U.S. stocks finished lower Friday in a pullback from the market's recent strong gains. Third-quarter earnings reports posted by General Electric (GE) and Bank of America (BAC) -- and a drop in a consumer sentiment gauge -- generated selling pressure.
GE's third-quarter revenues missed analysts' estimates, while BofA posted a loss for the period. The University of Michigan consumer sentiment index fell to 69.4 in October from 73.5 in September.
The Dow Jones industrial average moved back below the 10,000 mark. The retreat in equities followed a late-session rebound Thursday that allowed the Dow industrials to close above 10,000 for two days in a row.
The weakness in GE and BofA countered better than expected results from Google (GOOG) and IBM Corp. (IBM) reported after the close of trading Thursday.
Meanwhile, industrial production rose a better-than-expected 0.7% in September.
On Friday, the 30-stock Dow Jones industrial average ended lower by 67.03 points, or 0.67%, at 9,995.91. The broad Standard & Poor's 500-stock index was down 8.88 points, or 0.81%, at 1,087.68. The tech-heavy Nasdaq composite index lost 16.49 points, or 0.76%, to 2,156.80.
On the New York Stock Exchange, 20 stocks were lower in price for every 10 that advanced Breadth on the Nasdaq was 18-8 negative.
Treasuries, the dollar index, and gold and crude oil futures were higher.
Looking ahead to next week, investors will get readings on inflation and the health of the housing sector. Here are next week's key releases:
Top Economic Reports Date Time For Median Estimate Last Period Producer Price Index Tuesday, Oct 20 8:30 a.m. Sept. -0.4% 1.7% Producer Price Index (Excluding Food & Energy) Tuesday, Oct 20 8:30 a.m. Sept. 0.1% 0.2% Housing Starts (Millions) Tuesday, Oct 20 8:30 a.m. Sept. 0.609 0.598 Leading Indicators Thursday, Oct 22 10:00 a.m. Sept. 0.4% 0.6% Existing Home Sales (Millions) Friday, Oct 23 10:00 a.m. Sept. 5.325 5.100 Source: Action Economics
Wall Street will also brace for another flood of third-quarter earnings reports.
Bank of America said on Friday it lost more than $2 billion after preferred dividends in the third quarter, steeper than what analysts had been expecting. One of the largest recipients of government bailout funds, the bank also set aside more than $11 billion to offset bad loans, $5 billion more than in the year-ago period.
GE said its profit dropped 44% in the most recent quarter, hurt by weakness in its financial unit, GE Capital.
Earnings reports from banks have been a key focus for the market this week. Investors want to see signs that credit losses are easing, which would be a sign that consumers and businesses are having an easier time paying off their debts. Surprisingly strong profit from JPMorgan Chase & Co. on Wednesday helped push the Dow Jones industrials over the 10,000 mark for the first time in a year, but slightly disappointing results from Citigroup (C) and Goldman Sachs Group (GS) on Thursday weighed on shares for much of the day before the market moved higher in the last few minutes of trading.
Analysts say stocks' wayward moves are to be expected, considering the size of the market's rally. But at the same time, analysts are encouraged that investors continue to wade back into the market on any dips, sensing an opportunity to take part in the rally. That momentum could continue to push stocks higher.
In economic news Friday, the U.S. Treasury posted a $46.6 billion budget deficit in September, compared to a $45.7 billion surplus one year earlier. That brings the fiscal 2009 red ink amount to a record $1.417 trillion, up 211.6% vs. last year's figure.
"Get used to these trillion dollar amounts, they'll be with us for years," says Action Economics.
U.S. industrial production climbed 0.7% in September from a revised 1.2% gain in August (was 0.8%) and a 0.9% increase in July (revised from 1.0%). That's much stronger than expected. Manufacturing production rose 0.9% from a revised 1.2% previously (was 0.6%), with motor vehicles and parts jumping another 8.1% after a near cumulative gain of 25% in the prior two months. Utilities declined 0.7% following a 1.9% gain in August. Mining was up 0.7% after a 1.1% increase in August (revised up from 0.5%). The data reflect lingering effects from the "cash for clunkers" program, notes Action Economics.
U.S. consumer sentiment dropped to 69.4 in the preliminary October reading from the University of Michigan survey. That compared to the 73.5 final print from September. The index was 57.6 last year in the wake of the Lehman failure and as the financial crisis was taking hold. Weakness was centered in the future component, where the economic outlook index fell to 67.6 from 73.5 in September, and was at 57.0 last October. The current conditions index slipped to 72.1 from 73.4 last month, and compares to 58.4 last year. The 1-year inflation index popped up to 2.8% from 2.2% in September and was at 3.9% a year ago. The 5-year ahead index edged up to 2.9% from 2.8% last month and 2.9% last year.