U.S. stocks suffer biggest fall in nearly 3 years
Fri Jan 20, 2006 04:57 PM ET
(Updates with more reaction, details, bond market)
By Jennifer Coogan
NEW YORK, Jan 20 (Reuters) - U.S. stocks suffered their biggest loss in nearly three years on Friday, plummeting on disappointing earnings from blue chips Citigroup Inc. (C.N: Quote, Profile, Research) and General Electric Co. (GE.N: Quote, Profile, Research) and a spike in oil caused by geopolitical tensions.
The Dow Jones industrial average and Standard & Poor's 500 stock index posted their biggest point declines since March 24, 2003, soon after the war in Iraq began. The Dow erased its gains for 2006.
Citigroup and GE joined a growing list of companies, including chip maker Intel Corp. (INTC.O: Quote, Profile, Research) and Internet media firm Yahoo Inc. (YHOO.O: Quote, Profile, Research) , whose quarterly results have disappointed investors.
A surge in oil prices above $68 also battered stocks. Crude climbed on concern about potential supply disruptions stemming from Iran's nuclear plans, the targeting of oil companies by militants in Nigeria and Osama bin Laden's threat of attacks against the United States.
"The market's been watching the earnings reports very closely. We got off on the wrong foot with Citibank and GE," said Evan Olsen, head of equity trading at Stephens Inc. "You've also had oil lifting higher with bin Laden acting up and Iran acting strange which is concerning going into a weekend, so people are taking profits."
The Dow Jones industrial average was down 213.32 points, or 1.96 percent, at 10,667.39. The Standard & Poor's 500 Index was down 23.55 points, or 1.83 percent, at 1,261.49. The Nasdaq Composite Index was down 54.11 points, or 2.35 percent, at 2,247.70.
Friday's decline was the biggest point loss for Nasdaq since September 2003.
The major stock indexes suffered their first weekly loss of the new year. For the week, the Dow shed 2.7 percent, the S&P lost 2.0 percent and Nasdaq ended 3 percent lower.
Before Friday's slide, the Dow was up 1.5 percent for 2006 but the blue-chip average is now down 0.5 percent for the year.
In the bond market, Treasury prices rose slightly but failed to gain major traction from the rout in stocks and soaring oil prices. The benchmark 10-year note eked out a 3/32 gain to yield 4.37 percent, down from 4.38 percent Thursday.
Weighing on the technology-laced Nasdaq were shares of Google Inc. (GOOG.O: Quote, Profile, Research) which slid 8.5 percent to $399.46, making it the worst week since the Web search engine made its market debut in August 2004.
Shares of Google were hurt after competitor Yahoo Inc. (YHOO.O: Quote, Profile, Research) released disappointing earnings on Tuesday.
"The great names that had been the sweethearts of the market, like Google and Apple, are down. And you can look at oil, rallying from $60 a barrel to $68, so there are concerns of inflation and higher costs for businesses," said Aaron Ford, head of U.S. institutional equity derivative sales at BNP Paribas in New York.
Citigroup shares lost 4.7 percent to $45.69 on the New York Stock Exchange and were the biggest drag on the Dow. Citigroup, the largest U.S. bank, posted quarterly profit and revenue that missed analysts' estimates. Its shares had their biggest one-day percentage drop since a 4 percent decline on March 24, 2003. [ID:n20196209]
Shares of GE fell 3.8 percent to $33.37. The stock was the heaviest drag on the S&P 500. Even though GE's fourth-quarter profit rose, its revenue fell short of expectations. [ID:n19244063]
Motorola Inc. (MOT.N: Quote, Profile, Research) , the world's second-largest mobile phone maker, fell 7.6 percent to $22.49 on the NYSE. Late on Thursday, the company issued a first-quarter earnings per share forecast below Wall Street estimates. [ID:n19361768]
U.S. crude oil futures shot up $1.52 to settle at $68.35 as Iran, the world's fourth-largest oil exporter, said it was moving its foreign assets to shield them from possible U.N. sanctions in its nuclear standoff with the West.
Trading was heavy on the NYSE, with about 2.12 billion shares changing hands, while on Nasdaq about 2.37 billion shares traded.
Declining stocks outnumbered advancing ones by a ratio of 5 to 2 on the NYSE and by about 8 to 3 on the Nasdaq.
"Three years ago, there would have been a much more volatile environment on the CME (Chicago Mercantile Exchange) floor, given this type of day," said Harry Michas, stock index futures trader at manmarketmonitor.com, a division of Man Financial.
"But since many of the S&P 500 floor traders either left the business or have moved to electronic platforms, moves like this in the market seem to be much less boisterous." (Additional reporting by Dan Wilchins, Doris Frankel)
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