GE, which sells products from aircraft engines to refrigerators, reported a 20 percent drop in revenue, while Bank of America posted a $1 billion loss as both struggled with still meager business and consumer spending.
“As you came into the third quarter there was hypersensitivity to the quality of topline growth,” said Michael Feser, president of Zecco Trading in New York.
“Investors are linking that to the economy, trying to determine if these are quality earnings that are being reported and does it spell a solid economic recovery?”
Friday’s results contrasted sharply with those of JPMorgan Chase & Co (JPM.N) and Intel Corp (INTC.O) earlier this week, which breezed past Wall Street forecasts and helped the Dow to close above 10,000 for two straight days.
The Dow Jones industrial average .DJI fell 67.03 points, or 0.67 percent, to 9,995.91. The Standard & Poor's 500 Index .SPX lost 8.88 points, or 0.81 percent, to 1,087.68. The Nasdaq Composite Index .IXIC gave up 16.49 points, or 0.76 percent, at 2,156.80.
Analysts said investors may have become too optimistic going into the earnings season, in contrast to the second quarter when the bar was set low. The search for revenue growth has been a key theme after the last two quarters were characterized by cost cutting.
Bank of America’s shares fell 4.6 percent to $17.26, and GE dropped 4.2 percent to $16.08.
But indexes gained for the second straight week with the S&P 500 up 1.5 percent, the Dow up 1.3 percent and the Nasdaq up 0.8 percent. The Dow slipped from its perch at 10,000 after breaking the key barrier for the first time in a year earlier in the week.
Data showing weak consumer sentiment further pressured the market on Friday and overshadowed an earlier report that showed industrial production rose in September.
Google Inc (GOOG.O) provided some cheer after reporting earnings and revenue that beat forecasts and said it was looking for major acquisitions. Its stock closed up 3.8 percent at $459.85.
But International Business Machines Corp’s (IBM.N) shares fell 5 percent to $121.64 on a mixed report that failed to satisfy investors whose expectations had risen along with the stock’s advance over the past three months.
The market will continue to feel the push and pull as earnings season revs up next week and investors react to individual corporate results.
“Investors are having a healthy and traditional debate on when the recovery arrives as to what it’s going to look like,” said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.
Volume was moderate on the New York Stock Exchange, with 1.39 billion shares changing hands, below last year’s estimated daily average of 1.49 billion, while on the Nasdaq, about 2.23 billion shares traded, below last year’s daily average of 2.28 billion.
Declining stocks outnumbered advancing ones on the NYSE by 1,962 to 1,041, while declining stocks beat advancers on the Nasdaq, by about 1,828 to 837.
Editing by Kenneth Barry