A late-day surge in crude oil prices sent the major U.S. stock indices to their lowest level of the year Friday, as investors overlooked a strong earnings report and a bullish outlook from General Electric.
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.
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 sell-off began at the start of the year. Oil prices, a weak U.S. dollar, concern over interest rates and the upcoming Iraqi election have all been cited as potential problems that have kept investors on the sidelines of the stock market.
“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 Dow Jones industrial average was down 78.48 points, or 0.8 percent, at the close of trading, while the broader Standard & Poor’s 500-stock index was off 7.54 points, or 0.6 percent. The Nasdaq composite index lost 11.61 points, or 0.6 percent. The Dow fell 1.6 percent for the week, while the S&P 500 lost 1.4 percent and the Nasdaq composite dropped 2.6 percent.
The stock market’s three major stock indices posted their third straight losing week, as the market continued its correction from an impressive year-end rally in 2004. The last time the stock market sustained losses for this long was a four-week stretch in late June through late July 2004 and the Dow industrials and S&P 500 haven’t started January with three straight down weeks since 1977. Profit-taking, concerns over inflation, and some high-profile earnings disappointments — despite a strong overall earnings season — have all contributed to the downturn
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 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 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.
Earnings were generally good in the financial sector, but Wall Street’s reactions were mixed. PNC Financial Services beat Wall Street estimates by 4 cents per share and KeyCorp surpassed 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 was upgraded by analysts Friday, with Verizon Communications boosted to a “buy” by Deutsche Bank, and Citigroup receiving a “buy” rating from Merrill Lynch. Verizon gained 23 cents to $36.53 and Citigroup was up 16 cents at $47.93.
Overseas, Japan’s Nikkei stock average fell 0.4 percent. In Europe, Britain’s FTSE 100 added 0.1 percent, France’s CAC-40 rose 0.3 percent and Germany’s DAX index lost 0.2 percent.