Dow down 205 as weak earnings drag market lower
NEW YORK — Poor corporate earnings reports pounded the stock market Friday in a sour end to an otherwise strong week of trading. The Dow Jones industrial average fell more than 200 points for its worst day in four months.
Disappointing results from three giants of the Dow — Microsoft, General Electric and McDonald’s — were partly to blame. The S&P 500 index fared even worse, as widespread worries about companies’ ability to keep churning out better profits drove the broader market down.
Through Thursday, with 115 companies in the S&P 500 reporting, earnings have dropped 3.7 percent compared with a year earlier, according to Thomson Reuters, a financial data provider, and ING, a financial company.
“And once you get one quarter of negative earnings, it’s a precursor,” said Doug Cote, chief market strategist at ING Investment Management in New York. “It’s the cockroach theory: If you find one, there’s probably many more.”
Heading into this earnings season, financial analysts had estimated that corporate profits for July through September would fall compared with the same period a year ago. That would be the first such decline in three years.
The Dow sank 205.43, or 1.5 percent, to close at 13,343.51.
The S&P lost 24.15, or 1.7 percent, to 1,433.19. The Nasdaq composite index, hammered by a second ugly day for Google, lost 67.25 to 3,005.62, a 2.2 percent decline.
The big drops Friday left the Dow and S&P clinging to gains for the week.
All 10 industry groups in the S&P 500 fell, led by technology and materials stocks.
Google continued its slump, losing $13.21 to $681.79, a day after its earnings report was accidently hours ahead of schedule. The report raised questions for Google and other Internet companies about ads that target mobile devices.
It’s been a tough week for technology companies. IBM pointed to Europe’s troubles and slowing business spending when it posted weaker revenue than analysts expected. Intel, the world’s largest maker of computer chips, blamed the global economy and sliding computer sales for pushing net income down.
As corporate earnings roll in, banks and so-called consumer discretionary companies, which include luxury stores and hotels, are projected to report the best growth.
Analysts expect companies dealing in metals and other materials to report the worst results, followed by energy companies.
But it’s technology companies like IBM, Intel and Google whose results have grabbed the most attention.