Published October 19, 2012
NEW YORK – Stocks suffered their worst day since late June on Friday, after bellwethers General Electric and McDonald's extended a string of disappointing earnings.
The Nasdaq ended down 2.19 percent, dragged lower for a second day by Google's weak results. Microsoft dropped 2.9 percent to $28.64 after it said profits fell on poor sales of PCs. Google's stock lost 1.9 percent to close at $681.79.
For the Dow, Friday's decline marked its worst day since June 21 - with the sell-off coming on the 25th anniversary of Black Monday, the Dow's worst single-day percentage loss ever.
For Wall Street, corporate America's top-line figures are of particular concern. The beat rate for revenue forecasts is just 41.4 percent, compared to the long-term average of 62 percent, according to Thomson Reuters data.
General Electric Co shares fell 3.4 percent to $22.03. Quarterly earnings met Wall Street's expectations, but revenue fell short of estimates. GE, however, stood by its full-year earnings forecast.
"Going into the earnings season, traders were more forgiving of a weaker period, but the forward guidance is killing us now," said Todd Schoenberger, managing principal at the BlackBay Group in New York.
"McDonald's, Chipotle, Coca-Cola have all been slammed. And Wal-Mart, Target, even Dollar Stores are getting hit. That's tough to stomach because across income levels, everything is sharply lower."
McDonald's Corp lost 4.5 percent to hit $88.72 and Chipotle Mexican Grill fell 15 percent to $243 after quarterly profits missed analysts' expectations.
The S&P 500 still managed to gain 0.3 percent this week, but the Dow eked out a gain of just 0.1 percent.
The sharp declines boosted expectations of near-term volatility. The CBOE Volatility Index , Wall Street's gauge of investor anxiety, rose 13.5 percent to end at 17.06 - off its intraday high of 17.60. Options expiration also contributed to Friday's heavy activity.
The Dow Jones industrial average tumbled 205.43 points, or 1.52 percent, to 13,343.51 at the close. The Standard & Poor's 500 Index dropped 24.15 points, or 1.66 percent, to 1,433.19. The Nasdaq Composite Index slid 67.24 points, or 2.19 percent, to close at 3,005.62.
"This sell-off is definitely earnings-driven, but there is also an element of profit taking after several strong days," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York. "But it is a very quiet crash, coming on the anniversary of the 1987 collapse."
(Reporting by Atossa Araxia Abrahamian in New York; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)