The market closed on a sour note Friday due to disappointing corporate earnings. The Dow Jones industrial average dropped more than 200 points to reach its worst level in four months. Three companies belonging in the Dow announced poor earnings. These are Microsoft, McDonald’s and General Electric.
General Electric Co shares dropped 3.5 percent to $22.01. It was one of the biggest declines on the S&P 500 after releasing its third quarter earnings report. Its earnings met the estimates of Wall Street analysts but its revenue was short. The company maintained that its full year earnings are still on track.
The Dow dropped 205.43 points to close at 13,343.51. The S&P fell 24.15 points to 1,433.19. The Nasdaq composite index got its second straight day of decline as it lost 67.25 points to 3,005.62. The brig drops last Friday left S&P and Dow to cling on gains for the week.
Last Thursday, 115 companies in the S&P 500 reported their earnings were down 3.7 percent as compared to the previous year. This was according to Thomson Reuters and ING. Doug Cote, chief market strategist at ING Investment Management in New York, once companies get a quarter of negative earnings, it acts as a precursor. He added that the cockroach theory is at play here. Once you find one, there’s a lot more left undiscovered.
All the ten industry groups belonging in the S&P 500 dropped with technology and materials stocks leading the losers. Home Depot and Bank of America were the only stocks in the Dow that were trading higher for the session but they were lower by 3 p.m.
The declines were broad as four stocks dropped for every stock that gained on the New York Stock Exchange. Trading volume was heavy at 3.8 billion shares. Earnings on Friday from large multinational firms emphasized the effect of the economic slowdown across the globe.