NEW YORK – Stocks headed lower Friday as data indicating a drop in a consumer sentiment index, along with a surge in oil prices, offset better-than-expected earnings from Dow components General Electric (GE) and United Technologies (UTX).
Indexes carved out fresh lows for the year. It was the first time since 1982 — the year that the '80s bull market started — that the Dow and the Nasdaq fell for the first three weeks of a year.
The Dow Jones industrial (search) average lost 78.48 points, or 0.75 percent, to end at 10,392.99. The Standard & Poor's 500 Index (search) closed down 7.54 points, or 0.64 percent, to finish at 1,167.87. The Nasdaq Composite Index (search) ended down 11.61 points, or 0.57 percent, to close at 2,034.27.
"It's more of the same — economic concerns, worries about higher rates and earnings being in line at best," said David Memmott, head of listed block trading at Morgan Stanley.
"Oil is still a concern, it's inching back up to $50, while new money coming to the marketplace is very light."
Frigid weather in the Northeast and concerns over possible OPEC production cuts pushed crude futures substantially higher. A barrel of light crude settled at $48.53, up $1.22, on the New York Mercantile Exchange (search).
Even an 18 percent jump in earnings at General Electric — a market bellwether due to the conglomerate's varied holdings — failed to hold investors' attention for long, highlighting the deep concerns on Wall Street since the three-week selloff began at the start of the year. Oil prices, a weak dollar, concern over interest rates and the upcoming Iraqi election have all been cited as potential problems that have kept investors on the sidelines.
"I think you're seeing people reacting to things, rather than anticipating things. There's a lot of caution out there," said Paul McManus, chief investment strategist at Independence Investments. "I think people are sitting around, waiting for earnings to get past us, before making any kind of moves."
The last time the major indexes sustained losses for this long was a four-week stretch in late June through late July. The Dow and S&P haven't started January with three down weeks since 1977. Profit-taking, concerns over inflation, and some high-profile earnings disappointments — despite a strong overall earnings season — all contributed to the slump.
For the week, the Dow ended down 1.6 percent, the S&P 500 was off 1.4 percent and the Nasdaq fell 2.6 percent. The Nasdaq closed at its lowest in 11 weeks, while the Dow and the S&P 500 closed at their lowest in 10 weeks.
A weak January could set the tone for the months ahead, said Robert Drust, managing director of listed trading at regional investment bank Wedbush Morgan.
"It seems to me that it sets the tone for how people will position themselves for the coming months," he said. "I think traders have been disappointed with what's going on in January and will be more cautious going forward and less likely to buy on the dips."
Analysts said the week ahead could feature more of the same, with worries about the Iraqi elections, production cuts from OPEC after its Jan. 30 meeting, and the upcoming Federal Reserve (search) meeting on Feb. 1-2 adding to the mix of uncertainty.
Consumer confidence fell slightly in January, according to a preliminary reading of the University of Michigan's (search) consumer sentiment index. The index fell to 95.8, down from December's 97.1 reading and less than the 97.5 Wall Street had expected.
GE remained confident regarding its 2005 earnings. The Dow component, which beat earnings estimates by a penny per share for the quarter, said it expects earnings to grow 10 percent to 15 percent this year and will be sustained through 2006 as well. GE nonetheless slipped 24 cents to $35.13.
"When good news leads to more selling, as opposed to a broad-based rally, that's a sign that the market is really struggling," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "GE did well, but this is not the kind of environment where investors should jump in and try to be a hero."
Fellow Dow industrial United Technologies Corp. added 30 cents to $100.08 after beating Wall Street profit forecasts by 2 cents per share. Earnings at the industrial manufacturer rose 11 percent for the quarter, and company executives expect earnings to grow by up to 15 percent in the coming year.
Industrial-related stocks, sensitive to oil prices, slipped. Caterpillar Inc. (CAT) fell 1 percent, or 85 cents, to $89.23 while 3M Co. (MMM) slid 2 percent, or $1.68, to $81.27. Meanwhile, tension was ratcheting up between Iraq's religious communities just nine days before landmark elections, as a suicide car bomber killed 14 Shi'ite worshippers as they left a Baghdad mosque.
Earnings were generally good in the financial sector, with PNC Financial Services Inc. (PNC) beating Wall Street estimates by 4 cents per share and KeyCorp (KEY) surpassing expectations by 8 cents per share after one-time charges. PNC nonetheless tumbled $1.80 to $52.85, while KeyCorp rose 83 cents to $32.53. .
A pair of Dow companies were upgraded by analysts Friday, with Verizon Communications Inc. (VZ) boosted to a "buy" by Deutsche Bank, and Citigroup Inc. (C) receiving a "buy" rating from Merrill Lynch. Verizon gained 23 cents to $36.53 and Citigroup was up 16 cents at $47.93.
Shares of Johnson & Johnson (JNJ), a Dow component, fell 1 percent, or 64 cents, to $61.85. The company said on Friday that health authorities are reviewing data from two clinical trials in which more patients taking its drug, Reminyl, to treat Alzheimer's disease died than patients taking a placebo.
Verizon Communications (VZ) rose 0.6 percent, or 23 cents, to $36.50 after Deutsche Bank upgraded it to "buy" from "hold," citing a recent sharp drop in the stock's price.
Overall, trading was active, with 1.64 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 2.04 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year. Decliners outnumbered advancers on the New York Stock Exchange by about 9 to 8 and by about 8 to 7 on Nasdaq.
The Russell 2000 index of smaller companies was down 1.26, or 0.21 percent, at 611.08.
Overseas, Japan's Nikkei stock average fell 0.41 percent. In Europe, Britain's FTSE 100 was closed 0.05 percent, France's CAC-40 rose 0.31 percent for the session, and Germany's DAX index lost 0.16 percent.
Reuters and the Associated Press contributed to this report.