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) - Get Report
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)
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
, but shares still slipped 1.6%.
BlackRock
(BLK) - Get Report
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) - Get Report
, meanwhile, said chief technology officer Phil Hester is
. 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)
moved down 4% after some mixed trading earlier.
At the same time,
Frontier Airlines
(FRNT)
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.
As for notable analyst calls, Bernstein cut
Hershey
(HSY) - Get Report
to underperform, sinking shares by 6.4%, and uniform outfit
Cintas
(CTAS) - Get Report
lost 4.5% on a Lehman downgrade to equal weight from overweight. JPMorgan and Oppenheimer respectively lowered
Abercrombie & Fitch
(ANF) - Get Report
and GPS maker
Garmin
(GRMN) - Get Report
to neutral equivalent ratings. Shares were down 4.5% and 3.7%.
On the bright side, Credit Suisse lifted airliners
Northwest
(NWA)
and
Delta
(DAL) - Get Report
to outperform, bringing shares up 0.8% and 2.7%, respectively. Lehman Brothers started
Tiffany
(TIF) - Get Report
with an overweight rating, but shares still fell 1.5% after a brief morning uptick.
Among commodities, crude oil ticked up 3 cents at $110.14 a barrel, and gold futures surrendered $4.80 to settle at $927. The U.S. dollar weakened by 0.4% against the euro at $1.5803. Against the yen, the greenback dropped 1% to 100.87.
Treasury prices were gaining ground. The 10-year note added 18/32 in price to yield 3.47%, and the 30-year bond jumped 27/32 in price, yielding 4.30%.
The major overseas markets were mixed. Asian exchanges did well overnight, with the Nikkei 225 in Tokyo spiking 2.9% to 13,324 and Hong Kong's Hang Seng Index jumping 2% at 24,668. In Europe, however, London's FTSE 100, the Paris Cac, and Germany's Xetra Dax retreated by 1.2% or more.