NEW YORK (Reuters) - Stocks slumped on Friday after surprisingly weak earnings from General Electric Co and data showing consumer sentiment at a 26-year low fed fears the economy is in recession.
Shares of GE, viewed as an economic bellwether because of the range of its businesses, sank almost 13 percent in their worst decline since the October 1987 market crash. The news also dragged down shares of a wide range of multinational companies, including IBM and United Technologies.
GE’s unexpected 6 percent profit drop was the biggest shock yet to the U.S. industrial sector from the credit crisis and cast a shadow over the upcoming quarterly earnings season.
The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell sharply in April to its lowest level since 1982, when the economy was plagued by low growth and high inflation.
“GE is a reminder that there is still bad news out there,” said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey. “It keeps the financial problem and credit problem alive.”
The Dow Jones industrial average was down 256.56 points, or 2.04 percent, finishing the day at 12,325.42. The Standard & Poor’s 500 Index was down 27.72 points, or 2.04 percent, ending at 1,332.83. The Nasdaq Composite Index was down 61.46 points, or 2.61 percent, at 2,290.24.
Apple Inc tumbled 4.8 percent to $147.14 as negative sentiment on the outlook for consumer spending spread, and was the biggest factor in the Nasdaq 100’s largest daily drop since February 5.
On the New York Stock Exchange, decliners beat advancers by a ratio of slightly more than 3 to 1, though volume was modest with 1.26 billion shares changing hands, below last year’s average daily volume around 1.90 billion.
On Nasdaq, decliners exceeded advancers by a factor of almost 4 to 1 with 1.90 billion shares trading, down from 2007’s daily average of 2.17 billion shares.
Shares of GE slid 12.8 percent to $32.05.
Other recent gloomy earnings from U.S. companies have contributed to fears that the economy is heading for or is already in a recession.
United Parcel Service Inc, the world’s largest package delivery company, forecast weak first-quarter earnings. Aluminum producer Alcoa Inc said its quarterly profit was cut in half due to higher energy costs and a weak dollar. Advanced Micro Devices gave a revenue estimate below expectations and said it would cut its work force.
Frontier Airlines Holdings Inc filed for bankruptcy, citing unexpected problems with its principal credit card processor. Frontier shares plummeted 69 percent to 48 cents.
The parade of bad earnings news was a foreboding sign ahead of next week’s results from Intel Corp, Johnson & Johnson, Coca-Cola Co and JPMorgan Chase & Co, among others.
Amid concerns about the global credit crisis, finance ministers and central bankers from the Group of Seven nations were meeting in Washington. A communique was expected to be issued Friday evening.
“If you had some very strong support for the dollar, it would be helpful in many ways to the financial markets,” said Jim Awad, chairman of W.P. Stewart & Co. Ltd in New York.
Additional reporting by Caroline Valetkevitch; Editing by Jan Paschal