Stocks closed lower Friday, led by drops in financials and industrials. The pullback pared gains won over the last two weeks and came as worries resurfaced about the outlook for banks and other financial service firms, says S&P MarketScope. Also, various futures and options expired, and a number of analysts cut earnings forecasts for Dow-component General Electric (GE).
On Friday, the 30-stock Dow Jones industrial average fell 122.42 points, or 1.65%, to 7,278.38. The broad S&P 500 index lost 15.50 points, or 1.98%, to 768.54. The tech-heavy Nasdaq composite index shed 26.21 points, or 1.77%, to 1,457.27.
Treasuries, which soared earlier this week, retreated amid concerns the Fed's debt buying may trigger severe inflation. 10-year notes were lower at 101-06/32 for yield 2.620% and 30-year bonds were flat at 97-19/32 for yield of 3.636%.
In other markets, the dollar index rose to 83.58. April gold futures fell to $957.10, while WTI crude oil slipped to $51.20.
There were no economic reports released today. Ben Bernanke delivered a speech on the financial crisis and community banking.
The Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF) program got off to a slow start Thursday. The Fed's effort to unfreeze markets for securities backed by loans kicked off with requests for $4.7 billion of financing, a total that officials hope will surge to as much as $1 trillion after investors resolve contract terms with dealers and other concerns. Bloomberg reported investors could have used the TALF to finance purchases of as much as $8.3 billion of securities. Investors asked for $1.9 billion in loans to buy securities backed by auto loans and $2.8 billion for debt linked to credit-card loans, the New York Federal Reserve Bank said yesterday.
Washington lawmakers were continuing to pile onto the AIG (AIG) controversy surrounding the bonus issue. There was much debate over Barney Frank's proposal to ban bonus payments at companies getting U.S. aid until borrowed money is repaid.
In other news, a federal appeals court denied a bid by disgraced financier Bernard Madoff to be released from jail pending sentencing. U.S. District Judge Denny Chin in Manhattan ordered Madoff directly to jail last week after he pleaded guilty to 11 criminal counts in connection with a decades-long Ponzi scheme that bilked thousands of investors out of billions of dollars. Madoff, 70 years old, is expected to be sentenced in June and faces up to 150 years in prison.
GE shares fell 6% to 9.52 Friday after several analysts cut their earnings projections for the company on Friday, saying it doesn't look likely GE Capital will hit the more optimistic targets given the tough economic environment. On Thursday, GE said that its finance unit could just break even this year because of the weak economy.
Among other stocks in the news Friday, Citigroup (C) announced that Gary Crittenden, previously CFO, has been named to newly created role of Chairman of Citi Holdings, and Edward "Ned" Kelly, previously the head of Global Banking, will assume the role of CFO.
Xerox (XRX) said that due to the increasingly more challenging global economic environment, it has lowered its first quarter EPS forecast to $0.03-$0.05 from $0.16-$0.20. The company noted reduction includes $0.06 impact from its share of Fuji Xerox's restructuring and a lower-than-expected Fuji Xerox profit contribution with the balance resulting from industry-wide slowdown in technology spending, putting pressure on revenue and earnings.
Ericsson (ERIC) and Sony (SNE) could move on news that their joint venture Sony Ericsson said first quarter net sales continue to be negatively affected by weak consumer demand and de-stocking. Now forecasts net loss of €340-390 million, excluding restructuring charges of €10-20 million. Sony Ericsson expects to ship 14 million handsets in first quarter. Forecasts gross margin to decline both year-over-year and quarter-to-quarter.
Palm (PALM) posted $0.86 third quarter non-GAAP loss, vs. $0.16 loss a year ago, on 72% decline in Smartphone revenue. It says Smartphone sell-through for the quarter was 482,000 units, down 42% year over year. Its CFO reportedly says difficult third quarter issues will persist to fourth quarter.
3Com (COMS) posted $0.13, vs. $0.08, third quarter non-GAAP EPS as higher gross profit, lower operating expenses offset 3.5% revenue decline. The Street was looking for EPS of $0.10.