Stocks bounced off earlier lows Friday afternoon, with the Nasdaq composite index and the Standard & Poor's 500 index turning positive at least briefly, boosted by gains in financials and Google, which reported earnings on Thursday that beat Wall Street's expectations.
But the Dow Jones industrial average was still down more than 100 as weak corporate earnings reports stir fears that the recession will be deeper and longer lasting than some investors had predicted.
"I think we're in a period of extreme risk aversion, and the earnings play into that," said Tim Courtney, chief investment officer at Burns Advisory Group. "When you couple companies missing earnings estimates with investor risk aversion, there's no tolerance" for buying.
General Electric's fourth-quarter numbers made investors uneasy. While the 46% drop in earnings met Wall Street's lowered expectations, investors are worried the conglomerate will reduce its dividend. They are also nervous the company could lose its coveted 'AAA' credit rating because of the recession that has crimped lending at GE Capital and hurt its industrial and entertainment businesses. The stock, a component of the Dow Jones industrial average, fell 8%.
Reports from a range of industries gave fresh evidence of the toll the weak economy is taking: Copier and printer maker Xerox fell 13% after its results fell short of expectations. Capital One Financial cof, which focuses on credit card lending, reported a loss rather than the profit Wall Street expected after it set aside money to cover bad debt. The stock lost 13%. And Harley-Davidson said it will cut jobs and reduce shipments because of falling demand. The company's earnings for the final quarter of 2008 fell nearly 60%, sending the stock down 10%.
One of the lone bright spots among earnings reports was Google's ability to beat analysts' estimates as it reported quarterly earnings after the market closed Thursday. Excluding one-time charges, Google earned about $5.10 a share, compared with analysts' expectations for profit of $4.95 a share, according to Thomson Reuters.
The trouble isn't just in the U.S. The British government released data Friday showing the country's economy shrank 1.5% in the fourth quarter and declared the country in a recession. The fourth-quarter decline was the worst since 1980.
Joe Clark, managing partner at Financial Enhancement Group, said the range of results companies have posted and their opaque forecasts make it difficult for Wall Street to determine how a company or others in its industry might fare in the coming quarters. That uncertainty makes investors nervous.
"We are going to go back to a time where we won't infer a company does well based on its sector," he said.
Bond prices mostly fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.64% from 2.60% late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.10% from 0.09% late Thursday.
The dollar was mixed against other major currencies, while gold prices rose.
Meanwhile, oil prices fell $1.63 to $42.04 a barrel on the New York Mercantile Exchange.
The market has seen a turbulent week, with the Dow tumbling 4% Tuesday only to regain more than 3% Wednesday, followed by another big drop Thursday. Volatility has been more the rule than the exception in recent trading as investors sort through a plethora of wide-ranging earnings reports.
"I think it's just a matter of what side of the bed the market wakes up on," Clark said.
Corporate results are pushing and pulling the market as investors try to determine where the economy is headed.
Advanced Micro Devices said late Thursday it narrowed its quarterly loss, but still failed to meet analyst expectations. The chipmaker is the latest technology firm to report quarterly struggles, following rival Intel last week and software firm Microsoft, which reported disappointing results Thursday.
Sales at AMD fell 33% and the company expects another drop in the first quarter.
Elsewhere in corporate news, The Wall Street Journal is reporting drugmaker Pfizer is in talks to acquire rival Wyethwye in a deal valued at more than $60 billion. Citing unidentified sources, the Journal said the discussions have been going on for months, but a deal is not imminent.
Overseas, Japan's Nikkei stock average fell 3.8%. In afternoon trading, Britain's FTSE 100 fell 1.32%, Germany's DAX index fell 1.98%, and France's CAC-40 lost 1.71%.