Stocks were broadly lower Friday after General Electric (GE) reported unexpectedly weak earnings and offered gloomier predictions for the rest of the year. A drop in a closely watched gauge of the mood of the U.S. consumer and a jump in import prices also weighed on the market.
Also, there's talk G7 financial chiefs might unveil a plan to stabilize banks and financial markets, according to S&P MarketScope.
Bond prices were slightly lower. Gold futures were lower on the perception economic slowdown will reduce demand for the yellow metal. The dollar was down vs. other major currencies, while oil futures were mixed.
On Friday, the Dow Jones industrial average fell 144.20 points, or 1.15%, to 12,437.78. The S&P 500 index declined 11.89 points, or 0.87%, to 1,348.66. The Nasdaq composite index shed 27.92 points, or 1.19%, to 2,323.78.
Activity in the broader market was negative, with 22 stocks declining in price for every 5 that gained on the New York Stock Exchange. The ratio on the Nasdaq was 18-5 negative.
General Electric's earnings were closely watched, both because of the size of the $367-billion conglomerate and because its diverse businesses might give early clues to how other companies are faring in the economic slowdown.
"Demand for our global infrastructure business remained strong," chairman and chief executive Jeff Immelt said in a statement, "but our financial services businesses were challenged by a slowing U.S. economy and difficult capital markets.”
The company posted earnings of 44 cents per share, at least 6 cents lower than GE had predicted. The "extraordinary disruption in the capital markets in March" hurt earnings by about 5 cents per share, Immelt said.
"GE's disappointing earnings report suggests [the] economy might have a steep contraction," said S&P's MarketScope. Jay Collins of DT Trading, said "GE didn't bring good earnings to life this morning, dropping the pneumatic hammer on the head of the market, sending the S&P reeling" in pre-market trading.
The University of Michigan U.S. consumer sentiment index plunged to 63.2 for the preliminary April reading -- a 26-year low. This is well below the 69.5 reading that
markets had expected, and the final 69.5 print in March. The current economic conditions index plunged to 78.4 from 84.2 in March, while the future outlook index dropped to
53.4 from 60.1 the month before. The 1-year ahead inflation median rose to 4.8% from 4.3%. The weaker than expected report should extend the downward pressure
on Treasury yields and stocks, says S&P Economics.
Also Friday morning, a report showed U.S. import prices jumped 2.8% in March, while export prices rose 1.5%. Petroleum prices surged 9.1% and are up 60% from a year ago.
Rising import prices are adding to inflation, says Bear Stearns economist John Ryding. "With energy prices still elevated and the dollar weak, we do not see this pressure reversing in the near future," he wrote.
Among other stocks in the news, Frontier Airline Holdings (FRNT) filed for Chapter 11 bankruptcy protection, a move it blamed on a credit card processor that was threatening to withhold larger proceeds from ticket sales. Frontier is the fourth U.S. air carrier to file for bankruptcy in the last two weeks, as high fuel costs take their toll on the industry.
Genentech (DNA) reported earnings of 84 cents, vs. 74 cents a year ago, as revenue rose 8%. Earnings beat analysts' estimates, but sales of major drugs like Avastin fell short. Analysts at Thomas Weisel have reportedly downgraded the stock to "market weight."
PDL BioPharma (PDLI) plans to pay out a special cash dividend of $4.25 per share, and spin off its biotech assets into a separate publicly traded company. The company said it expects royalty revenue of $240 to $260 million in 2008.
Trizetto Group (TZIX) will be bought and taken private for $1.4 billion, or $22 per share, by funds advised by Apax Partners.
Major European indexes were lower Friday. In London, the FTSE 100 index lost 1.21% to 5,893.20. Paris' CAC 40 index fell 1.27% to 4,797.74, and Germany's DAX index was down 1.47% to 6,605.76.
In Asia, Japan's Nikkei 225 rose 2.92% to 13,323.73, while Hong Kong's Hang Seng index was up 1.99% to 24,667.79.
Treasury market
Treasuries were lower in price on Friday. The 10-year note was lower at 100-13/32 for a yield of 3.456%, while the 30-year bond was lower at 101-16/32 for a yield of 4.288%.