1.1% in March, up from a revised February climb of 0.7%. Stripping out agricultural products, export prices spiked 1.2% last month, also compared with a revised 0.7% uptick in the prior month.