US stocks have worst day in four months
Losses put market on track for a second day of declines on the 25th anniversary of Black MondayReuters , First Published: Sat, Oct 20 2012. 01 03 AM IST New York:
U.S. stocks fell sharply on Friday, on track for the market’s worst day since June after weak earnings from bellwethers General Electric Co. (GE) and McDonald’s Corp. triggered heavy selling pressure at the close of the week.
The Nasdaq was the weakest of the three major indexes, hurt afterGoogle Inc.’s disappointing results on Thursday and an underwhelming report from Microsoft Corp. as well. For all three major indexes, Friday marks the worst day since June 21. So far, this earnings season has been dismal in terms of the top line. The beat rate for revenue forecasts is 41.4%, trailing the long-term average of 62%, according to Thomson Reuters data. The losses put the market on track for a second straight day of declines on the 25th anniversary of Black Monday, the Dow’s worst single-day percentage loss ever. “This sell-off is definitely earnings-driven, but there is also an element of profit taking after several strong days,” said Andrew Wilkinson, chief economic strategist at Miller Tabak and Co, in New York.
“But it is a very quiet crash, coming on the anniversary of the 1987 collapse.” Options expiration has been another catalyst, as many funds would have had to sell stock holdings against expiring positions, and as investors start to hedge against the uncertain outlook for the end of the year. McDonald’s lost 4.5% to hit $88.69 after its quarterly profit missed analysts’ expectations. Chipotle Mexican Grill Inc., another fast-food chain, lost 15.6% to $241.39 after its quarterly results also missed targets. GE shares fell 3.6% to $21.98. Quarterly earnings met Wall Street’s expectations, but revenue fell short of estimates. GE, however, stood by its full-year earnings forecast. Microsoft said late on Thursday that its quarterly profit fell 22%—much more than expected. The stock tumbled 3.3% to $28.51. On Thursday, Google took a hit after weak quarterly results were released early. On Friday, Google’s stock was down 2.6% at $676.98.
The Dow Jones industrial average dropped 214.37 points, or 1.58E, to 13,334.57. The Standard and Poor’s 500 Index fell 25.55 points, or 1.75%, to 1,431.79.The Nasdaq Composite Index slid 71.02 points, or 2.31%, to 3,001.85. The CBOE Volatility Index, Wall Street’s fear gauge, rose 16.9% to 17.57 on Friday afternoon. That was the highest level for the VIX since 5 September as earnings worries and the October options expiration conspire to drive market volatility higher, said WhatsTrading.com options strategist Frederic Ruffy.
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