Wall Street extends slide on economic worries
NEW YORK -- Stocks skidded today for a second straight day, but eased off earlier lows, as weak corporate earnings reports stir fears that the recession will be deeper and longer lasting than some investors had predicted.
General Electric Co.'s fourth-quarter numbers made investors uneasy. While the 46 percent drop in earnings met Wall Street's lowered expectations, investors are worried the conglomerate will reduce its dividend. They are also nervous the company could lose its coveted 'AAA' credit rating because of the recession that has crimped lending at GE Capital and hurt its industrial and entertainment businesses. The stock, a component of the Dow Jones industrial average, fell 6 percent.
Reports from a range of industries gave fresh evidence of the toll the weak economy is taking: Copier and printer maker Xerox Corp. fell 10 percent after its results fell short of expectations. Capital One Financial Corp., which focuses on credit card lending, reported a loss rather than the profit Wall Street expected after it set aside money to cover bad debt. The stock lost 12 percent. And Harley-Davidson Inc. said it will cut jobs and reduce shipments because of falling demand. The company's earnings for the final quarter of 2008 fell nearly 60 percent, sending the stock down 10 percent.
"I think we're in a period of extreme risk aversion, and the earnings play into that," said Tim Courtney, chief investment officer at Burns Advisory Group. "When you couple companies missing earnings estimates with investor risk aversion, there's no tolerance" for buying.
The trouble isn't just in the U.S. The British government released data Friday showing the country's economy shrank 1.5 percent in the fourth quarter and declared the country in a recession. The fourth-quarter decline was the worst since 1980.
Joe Clark, managing partner at Financial Enhancement Group, said the range of results companies have posted and their opaque forecasts make it difficult for Wall Street to determine how a company or others in its industry might fare in the coming quarters. That uncertainty makes investors nervous.
"We are going to go back to a time where we won't infer a company does well based on its sector," he said.
In late morning trading, the Dow industrials fell 75.82, or 0.93 percent, to 8,046.98.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 1.06, or 0.13 percent, to 826.44, and the Nasdaq composite index reversed course and rose 7.78, or 0.53 percent, to 1,473.27.
