Major indexes ended Friday's session sharply and broadly lower amid a fresh barrage of bad news for Wall Street. New worries emerged in the credit mess as Wachovia (WB) said it will raise its loan allocation by $600 million, and British giant Barclays (BCS) refused to say if it will have a derivatives loss. The tech sector, stung by a downbeat report from Cisco (CSCO) late Wednesday, had to contend with another disappointment as Qualcomm (QCOM) cut its annual forecast.
Data on import prices and consumer sentiment were also discouraging, outweighing a small decline in the U.S. trade deficit. Bonds were higher in a flight to safety amid speculation the Federal Reserve will have to cut rates soon.
A burst of selling in the last hour of trading sent the major indexes plunging. The Dow Jones industrial average finsihed lower by 223.55 points, or 1.69%, to 13,042.74. The broader S&P 500 fell 21.07 points, or 1.43%, to 1,453.70. The tech-heavy Nasdaq composite index was the weakest performer among the major stock market benchmarks, dropping 68.06 points, or 2.52%, to 2,627.94.
Once again, activity in the broader market was resoundingly negative. On the NYSE, 24 shares declined in price for every eight that advanced. Nasdaq breadth was 20-9 negative.
The S&P 500 and and Dow are now down more than 6% in the month of November, but the biggest damage has been among technology stocks. The Nasdaq is off 8% this month. Tech was the market's big success story in recent months, but bad news from Cisco and Qualcomm this week sent the sector tumbling.
The market has been especially volatile recently, with big moves within trading sessions. Indexes fell rapidly in the last hour of trading on Friday, sending the VIX index, a measure of market volatility, up almost 9% Friday to 28.50.
"It feels awful," says John Wilson, chief technical strategist at Morgan Keegan. The market may be carving out the lows it hit in August, he says. "Fear [is] building up pretty quickly here."
Investors were not reassured by news from Barclays early Friday. Yes, the giant British bank said there was "no substance" to rumors of a $10 billion write-down. But when asked if the company was preparing for a significant write-down, executives reportedly said "no comment." The stock fell 4%.
In economic news Friday, the U.S. trade deficit narrowed to $56.5 billion in September, from $56.8 billion in August. Imports are up 4.9% from a year ago, while exports are up 13.6% year-over-year. The trade deficit with China widened to $23.8 billion. The data suggests economic growth figures for the third quarter will be revised higher, Action Economic says.
U.S. import prices jumped 1.8% in October, more than expected, while export prices were up 0.9%. The data may "fuel fears of stagflation," Action Economics says. Stone & McCarthy Research says much of the big increase can be attributed to the rise in the price of oil.
Also worrisome was a widely followed report on the mood of the consumer. The University of Michigan consumer sentiment index fell to 75.0 in October from 80.9 in September.
Next week, investors will get more information on the key questions of consumer spending and inflation. On Wednesday, reports on producer prices, October retail sales and September business inventories are released. On Thursday, data on consumer prices arrive, and industrial production data come at the end of the week.
"There is going to be a lot of data for investors to digest," says Todd Salamone of Schaeffer's Investment Research. "As a result, we may see some of the same zig-zag action we've seen in the last couple days."
On Friday, oil prices continued their volatile ways as crude continued just below the symbolic $100 per barrel mark. December NYMEX crude initially declined modestly, then traded higher, up 87 cents to $96.33 per barrel.
Among stocks in the news Friday, Wachovia says that, due to market deterioration, credit instruments in its portfolio lost another $1.1 billion in value in October. Also, the bank expects to record an extra $500 to $600 million in loan loss provisions in its fourth quarter.
Qualcomm reported earnings of 67 cents per share, vs. 36 cents a year ago as revenue rose 15%. Investors were disappointed by lower-than-expected predictions for 2008 earnings.
Fannie Mae (FNM) shares slid Friday after the mortgage giant reported earnings per share of $1.17 for the first three quarters of 2007, vs. $3.16 for the corresponding year-ago period. The company's provision for losses jumped almost ten-fold to $1.1 billion, and it also wrote down some of its guaranty contracts.
Priceline.com (PCLN) reported earnings of $1.58 per share, vs. 72 cents a year ago as revenue shot up 34%. Research analysts at Piper Jaffray raised their earnings estimates and target price for the company.
Merck & Co. (MRK) agreed to pay $4.85 billion into a settlement fund to deal with lawsuits from its Vioxx product.
Leap Wireless (LEAP) says it must restate financial results from 2004 through the first half of 2007 to correct errors.
Estee Lauder Companies (EL) raised its dividend 10% and said it would buy back another 20 million shares. A Bear Stearns analyst reportedly upgraded the stock to outperform from peer perform.
European equity indexes were lower on Friday. In London, the FTSE 100 index lost 1.21% to 6,304.90. Germany's DAX index fell 0.09% to 7,812.40. In Paris, the CAC 40 index declined 1.91% to 5,524.18.
Asian markets were mixed. In Japan, the Nikkei 225 index fell 1.19% to 15,583.42 after losses of 2% the day before. In Hong Kong, the Hang Seng index edged up 0.08% to 28,783.41. The Shanghai composite index lost 0.27% to 5,315.54.
Bonds surged as the expanding subprime mortgage loan problem crisis forced traders to seek safe havens. The 2-year note rose 04/32 in price to 100-14/32 for a yield of 3.410%, the 10-year note was up 18/32 to 100-10/32 for a yield of 4.217%, and the 30-year bond rallied 1-04/32 to 106-16/32 for a yield of 4.598%