NEW YORK – Stocks tumbled Friday, with the Dow average hitting a low for the year, as tepid earnings from Microsoft and Coca-Cola, along with another rise in oil prices, offset Google's strong third-quarter report.
The Dow Jones industrial average (search) ended down 107.95 points, or 1.09 percent, at 9,757.81. The Standard & Poor's 500 Index (search) closed down 10.75 points, or 0.97 percent, at 1,095.74. The technology-laced Nasdaq Composite Index (search) finished down 38.48 points, or 1.97 percent, at 1,915.14.
For the week, the Dow ended down 1.77 percent. The Nasdaq rose 0.19 percent, while the S&P 500 index fell 1.12 percent. The Dow closed at its lowest point since Nov. 24, 2003 while the S&P was at its lowest level since Aug. 23, 2004.
"Today is really about oil -- it's over $55 a barrel and it's pretty much that that's hitting the market," said David Chalupnik, head of equities at U.S. Bancorp Asset Management.
Oil prices continued to pressure the market, casting doubt not only on fourth-quarter earnings, but also on the health of the economy as a whole. A barrel of light crude was quoted at $55.30, up 83 cents, on the New York Mercantile Exchange (search).
"These oil prices are really going to bite the consumer at some point. Heating oil is up, it's supposed to be a very cold winter in the Northeast, and lower and middle income people are going to pay," said Russ Koesterich, U.S. equity strategist at State Street Corp. "Combine that with a total lack of fundamentals in the big name stocks, and there are very few places left to hide for investors."
Microsoft (MSFT) fell nearly 3 percent, or 82 cents to $27.74, and was the biggest drag on the S&P 500 and Nasdaq and fourth biggest drag on the Dow. Analysts were concerned about a dropoff in long-term contract revenues, a possible sign that demand for the company's software was waning as companies waited for a long-delayed update of the Windows operating system.
Shares of Google (GOOG) surged as the online search giant doubled both revenues and profits from a year ago. Google's earnings impressed analysts, with Prudential raising the company's target stock price to $200 early Friday. Google skyrocketed more than 15 percent to $172.43, but other major technology stocks stole Google's momentum.
Online retailer Amazon.com Inc. (AMZN) missed its third-quarter earnings forecasts by a penny per share, even as the company saw its profits triple from a year ago. A disappointing 2005 sales outlook further disappointed investors. Amazon.com tumbled $4.87, or 12.3 percent, to $34.60.
3M Co. (MMM), maker of Scotch tape and Post-It notes, dragged on the Dow, falling $1.72 to $75.88. On Monday, 3M results were below Wall Street's estimates.
Coca-Cola (KO), also a Dow component, slid 58 cents to $38.90 after posting a 24 percent drop in quarterly profits on flat revenues. However, the soft-drink giant managed to beat reduced Wall Street estimates by 3 cents per share.
American International Group Inc. (AIG) fell $1.75 to $54.70, a day after the insurer said a federal grand jury is investigating products sold by AIG that companies might have used to make their earnings look better
Shares of phone companies Verizon Communications Inc. (VZ) and SBC Communications (SBC), both Dow components, fell after earnings from SBC's Cingular Wireless joint venture upset some investors. Verizon fell 2 percent to $38.94 and SBC was down 45 cents at $25.23.
The Dow's decline was limited by Caterpillar Inc. (CAT), the world's largest heavy construction equipment maker, which rebounded 31 cents to $77.34 after falling 3.7 percent on Thursday.
Caterpillar's earnings topped expectations on Thursday, but analysts worried about the company's struggle with higher steel costs. Charles Rentschler, analyst with Langenberg & Co., who has a "buy" rating on Caterpillar, said: "I think the market somewhat overreacted yesterday. Caterpillar is an excellent long-term stock."
Fast-food operator Wendy's International Inc. (WEN) posted a 4 percent rise in its third-quarter profits, but issued a lower outlook for its full 2004 results. Wendy's rose 93 cents to $32.73.
Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 150.37 million shares, compared with 185.22 million at the same point Thursday.
Trading was active, with 1.47 billion shares changing hands on the New York Stock Exchange, just above the 1.4 billion daily average for last year. About 1.72 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year. Decliners outnumbered advancers on the NYSE by about 5-to-3, and about 2-to-1 on Nasdaq.
The Russell 2000 index (search) of smaller companies was down 8.89, or 1.5 percent, at 567.77.
Overseas, Japan's Nikkei stock average rose 0.63 percent. In afternoon trading, Britain's FTSE 100 closed down 0.04 percent, France's CAC-40 lost 0.01 percent for the session, and Germany's DAX index gained 0.03 percent.
Reuters and the Associated Press contributed to this report.