Courtesy "The Wall Street Journel"
The credit-market crisis came zooming back into investors' consciousness on the 20th anniversary of the Black Monday stock-market crash, sending shares plummeting amid uninspiring earnings reports and high oil prices.The major indexes all ended down more than 2.5%, closing with their biggest weekly declines since the week ended July 27th. The Dow Jones Industrial Average dropped 366.94 to 13522.02. The S&P 500-stock index lost 39.45 to 1500.63, and the Nasdaq Composite Index was down 74.15 to 2725.16.
"Nobody wants to own stocks. Everybody [sold] into the weekend," said Ryan Detrick, chief technical strategist at Schaeffer's Investment Research. "The overall concern for the financial markets and credit markets has taken over… People realized that these third-quarter earnings haven't been what we wanted."
Earnings from financial companies have been particularly disappointing, and there was more grim news from that segment Friday as Wachovia said its third-quarter net income dropped 10% amid a quadrupling in provisions for soured loans and $1.3 billion in losses and write-downs. Wachovia shares fell 3.6%.
Wachovia reported its results in the wake of similar announcements this week from the likes of Bank of America, Citigroup and Washington Mutual. The fact that so many financial institutions have suffered similar problems signaled that the sector may have a long way to go before it recovers from the credit squeeze. The Amex Broker/Dealer Index slumped 3.7%.
"There's a sense that the full impact of the subprime-mortgage crisis has yet to be revealed," said Alan Gayle, senior investment strategist at Trusco Capital Management.
But the pain spread beyond Wall Street and the banks, as blue-chip industrial companies reporting earnings also fared poorly. Honeywell International's quarterly profit climbed 14% amid strong sales growth in its key businesses, but shares fell 3.6%. 3M dropped 7.6% after posting a 7.4% climb in quarterly net and boosting its 2007 earnings view. And Caterpillar's quarterly net jumped 21% despite continued U.S. weakness, as the company cut its 2007 earnings outlook and issued tepid guidance for 2008. Its shares declined 6%.
"Some of the [blue chips] beat expectations on the surface, but the guidance wasn't as good as people were hoping for," Mr. Detrick said. All 30 Dow components ended the session lower.
Some companies "are seeing slowdowns in their business," added Scott Wren, senior equity strategist at A.G. Edwards & Sons. "It's giving people the feeling that we could see some sort of recession." And Jim Herrick, head trader at Robert W. Baird, said that positive earnings surprises had already been priced into the market, and were now coming out.
Losses in stocks accelerated into the afternoon. Friday was an options-expiration day, which can often see more volatility and exaggerated market moves.
Among companies that reported earnings, AMD beat revenue targets but also posted a bigger-than-expected loss of $396 million, or 71 cents a share, due to a $120 million charge related to its acquisition of ATI Technologies. AMD shares fell 5.2%.
One of the few companies reporting earnings that saw its shares climb was the Web search giant Google, which reported a 46% rise in third-quarter earnings after Thursday's close. Revenue jumped 57%. Google shares added 0.8%
