Stocks fell sharply Friday after earnings from the nation's biggest banks disappointed investors and the latest reading on consumer sentiment plunged on job fears. The financial sector sold off more than 4%, led by drops in Dow components Bank of America (BAC) and JPMorgan Chase (JPM), as well as Citigroup (C). An earnings miss out of Google (GOOG) late Thursday weighed on the tech sector.
The blue-chip Dow Jones Industrial Average ($INDU) dropped 261 points, or 2.5%, to settle at 10,098. The broader S&P 500 ($INX) shed 32, or 2.9%, to 1,065. The more volatile, tech-heavy Nasdaq Composite ($COMPX) tumbled 70 points, or 3.1%, to finish at 2,179.
Banks and Economy Still in Question
Pre-market earnings from Bank of America, the nation's biggest bank by assets, and Citigroup, sparked the selling, says Maier Tarlow, a trader with Raven Securities on the floor of the New York Stock Exchange (NYX). Although the numbers came in better than Wall Street forecasts, revenue is still declining faster than credit quality is improving, making investors jittery about where future profits are going to come from -- especially once financial reform regulation becomes law.
"In many cases the banks are beating on profits because they had to set aside less money for bad loans," Tarlow says. That's really just moving numbers from one column to another."
Dow component General Electric (GE) also sold off on earnings that signaled tepid revenue growth ahead.
Adding insult to second-quarter earnings injuries, the consumer sentiment index unexpectedly plunged 9.5 points from 76 to 66.5 in July as Americans became increasingly concerned about the U.S. economic recovery's strength and lackluster job growth. The decline in the index, based on the Reuters/University of Michigan Surveys of Consumers, brings the metric to its lowest level in 11 months.
In a rare patch of green, shares in Goldman Sachs (GS) vaulted after the investment bank came to a $550 million settlement with the Securities Exchange Commission over fraud claims tied to a subprime mortgage product it sold to investors.
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