Updated from 4:04 p.m. EDTWall Street sold off for a third straight session Friday, as a mild profit improvement at General Electric ( GE) proved insufficient to relieve the market of its obsession with overseas violence. The Dow Jones Industrial Average fell 106.94 points, or 0.99%, to 10,739.35, and the S&P 500 lost 6.10 points, or 0.49%, at 1236.19. The Nasdaq Composite dropped 16.76 points, or 0.82%, to 2037.35, putting the tech-laden measure near levels not seen since last October. Stocks in the U.S. sold off for most of the week on a steady stream of dour news out of the Middle East. For the last three days, the Dow lost 3.5%, and the Nasdaq plummeted 4.3%, the worst three-session decline since April 2005. For the full week, the Dow fell 3.2%, the S&P 500 finished down 2.3%, and the Nasdaq dropped 4.4%. On the Dow, components United Technologies ( UTX), General Motors ( GM) and Boeing ( BA) all fell by 2.9% or more. About 1.72 billion shares changed hands on the New York Stock Exchange, and volume on the Nasdaq was 1.81 billion shares. Decliners outpaced advancers 2 to 1. Oil continued to hit new all-time highs, pushing past $78 a barrel at one point as Israel pressed a military offensive into Lebanon. A total of 56 people are reported dead in the incursion, which included a second bombing of Beirut's airport on Friday. Crude for August delivery added 33 cents to $77.03 a barrel, a record close. For the week, crude prices rose 4%. "It comes as no great surprise that we've switched from implications of a slowing economy vs. inflation to the geopolitical conflict," said Paul Nolte, director of investments with Hinsdale Associates. "The Middle East struggle hasn't been factored into anyone's plans. With this comes higher oil prices, keeping pressure on the consumer. This environment is still one of a slowing economy." The 10-year Treasury was up 1/32 in price, yielding 5.06%, while the dollar rose against the yen after Japan's central bank raised interest rates by a quarter-point but pledged to keep them low in the near future. "The earnings news and economic data today will be subject to the headlines from the Middle East," said Peter Cardillo, chief market strategist with S.W. Bach & Co. "It's a critical day, especially heading into the weekend. No one will want to take long positions ahead of the weekend." Precious metals were stronger. Gold added $13.60 to close at $668 an ounce, silver was up 4 cents at $11.53 an ounce, and copper was higher by 3.5 cents at $3.71 a pound.
By sector, the Philadelphia Gold and Silver Index gained 1.9%, and the Amex Oil Index was higher by 0.9%. Selling hit most other sectors, with the Amex Airlines Index tumbling 3.3%, the Nasdaq Transportation Index falling 2% and the Nasdaq Biotech Index finishing down 1.7%. Elsewhere, the Philadelphia Housing Sector index slid 2.4% after component D.R. Horton ( DHI) slashed its quarterly forecast, sending the stock lower by 7.3%. GE said second-quarter earnings rose 4% from a year ago to $4.9 billion, or 47 cents a share, matching estimates on 9% revenue growth. Strength in the company's infrastructure and energy units offset a lackluster performance at NBC Universal. GE also guided its third quarter and full-year profit in line with forecasts. GE was off by 56 cents, or 1.7%, to close at $32.11. EMC ( EMC), which
warned on its results earlier this week, posted second-quarter earnings of $279 million, or 12 cents a share, compared with $293 million, or 12 cents a share, last year. Excluding items, the company earned 15 cents a share. Revenue came in at $2.57 billion. EMC dipped 15 cents, or 1.5%, to $9.83. Friday's economic docket included the Commerce Department's report on retail sales for June, which fell 0.1%. Economists expected a 0.4% increase. Stripping out automobile sales, retail sales were up 0.3% for the month, matching expectations. The Commerce Department also said that May inventories rose 0.8%, doubling expectations. Ian Shepherdson, chief economist with High Frequency Economics, said the data show that "retailers are hurting -- which is why retail payrolls are falling -- with worse to come." The Labor Department said import prices rose 0.1% in June, below expectations, while export prices ramped up 0.8%. Excluding a 1.4% decline in petroleum prices, import prices were 0.4% higher for the month. Elsewhere, the University of Michigan's preliminary reading on July consumer sentiment came in at 83.0, down from 84.9 in June and below estimates.
Petco Animal Supplies ( PETC) surged 43.4% after the company said it will be acquired by private firms Leonard Green & Partners and Texas Pacific Group for $1.8 billion, including debt. The price represents a 49% premium over Petco's closing price on Thursday. Shares jumped $8.44 to $27.89. Among ratings moves, Citigroup upgraded Monster Worldwide ( MNST) to buy from hold, citing the belief that the stock option investigation has been priced into the shares. Still, Monster gave up 11 cents, or 0.3%, to $36.58. Overseas markets were lower, with London's FTSE 100 falling 1% to 5707 and Germany's Xetra DAX losing 1.9% to 5422. In Asia, Japan's Nikkei slumped 1.7% overnight to 14,845, and Hong Kong's Hang Seng dropped 1% to 16,136.