NEW YORK – Soaring energy prices and lackluster earnings reports from Dow Jones industrials members General Electric (GE) and Citigroup (C) sent stocks plunging Friday, giving the Dow its biggest single-day percentage drop in nine months. The major indexes each lost more than 2 percent this week.
Crude oil returned to a four-month high on concerns about Iran's nuclear arms dispute, while a tempered outlook from Motorola Inc. (MOT) also disappointed investors.
At the close of trading, the Dow dropped 213.32, or 1.96 percent, to 10,667.39, giving back all of the 325 points it had gained this year. That was the largest one-day decline since April 15, when the index slipped 1.9 percent. It was also the biggest one-day point drop since the Dow lost 307.29 on March 24, 2003.
Broader stock indicators also finished sharply lower. The Standard & Poor's 500 index lost 23.55, or 1.83 percent, to 1,261.49, and the Nasdaq dropped 54.11, or 2.35 percent, to 2,247.70. Nasdaq's decline was exacerbated by an 8.47 percent drop in Google Inc. (GOOG), which fell on news that the Justice Department had filed a legal motion against the company to force it to comply with a subpoena for consumer Web search records
While GE and Citigroup's results were just shy of analysts' estimates, the large-cap firms that released earnings this week would have needed blockbuster reports to satisfy Wall Street's overblown expectations, said Rick Pendergraft, an equity trader at Schaeffer's Investment Research.
"The ramp up we had into earnings let you know that people were expecting big things," Pendergraft said of the market's January rally. "Any time we go into an earnings season and the market is overbought, it sends up a caution flag for me."
Bonds were little changed, with the yield on the 10-year Treasury note slipping to 4.35 percent from 4.37 percent late Thursday. The dollar was mixed against other major currencies in European trading, while gold prices edged lower.
The situation in Iran and new threats of terrorist attacks on the United States propelled the energy market. A barrel of light crude surged $1.52 to settle at $68.35 on the New York Mercantile Exchange, where natural gas also bounced off recent lows to add 37.5 cents to $9.28 per 1,000 cubic feet.
A larger-than-expected jump in consumer confidence did little to distract traders from earnings and rising crude oil. The University of Michigan's consumer sentiment index for January added nearly 2 points to read 93.4, topping economists' forecast of 92.5.
Optimism that the Federal Reserve would soon end its string of interest rate hikes launched a New Year's rally that sent stocks to multiyear highs earlier this month, carrying the Dow above 11,000 for the first time since June 2001. But Friday's retreat erased much of those gains, and left the Dow in negative territory for the year. For the week, the Dow lost 2.67 percent, the S&P 500 was down 2.03 percent and the Nasdaq declined 2.99 percent.
Although this week's earnings data was mostly downbeat, stocks would have had a tough time pushing higher after their recent advance, said Susan Malley, chief investment officer of Malley Associates Capital Management.
"Earnings haven't been disastrous thus far, we've just had some big names that were a bit conservative in their outlooks," Malley said. "The news is not terribly bad, it just has not met the expectations of the investing community."
GE said its fourth-quarter profit tumbled 46 percent after absorbing nearly $3 billion of losses from selling most of its insurance business. Excluding items, the results matched Wall Street estimates but failed to inspire investors. GE sank $1.31 to $33.37.
Citigroup's earnings jumped 30 percent from strength overseas and a gain on the sale of its asset-management unit. However, its profit before one-time items was slightly weaker than forecast, sending shares down $2.25 to $45.69.
Motorola fell $1.86 at $22.49. Chipmaker Xilinx Inc. (XLNX) also dropped $2.40 to $27.39 after its profit grew 26 percent but missed analysts' bullish estimates. Xilinx was the biggest loser on the Philadelphia Semiconductor Sector index, which plunged 4.15 percent.
Oilfield services firm Schlumberger Ltd. said its earnings doubled last quarter as revenue climbed 31 percent. Schlumberger jumped $7.38 to $122.25.
Google dropped $36.99 to $399.46 as investors continued to react to news earlier this week that the Justice Department asked a federal judge to force Google to comply with a subpoena issued in August. The subpoena relates to a separate matter involving the government's defense of online child protection laws that have been struck down by the U.S. Supreme Court.
Albertson's (ABS) said it received a revised buyout offer from a consortium that includes Supervalu Inc., but would not say how much the deal was worth. The Wall Street Journal reported the group raised its bid just above a previous $9.6 billion offer that fell through last month. Albertson's rose 24 cents to $24.11 while Supervalu dropped 34 cents to $31.85.
Declining issues led advancers by almost 3 to 1 on the New York Stock Exchange, where preliminary consolidated volume of 2.92 billion shares beat the 1.79 billion shares that changed hands on Thursday.
The Russell 2000 index of smaller companies fell 10.34, or 1.45 percent, to 704.60.
Overseas, Japan's Nikkei stock average finished flat. Britain's FTSE 100 dropped 0.37 percent, Germany's DAX index plunged 1.51 percent and France's CAC-40 was lower by 0.84 percent.