New York: US stock indexes fell as much as 2.4% on Friday after consumer sentiment fell to an 11-month low and consumer prices fell, while GE and two big US banking companies missed quarterly revenue expectations.
The Thomson Reuters/University of Michigan survey of consumers showed US consumer sentiment fell far more than expected to 66.5 — its lowest level in 11 months — in a preliminary July reading — down sharply from 76.0, June’s final number. Earlier, the US Labor Department reported the US Consumer Price Index dipped 0.1% in June, which was weaker than the forecast for no change, and marked a third straight month of decline.
General Electric Co, Bank of America Corp and Citigroup Inc on Friday joined the list of major companies that beat Wall Street’s expectations, along with Alcoa and Intel earlier this week, but shares of GE and both banks sold off after they reported a drop in quarterly revenues from a year ago. Bank of America and Citigroup also reported lower earnings compared with a year ago.
GE’s stock fell 3.5% to $14.71, while Bank of America slid 7.7% to $14.20 and Citigroup lost 3.9% to $4.00.
“The most important thing about second-quarter earnings is guidance, so investors are looking for revenue growth,” said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis.
This week, investors are trading more on economic data after disappointing revenue results from major companies placed a dampener on an otherwise positive start to earnings season that began with strong results from Alcoa Inc, Intel Corp and CSX Corp.
Michael Sheldon, chief market strategist for RDM Financial in Westport, Connecticut, said “the first week of earnings has been fairly positive, but investors will increasingly focus on economic data like today’s consumer” sentiment report “to determine what the outlook for the economy is in the back half of 2010.”
The Dow Jones industrial average was down 202.61 points, or 1.96%, at 10,156.70. The Standard & Poor’s 500 Index was down 24.66 points, or 2.25%, at 1,071.82. The Nasdaq Composite Index was down 54.29 points, or 2.41%, at 2,194.79.
The S&P 500 has risen seven out of the past eight sessions. This week’s strong start to the earnings season had led to optimism about a positive round of results to give the stock market some momentum through the third quarter.
Among the missteps, though, was Google Inc’s second-quarter earnings per share, excluding items, which missed Wall Street’s expectations for the first time in two years. The stock was down 5.2% at $468.21.
A positive note came from Goldman Sachs Group Inc, whose shares climbed 2.1% to $148.20 a day after the Wall Street firm settled a US civil fraud case with the Securities and Exchange Commission.
But the overall banking sector was in a funk, with the KBW Banking Index down 4.5%, a day after the US Congress approved the broadest overhaul of financial rules since the Great Depression and sent it to US President Barack Obama to sign into law.
In the energy sector, US-listed shares of BP Plc fell 3.4% to $37.59 despite reports that a new cap on BP’s stricken oil well in the Gulf of Mexico showed no sign of leaking on Friday.
The decline in BP’s stock was in sync with a drop in August US crude oil futures, which fell 82 cents, or 1.1%, to $75.80 a barrel in midday trading. The weak US consumer sentiment and CPI data were taken as signs of sluggish demand, energy traders said.