Markets reel on dismal reports

  • Associated Press
  • Friday, January 20, 2006 9:00pm
  • Business

NEW YORK – Lackluster earnings reports from Dow Jones industrials General Electric Co. and Citigroup Inc. sent stocks plunging Friday, giving the Dow its biggest single-day percentage decline since April. The major indexes each lost more than 2 percent this week.

Soaring energy prices compounded the market’s gloom over earnings, with crude oil returning to a four-month high on concerns about Iran’s nuclear arms dispute. Meanwhile, a tempered outlook from Motorola Inc. also disappointed investors and weighed on tech stocks.

While GE and Citigroup’s results came in just shy of analysts’ estimates, the large-cap firms that released earnings this week would have needed blockbuster reports to satisfy Wall Street’s overblown expectations, said Rick Pendergraft, an equity trader at Schaeffer’s Investment Research.

“The ramp-up we had into earnings let you know that people were expecting big things,” Pendergraft said. “Any time we go into an earnings season and the market is overbought, it sends up a caution flag for me.”

According to preliminary calculations, the Dow dropped 213.32, or 1.96 percent, to 10,667.39. The index has given back all of the 325 points it had gained so far this year.

Broader stock indicators also closed sharply lower. The Standard &Poor’s 500 index lost 23.55, or 1.83 percent, to 1,261.49, and the Nasdaq dropped 54.11, or 2.35 percent, to 2,247.70.

Bonds were little changed, with the yield on the 10-year Treasury note slipping to 4.35 percent from 4.37 percent late Thursday. The dollar was mixed against other major currencies in European trading, while gold prices edged lower.

The situation in Iran and new threats of terrorist attacks on the United States propelled the energy market. A barrel of light crude surged $1.29 to settle at $68.48 on the New York Mercantile Exchange, where natural gas also bounced off recent lows to add 37.5 cents to $9.28 per 1,000 cubic feet.

A larger-than-expected jump in consumer confidence did little to distract investors from earnings reports and rising crude oil. The University of Michigan’s consumer sentiment index for January added nearly 2 points to read 93.4, topping economists’ forecast of 92.5.

Optimism that the Federal Reserve would soon end its string of interest rate hikes launched a New Year’s rally that sent stocks to multiyear highs earlier this month, carrying the Dow above 11,000 for the first time since June 2001.

But Friday’s retreat erased much of those gains, and left the Dow in negative territory for the year. For the week, the Dow lost 2.67 percent, the S&P 500 was down 2.03 percent and the Nasdaq declined 2.99 percent.

While this week’s earnings data was mostly downbeat, stocks would have had a tough time pushing higher after their recent advance, said Susan Malley, chief investment officer of Malley Associates Capital Management.

“Earnings haven’t been disastrous thus far, we’ve just had some big names that were a bit conservative in their outlooks,” Malley said. “The news is not terribly bad, it just has not met the expectations of the investing community.”

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