Wall Street gets walloped

By Alexandra Twin, CNNMoney.com senior writer
Last Updated: April 11, 2008: 1:02 PM EDT

NEW YORK (CNNMoney.com) -- Stocks slumped Friday afternoon after General Electric's earnings miss amplified worries about how badly the economic slowdown could hurt corporate profits.

A steep drop in a key consumer sentiment index added to the negative tone.

With around 3 hours left in the session, the Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index had both lost 1.4% and the Nasdaq composite (COMP) tumbled 1.8%.

Stocks rallied Thursday, extending a recent advance, thanks to an upgrade of Intel, lower oil prices and improved earnings forecasts from Dow components Wal-Mart and DuPont.

But GE dragged on Wall Street Friday, with its stock falling more than 11%.

GE, often seen as a proxy for the economy due to the breadth of its businesses, reported lower first-quarter sales and earnings that missed estimates as the sluggishness plaguing the nation hurt its financial services business. The company, a Dow component, also cut its second-quarter and full-year 2008 profit forecast.

The company's poor results played into fears that the weakness in the economy is going to have a worse impact on corporations than has been anticipated.

"We're in a period where we need enough time to pass so all the negatives that are being held over our heads can be exposed," said James King, chief investment officer at National Penn Investors Trust.

"The most difficult time for the market is when you know something is wrong but you don't know how bad it's going to get," he said. "Something like GE brings all of that to a head."

However, it was perhaps another sign of the market's recent improved tone that the declines Friday weren't even worse considering the day's news, he said.

Additionally, investors reacted to the University of Michigan's preliminary report on April consumer sentiment. The index fell to 63.2 from 69.5, the worst result since March 1982, according to reports.

Airlines. AMR (AMR, Fortune 500)'s American Airlines canceled an additional 595 flights, or 25% of its schedule, Friday, stranding thousands of passengers. American has canceled about 3,100 flights this week due to safety concerns. AMR stock lost about 2%.

Frontier Airlines Holdings (FRNT) filed for Chapter 11 bankruptcy protection, although it said all flights will operate as scheduled. The low-fare carrier is facing a liquidity crunch after the the company that processes most of its credit card transactions increased the amount of money it keeps from the sale of Frontier tickets. Shares fell 72% in unusually active Nasdaq trade.

On an up note for the industry, the pilots union at Delta Air Lines (DAL, Fortune 500) agreed on contract revisions that could help move along the company's merger with Northwest Airlines (NWAC), a deal that has been in the works for several months.

Other company news. Washington Mutual (WM, Fortune 500) shares lost 3% in active trade Friday after a Goldman Sachs analyst said the mortgage lender could see an additional $14 billion in loan losses this year.

A variety of big technology shares fell, including Microsoft (MSFT, Fortune 500), Intel (INTC, Fortune 500), Oracle (ORCL, Fortune 500) and Cisco Systems (CSCO, Fortune 500).

Market breadth was negative. On the New York Stock Exchange, losers beat winners 7 to 3 on volume of around 570 million shares. On the Nasdaq, decliners topped advancers by over 2 to 1 on volume of 900 million shares.

Commodity prices. U.S. light crude oil for May delivery fell 61 cents to $109.50 a barrel on the New York Mercantile Exchange.

Gas prices set another record at $3.365 a gallon, the AAA reported.

COMEX gold for June delivery fell $4.50 to $927.30 an ounce.

Other markets. The dollar fell versus the euro and the yen.

Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.46% from 3.54% late Thursday. Bond prices and yields move in opposite directions. To top of page
First Published: April 11, 2008: 9:36 AM EDT

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taken from : http://money.cnn.com/2008/04/11/markets/markets_newyork/index.htm?postversion=2008041113