Dismal consumer sentiment data and anemic revenues from GE and two big banks slammed US stocks on Friday, driving down major indexes more than 2%.
The slide in the S&P 500 was a decisive break of an 8% rise over the last two weeks as investors lost hope that strong earnings could overcome doubts about the economic outlook.
“Economic recoveries rarely go smoothly,” said Gail Dudack, chief investment strategist at Dudack Research Group in New York.
“They’re very sensitive to anything that helps or hurts confidence, on the corporate side and the consumer side.”
General Electric Co, Bank of America Corp and Citigroup Inc joined the list of major companies that beat Wall Street’s expectations, but investors unloaded some shares of all three after the companies reported a drop in quarterly revenues.
“The next step for earnings has to be top line or revenues, and revenues slowed down along with the consumer and the economy in the second quarter,” Dudack said.
Bank of America, the biggest US bank, slid more than 9% and the S&P financial index dropped 4.4% as investors fretted about how banks will make money going forward.
The Dow Jones Industrial Average dropped 261.41 points, or 2.52%, to 10,097.90. The Standard & Poor’s 500 Index slid 31.60 points, or 2.88%, to 1,064.88. The Nasdaq Composite Index lost 70.03 points, or 3.11%, to 2,179.05.
GE’s stock fell 4.6% to USD 14.55, while Citigroup lost 6.3% to USD 3.90. Bank of America was down 9.2% at USD 13.98.
For the week, the Dow fell 1%, while the S&P 500 dropped 1.2% and the Nasdaq gave up 0.8%.
Weak energy costs pushed consumer prices down for a third straight month in June, US government data showed. That report and the Thomson Reuters/University of Michigan data were the latest in a string of economic indicators showing the pace of the recovery is slowing.
Google Inc shares also sagged after the company missed profit expectations for the first time in two years. The stock was down 7% at USD 459.61.
Among the Nasdaq‘s other leading decliners, Gilead Sciences Inc tumbled 8.5% to USD 31.94 after Jefferies cut its price target on the stock to USD 38.00 from USD 48.00.
The Thomson Reuters/University of Michigan survey of consumers showed US consumer sentiment fell far more than expected to 66.5 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.
The S&P’s consumer discretionary sector was among the biggest losers; the sector’s index fell 3.5%.