Wall Street extends slide on economic worries
NEW YORK (AP) — Stocks bounced off early lows and traded mixed Friday as weak corporate earnings reports stirred fears that the recession will be deeper and longer lasting than some investors had predicted.
General Electric Co.’s fourth-quarter numbers made investors uneasy. While the 46 percent drop in earnings met Wall Street’s lowered expectations, investors are worried the conglomerate will reduce its dividend. They are also nervous the company could lose its coveted “AAA” credit rating because of the recession that has crimped lending at GE Capital and hurt its industrial and entertainment businesses. The stock, a component of the Dow Jones industrial average, fell 8 percent.
Reports from a range of industries gave fresh evidence of the toll the weak economy is taking: Copier and printer maker Xerox Corp. fell 8 percent after its results fell short of expectations. Capital One Financial Corp., which focuses on credit card lending, reported a loss rather than the profit Wall Street expected after it set aside money to cover bad debt. The stock lost 13 percent. And Harley-Davidson Inc. said it will cut jobs and reduce shipments because of falling demand. The company’s earnings for the final quarter of 2008 fell nearly 60 percent, sending the stock down 8 percent.
“I think we’re in a period of extreme risk aversion, and the earnings play into that,” said Tim Courtney, chief investment officer at Burns Advisory Group. “When you couple companies missing earnings estimates with investor risk aversion, there’s no tolerance” for buying.
The trouble isn’t just in the U.S. The British government released data Friday showing the country’s economy shrank 1.5 percent in the fourth quarter and declared the country in a recession. The fourth-quarter decline was the worst since 1980.
Official word of recessions elsewhere around the world as economies in Europe and Asia struggle is also likely to give investors pause, Courtney said. A weakening global economy provides less opportunities for corporate growth, which could slow down any recovery, he added.
Joe Clark, managing partner at Financial Enhancement Group, said the range of results companies have posted and their opaque forecasts make it difficult for Wall Street to determine how a company or others in its industry might fare in the coming quarters. That uncertainty makes investors nervous.
“We are going to go back to a time where we won’t infer a company does well based on its sector,” he said.
In afternoon trading, the Dow industrials fell 30.26, or 0.37 percent, to 8,092.54.
Broader stock indicators were higher. The Standard & Poor’s 500 index rose 5.96, or 0.72 percent, to 833.46, while the Nasdaq composite index rose 17.39, or 1.19 percent, to 1,482.88.
The technology sector was getting a boost from Google’s surpassing analysts’ estimates. Excluding one-time charges, Google said after the end of trading Thursday that it earned about $5.10 per share, compared with analysts’ expectations for profit of $4.95 per share, according to Thomson Reuters. Google stock rose $17.16, or 5.6 percent, to $323.66.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.68 percent from 2.60 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.09 percent late Thursday.
The dollar rose against other major currencies, while gold prices also rose.
Meanwhile, oil prices rose $1.24 to $44.91 a barrel on the New York Mercantile Exchange.
The market has seen a turbulent week, with the Dow tumbling 4 percent Tuesday only to regain more than 3 percent Wednesday, followed by another big drop Thursday. Volatility has been more the rule than the exception in recent trading as investors sort through a plethora of wide-ranging earnings reports.
“I think it’s just a matter of what side of the bed the market wakes up on,” said Clark.
Corporate results are pushing and pulling the market as investors try to determine where the economy is headed.
In other corporate news, The Wall Street Journal is reporting drug maker Pfizer Inc. is in talks to acquire rival Wyeth in a deal valued at more than $60 billion. Citing unidentified sources, the Journal said the discussions have been going on for months, but a deal is not imminent. Wyeth jumped $3.09, or 8 percent, to $41.92, while Pfizer fell 29 cents to $16.92.
Meanwhile, GE fell $1.11, or 8 percent, to $12.37. Xerox fell 64 cents, or 8 percent, to $6.95 and Capitol One fell $2.75, or 13 percent, to $19.19. Harley slid 95 cents, or 8 percent, to $11.45.
Overseas, Japan’s Nikkei stock average fell 3.8 percent. Britain’s FTSE 100 rose 0.01 percent, Germany’s DAX index fell 0.96 percent, and France’s CAC-40 lost 0.71 percent.
